KKR Alternative Assets L.P., an indirect subsidiary of KKR & Co. Inc., announced its intention to commence a cash tender offer for up to $150 million in FS KKR Capital Corp. common stock and an additional $150 million in preferred shares. The dual-tranche structure targets a total $300 million repurchase of the business development company KKR already controls.
FS KKR Capital Corp. is a publicly traded BDC—ticker FSK—focused on middle-market credit. KKR Alternative Assets holds a 53.7% economic interest in the vehicle through a combination of common and preferred units. The tender offer allows KKR to consolidate ownership without triggering a full merger vote or incurring the regulatory friction of a take-private transaction. The move follows a 14-month period during which FSK shares traded between $18.32 and $21.05, regularly below the vehicle's net asset value per share of approximately $20.50 as of the most recent quarterly disclosure.
The tender is structured as a Dutch auction, meaning shareholders submit bids within a price range KKR will specify in the formal offer documents. The firm will accept the lowest clearing price that allows it to purchase up to the $150 million cap for each tranche. This mechanism gives KKR price discovery without committing to a fixed premium. The preferred stock targeted in the second tranche carries a 6.125% coupon and trades under the ticker FSKR. Both classes have been soft in secondary markets as yield-hungry allocators rotated out of BDC paper in favor of direct private credit vehicles offering higher net returns.
The tender consolidates KKR's control at a discount to replacement cost. FS KKR Capital holds a $6.2 billion portfolio of senior secured loans and subordinated debt across 174 middle-market companies. Replicating that exposure today would require warehousing risk at spreads roughly 75 basis points tighter than the portfolio's weighted average yield of 11.3%. By buying shares below NAV, KKR effectively acquires performing loan exposure at a markup to market while reducing the public float that complicates capital allocation decisions. The firm also benefits from the BDC's regulatory structure, which requires distribution of 90% of taxable income. Consolidating ownership redirects that cash flow internally rather than to third-party shareholders.
Allocators should watch for the formal tender offer documents within 10 business days, which will detail the price range, proration mechanics, and timing. The offer will remain open for at least 20 business days from commencement. Secondary market pricing for both FSK common and FSKR preferred will likely drift toward the high end of any announced range as arbitrageurs accumulate shares to tender. The completion of this tender will also clarify KKR's appetite for similar moves across its $34 billion in permanent capital vehicles, including KKR Real Estate Finance Trust and KKR Income Opportunities Fund, both of which trade below stated NAV.
The tender is the seventh such move by a major alternative asset manager since January 2024, and the largest by dollar amount targeting a controlled BDC. KKR has not commented on whether it intends to take FS KKR Capital fully private following this tender, but the structure leaves that option open without requiring board approval or fairness opinions. The firm files its next quarterly report on May 28.