Moody's Ratings have downgraded FS KKR Capital Corp. from Baa3 to Ba1, marking a significant step in the downward trend. The fund is jointly managed by KKR and FS Investments, which together hold roughly $14 billion in total assets under management. Moody's also highlighted structural risks beyond just weak quarterly earnings, which could expose the fund to significantly deeper losses if conditions worsen. Non-accrual loans where borrowers have stopped making payments are among the highest among all rated business development companies in the private credit space at 5.5% of total investments by 2025. Software and related services represent the largest loan category at 16.4% of the total portfolio exposure at year-end 2025. The level of concentration has become a major vulnerability due to rising interest rates and AI-driven competition. UBS Group predicts that private credit default rates could increase to 13% in 2026 if AI adoption accelerates. Apollo Global Management will limit its private fund withdrawals from its most fragile and most fragile sectors.