Fitch has downgraded FS KKR Capital's (FSK) rating to junk status due to weak asset quality. The agency cited a 16% of the company's portfolio being exposed to software companies, where AI could disrupt business models and pressure credit quality. Fitch also noted that non-traded business development company, KKR FS Income Trust, limited redemptions last week due to a surge in redemption requests. It warned that BDCs will continue to face a competitive environment, weaker earnings and dividend coverage metrics, and pressure on asset quality in 2026.