FSK - Navigating FS KKR's Ice-Cube Model As It Buys PayPal's Consumer Loans
2024-03-05 10:26:00 ET
Summary
- FSK faces challenges due to its ice-cube business model, which prioritizes income distribution over capital retention, limiting its ability to manage capital losses.
- The company's deal to acquire PayPal's credit card debt, while significant, amplifies the risk inherent in its ice-cube model.
- Despite a temporary surge in share value, FSK's structural and regulatory limitations suggest that, in the long run, the company will likely lose NAV value.
Investment Thesis
In last year's article , we maintained a cautious stance on FS KKR ( FSK ), primarily due to the prevailing macroeconomic conditions at the time. Our focus was on the potential negative impact of rising interest rates on the fiscal health of Small and Medium Enterprises 'SMEs,' potentially overshadowing any revenue gains for FSK arising from its variable interest rate-tied loan portfolio....
Navigating FS KKR's Ice-Cube Model As It Buys PayPal's Consumer Loans