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>> KKR Financial
Another victim of mortgage crisis 17 August 2007
The firm said it could take an additional $250 million hit from selling the remaining mortgage-backed bonds on its books. After that, shares of KKR Financial, a publicly traded unit of buyout firm Kohlberg Kravis Roberts & Co., plunged as much as 31% or $4.75, to $10.52 in New York Stock Exchange. The stock has declined 61% this year. In a conference call after issuing its statement, KKR Financial executives said they believed the firm had sufficient liquidity to fund its core business. The firm has as much as $1.2 billion in debt that has some margin triggers. A margin call requires the buyer of securities with borrowed money to deposit additional money in the account or sell some assets. “We have to assume the world is different. We may have to meet some margins,” KKR Financial Chief Executive Saturnino Fanlo said. “We assume we should keep some liquidity.” Also on the conference call, KKR Financial’s chief financial officer, Jeffrey Van Horn, said the firm was taking advantage of the credit market turbulence to invest in corporate debt. In the last few weeks, it has bought $500 million in corporate debt at an average price of 94.5 cents on the dollar, Van Horn said. “The disruptions in the corporate debt market,” he said, “continue to provide extremely attractive opportunities.” On Wednesday, KKR co-founder George Roberts, speaking on an earnings conference call, said global credit markets were experiencing a lot of chaos. ‘Life will go on, markets will adjust themselves,’ Roberts said. ‘We’ve just come off a period of a major bull market for corporate credit.’ The problems at KKR Financial could hit the larger franchise just as it prepares to follow rival Blackstone Group into the public markets, analysts said. |
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