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Presented by:
Donald Homsher
Founders of KK&R
Founded KK&R in 1976 with $120,000
Jerome Kohlberg and cousins Henry Kravis and George R. Roberts
1987 Jerome Kohlberg resigned
Jerome Kohlberg
KK&R The Corporation
They are a leading global alternative asset manager
Specialize in large complex buyouts
52 Billon AUM
Offices in NYC, Menlo Park, SF, Houston, Washington DC, London, Paris, Hong Kong, Tokyo, Beijing, Mumbai, Dubai, Sydney
Basis of KK&R
KK&R Earnings
Capital Markets
Asset Management
Private Equity
Basic Structure KK&R Holding
Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
KK&RPrivate Equity
KAMAsset
Management
KFNFinancial Holdings
History of KK&R
Early Years
• Pioneers of LBOs
1980s
• Media Interest in LBOs
• Safeway 1986• RJR Nabisco
New Millennium
• Improve operation to create value
• Debt investments
• Financial Holdings LLC
• 30% Public Arm KKR & Co. (Guernsey) L.P.
Explain LBO
80% Debt 20% Equity
Predictable cash flows and potential growth
The acquiring firm makes adjustments to acquired company.
The Split-Up, Whole Firm
KK&R Accomplishments
.
Basic Structure KK&R Holding
Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
KK&RPrivate Equity
KAMAsset
Management
KFNFinancial Holdings
KCM- Capital Markets
Primary Function Raising capital for KK&R funds and portfolio
companies
Secondary Function Providing capital markets advice
Structuring new investment products
Placing, arranging, or underwriting equity and debt transactions
KCM-Capital Markets Sample Deals
SunGard - Underwriter for $500 million senior secured term loan and $500 million senior notes offering
Oncor - Underwriter for $1.5 billion senior secured notes offering (Investment Grade issuer)
Northgate Information Solutions - Placement agent for mezzanine financing
Rockwood Holdings - Underwriter for $350 million follow-on equity offering
Basic Structure KK&R Holding
Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
KK&RPrivate Equity
KAMAsset
Management
KFNFinancial Holdings
Explain J Curve
10%
KK&R Private Equity
Global leader of Private Equity
Last three decades have sponsored 14 private equity funds with a told capital commitments of $59.3 billion
Post investment they management over the long term to revitalize the business.
KK&R employees/managers invested $1.9 billion
Private Equity Allocation
Active Private Equity Funds
Basic Structure KK&R Holding
Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
Private EquityKAMAsset
Management
KFNFinancial Holdings
KAM-Asset Management
Is KKR investment approach focused on fundamental, long-term value investing
Advantages.
Quality of Deals. KAM access investment opportunities through KKR private equity professionals
Capital Markets Intelligence. Through KKR Capital Markets KAM has market leadership in developing unique, flexible, long-term financing for its credit portfolios.
Pricing Power. Ability to raise capital with the help of KKR Capital Markets.
Basic Structure KK&R Holding
Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
KK&RPrivate Equity
KAMAsset
Management
KFNFinancial Holdings
KFN Portfolio Investment Portfolio Composition
Corporate Loans--- 86% Total Corporate Bonds--- 10% Total99% Dept Instruments
Asset Management KFN
KKR Financial is externally managed by KKR Financial Advisors.
Real estate investment trust in July 2004, KKR Financial converted in May 2007 and now invests primarily in corporate loans and other securities.
Base fee of 1.75% incentive fees of 25% of profits earned above a certain hurdle rate.
Deferred 50% of the base management fee for 2009.
KFN will opportunistically invest in equity securities to boost its returns.
2008 loan loss provisions $25 million end 2008 $428 million. Continue in 2009 with an additional $177 million in losses.
For 2007, $2.16 per share, or approximately 80% of its net income. Effective in the fourth quarter of 2008, KFN eliminated its dividend. We do not expect a dividend to be paid in 2009.
S&P Review of KFN
Basic Structure KK&R Holding Company
KK&R
KKR & Co. (Guernsey)
L.P.
KCMCapital Markets
KK&RPrivate Equity
KAMAsset
Management
KFNFinancial Holdings
Represents 30% KK&R
KKR V.S. Euronext Amsterdam
YTD Comparison
KKR = 325% Gain
Euronnext = 20% Gain
3 Year Comparison
KKR = 60% Loss
Euronnext = 27% Loss