Wednesday, February 20, 2008

KKRedit KKRunch KKRimps KKR

Kohlberg Kravis Roberts is one of the venerable and survivable buy-out firms. But even it is not immune from the credit crunch.

An offshoot, KKR Financial Holdings, has "delayed repayment of billions of dollars of commercial paper – due Friday - for the second time and begun a new round of restructuring talks."

FT Alphaville looks at KKRFH's SEC filing "disclosing" the event and says,
Talk about obfuscation.

What we think it means is: “The bailiffs are coming round - either in two weeks time or maybe tomorrow.”

Will Kohlberg Kravis Roberts, the buyout house that floated this listed structured investment vehicle, now bail KFH out as it did last summer?

Back in the summer KFH had more than $5bn of mortgages financed by short term commercial paper. Since then that seems to have mutated into a $7.6bn portfolio of corporate debt. (Yes, after the residential property blow up it moved into leveraged loans.) We can assume that unwinding all that on a fire sale basis will hurt - and yet KFH was busy declaring a dividend (of 50 cents) to shareholders just three weeks ago.

What’s even odder is that KFN made no mention of the fact that its finances were seriously gummed up when releasing year-end figures on January 28.

Clearly, we must be missing something.

With apologies to FT Alphaville. Not only did Guambat related most of their post, he also was "inspired" by their story headline. Guambat hopes they chalk it up to the sincerest form of flattery.

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