KFN news
KKR’s debt-management unit, KKR Financial Holdings LLC, said in a regulatory filing last month that it expects three of five CLOs it issued in 2006 and 2007 to fail valuation tests after declines in loan prices of “historic magnitude.” The San Francisco-based company sold pools of high-yield loans to fund the purchase of more than $8 billion of leveraged, or speculative grade, loans.
A KKR affiliate invested $525.4 million in the “junior notes,” the company’s November regulatory filing said. Interest payments from the loans the private-equity firm bought will likely be directed to paying down the top-rated slices of the CLOs, according to a KKR Financial conference call with analysts on Dec. 16.
KKR Financial replaced Chief Executive Officer Saturnino Fanlo Dec. 15 after losing 95 percent of its value this year on the New York Stock Exchange. David Lilly, a New York-based spokesman for KKR, declined to comment.
Carlyle “assembled the assets in the CLO portfolios in a way to perform through a recession,” said Michael Zupon, head of the company’s U.S. leveraged finance team in New York. He wouldn’t comment on the performance of the loan pools.
To contact the reporters for this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Neil Unmack in London nunmack@bloomberg.net
Last Updated: December 19, 2008 10:10 EST
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