Alert: Claims Focus on Alleged Misrepresentations About Non-Accrual Portfolio Management That Cost FSK Investors $880 Million in Fair Value Losses Across Two Corrective Disclosures
NEW YORK, May 20, 2026 /PRNewswire/ -- Levi & Korsinsky, LLP reminds purchasers of FS KKR Capital Corp. (NYSE: FSK) securities of a pending securities class action.
THE CASE: A class action seeks to recover damages for investors who purchased FSK securities between May 8, 2024 and February 25, 2026.
YOUR OPTIONS: You may be entitled to compensation without payment of any out-of-pocket fees. See if you can recover losses or contact Joseph E. Levi, Esq. at jlevi@levikorsinsky.com or (212) 363-7500.
FSK shares fell $2.03 per share, or 15.24%, closing at $11.29 on February 26, 2026, after the Company revealed its non-accrual rate had climbed above the long-term BDC industry average. Investors have until July 6, 2026 to seek lead plaintiff status.
The Alleged Non-Accrual Acceleration From 1.7% to 3.4% at Fair Value
A business development company cannot sustain its distribution strategy or maintain its debt-to-equity compliance when a growing share of its loan portfolio stops generating income. For FS KKR Capital, the complaint chronicles a dramatic reversal in the credit health of its investment book.
As alleged in the filing, the Company told investors quarter after quarter that its workout team was making "significant progress restructuring certain non-accruing investments." Non-accruals at fair value had reportedly declined from 5.5% in December 2023 to just 1.7% by September 2024. The lawsuit contends this progress narrative masked deepening problems in legacy holdings that management knew or should have known were deteriorating.
By June 2025, non-accruals at fair value had nearly doubled to 3.0%. By December 2025, they reached 3.4% at fair value and 5.5% at amortized cost, a level the Company's own Chief Investment Officer was forced to acknowledge exceeded the long-term BDC industry average of approximately 3.8% at cost.
Legacy Portfolio Management and the Workout Team's Alleged Failures
The action claims FS KKR's reported success in restructuring troubled credits was overstated. Specifically, the complaint identifies multiple portfolio companies — including Production Resource Group, 48forty, Kellermeyer Bergensons Services, Worldwise, Medallia, and Cubic Corp — whose deterioration drove hundreds of millions in realized and unrealized losses:
- Production Resource Group, 48forty, Kellermeyer Bergensons Services, and Worldwise were identified during the August 2025 earnings disclosure, when fair value fell $474 million in a single quarter
- Medallia and Cubic Corp emerged as additional problem credits in the February 2026 disclosure, which revealed another $406 million fair value decline
- The Company acknowledged that these identified companies represented only 50% of total net realized and unrealized losses, suggesting broader portfolio weakness
- Non-accrual rates at amortized cost surged from 3.5% in Q1 2025 to 5.5% by year-end, a 57% increase in three quarters
Calculate your potential recovery or call (212) 363-7500.
Alleged Non-Accrual Impact by the Numbers
The financial consequences of the alleged credit deterioration were severe. Net asset value per share eroded from $24.32 as of March 31, 2024 (the quarter in which the Class Period began) to $20.89 by December 2025, a cumulative decline of $3.43 per share, or 14.1%. Full year 2024 adjusted net realized and unrealized losses widened to negative $0.72 per share compared to negative $0.56 the prior year. The total fair value of investments contracted from approximately $14.2 billion to $13.0 billion.
The complaint asserts these losses were foreseeable because the underlying credit deterioration was occurring while management publicly assured investors the workout process was succeeding.
"The complaint raises serious questions about whether investors received accurate information regarding the trajectory of FS KKR's non-accrual portfolio and the effectiveness of its restructuring efforts." -- Joseph E. Levi, Esq.
Find out if you qualify to recover losses or contact Joseph E. Levi, Esq. at (212) 363-7500.
ABOUT LEVI & KORSINSKY, LLP -- Over the past 20 years, Levi & Korsinsky has secured hundreds of millions of dollars for aggrieved shareholders. The firm has extensive expertise in complex securities litigation and a team of over 70 employees. For seven consecutive years, Levi & Korsinsky has ranked in ISS Securities Class Action Services' Top 50 Report.
Frequently Asked Questions About the FSK Lawsuit
Q: Who is eligible to join the FSK investor lawsuit? A: Investors who purchased FSK stock or securities between May 8, 2024 and February 25, 2026 and suffered financial losses may be eligible. Eligibility is based on purchase date and documented losses, not on whether you still hold the shares.
Q: How much did FSK stock drop? A: Shares fell approximately 15.24%, a decline of $2.03 per share, after the Company disclosed deepening non-accrual problems and slashed its dividend on February 25, 2026. An earlier corrective disclosure on August 6, 2025 caused an additional 8.20% decline.
Q: What specific misstatements does the FSK lawsuit allege? A: The complaint alleges FS KKR Capital made materially false or misleading statements regarding the effectiveness of its portfolio restructuring efforts, the accuracy of its investment valuations, and the sustainability of its quarterly distributions. When the true state was revealed, the stock price declined sharply.
Q: What do FSK investors need to do right now? A: Gather brokerage records including purchase dates, share quantities, and prices paid. Contact Levi & Korsinsky for a free, no-obligation evaluation at jlevi@levikorsinsky.com or (212) 363-7500. No immediate action is required to remain eligible as a class member.
Q: What is a lead plaintiff and why does it matter? A: A lead plaintiff is the investor appointed by the court to represent the entire class. Lead plaintiffs are typically investors with the largest documented losses. Being appointed does not increase individual recovery but gives direct oversight of how the case is run.
Q: What if I already sold my FSK shares -- can I still recover losses? A: Yes. Eligibility is based on when you purchased, not whether you still hold them. Investors who bought during the class period and sold at a loss may still participate.
Q: What does it cost me to participate? A: Nothing. Securities class actions are handled on a pure contingency basis. No upfront fees, no retainer, no out-of-pocket costs.
CONTACT:
Levi & Korsinsky, LLP
Joseph E. Levi, Esq.
Ed Korsinsky, Esq.
33 Whitehall Street, 27th Floor
New York, NY 10004
Tel: (212) 363-7500
Fax: (212) 363-7171
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SOURCE Levi & Korsinsky, LLP
