JPMorgan Chase-led group reins in credit
JPMorgan Chase & Co. before the ribbon-cutting ceremony at the firm’s new headquarters at 270 Park Avenue in New York City, USA. building, 21 October 2025.
Eduardo Muñoz | Reuters
A. JPMorgan ChaseA group of banks led by the Bank reduced its exposure to a jointly managed private credit fund. KKR It comes just days before the asset manager announced it would spend $300 million to shore up the troubled vehicle.
Fund, FS KKR Capital Corp.., said on Monday release He said KKR would inject $150 million into the fund as equity capital and spend another $150 million to buy shares from investors looking to exit.
These moves, called “Strategic Value Enhancement Actions” by the fund, come after the JPMorgan-led group on Friday reduced its credit limit by $648 million, or about 14%, to $4.05 billion. According to the application, some lenders may have exited their commitments altogether rather than extending them.
The fund is jointly managed by KKR and the alternative asset manager Future Standard and is often referred to with a check mark, FSKhas become one of the most visible fault lines in the private credit story. Its shares have nearly halved in the past year and are trading at a large discount to the fund’s net asset value.
In March, Moody’s downgraded FSK to junk due to increased stress in the portfolio. FSK executives said on Monday that interest payments on loans to software maker Medallia and dental services company Affordable Care have since been suspended.
FSK said they had losses $2 per share As the fund’s net asset value fell by approximately 10%, there was a total loss of approximately $560 million in the first quarter, considering the share count of approximately 280 million.
FSK President “We are disappointed with our recent performance” Daniel Pietrzak he told analysts on Monday.
Pietrzak added that the firm’s reading of the situation and KKR’s actions to support the fund “support our view that there is a disconnect between FSK’s trading price and its intrinsic value.”
The fund stated that FSK loans, which no longer generate income, increased from 5.5% at the end of the year to 8.1% at the end of the first quarter.
Fall even further?
In addition to cutting the credit limit, the JPMorgan-led group also raised interest rates on the remaining loan, giving the fund more room to absorb losses without triggering a default.
The second move, which reduces the minimum equity base from $5.05 billion to $3.75 billion, gives FSK more breathing room. But it also shows that lenders believe the firm’s assets will decline further.
In a meeting on Monday, FSK executives warned that “individual names may deteriorate further” despite the company’s efforts to stabilize troubled portfolio companies.
The FSK facility was financed by a syndicate of banks led by JPMorgan as managing agent; this role often involved coordinating lender communications and amendment negotiations. While ING Capital acted as collateral agent, the names of other participating lenders were not mentioned in the application.
JPMorgan, the largest US bank by assets It has taken broader steps to protect itself from private credit turmoil, in part by reducing the value of private credit loans held as collateral on its books, CNBC reported in March. Many of these discounted loans are given to software companies facing potential disruptions from AI.
Executives also said Monday that FSK will sharply reduce new investments, focus on supporting existing portfolio companies and work toward a smaller, less leveraged balance sheet while buying back shares.
In addition to the $300 million that KKR spent backing FSK, the fund’s board also authorized a separate $300 million share repurchase program, and KKR agreed to waive half of its incentive fees for four quarters.
‘We are working as designed’
FSK, which makes loans to private, mid-sized U.S. companies, became the second-largest publicly traded business development company (BDC) when it was formed in 2018 through the merger of two previous funds.
The fund’s largest loan category is for software and related services, which accounted for 16.4% of exposure at year-end.
FSK’s problems have fueled debate about whether rapid growth in private credit poses systemic risks. Prominent investors, including DoubleLine Capital CEO Jeffrey Gundlach, have warned that private loans could cause the next financial crisis, drawing comparisons to the mortgage-backed securities market before the 2008 crash.
The private credit industry has challenged these comparisons, arguing that losses are distributed among investors rather than concentrated within the banking system.
“Private credit industry regulators have consistently found that the industry is conservatively capitalized and structurally designed to mitigate risk rather than transmit it to the financial system,” said Will Dunham, CEO of the American Investment Council, an industry trade group that represents private equity and private credit firms.
“The private credit system is working as designed,” Dunham said.
