KKR Financial Corp. Announces Second Quarter 2005 Results SAN
FRANCISCO, Aug. 1 /PRNewswire-FirstCall/ -- KKR Financial Corp.
(the "Company" or "KKR Financial") (NYSE:KFN) today announced its
results for its fiscal year second quarter ended June 30, 2005.
Highlights of the Company's performance during the period include:
* The Company completed its initial public offering on June 29,
2005, generating net proceeds of $848.9 million. * Distribution of
$0.40 per common share for the second quarter of 2005, a 60.0%
increase over the distribution of $0.25 per common share for the
first quarter 2005 which was the Company's first distribution. *
Net income for the quarter ended June 30, 2005 of $8.5 million, or
$0.21 per diluted common share, a 39.3% increase over net income
for the quarter ended March 31, 2005 of $6.1 million, or $0.15 per
diluted common share. Net income for the six month period ended
June 30, 2005, of $14.6 million or $0.36 per diluted common share.
The Company was formed in July 2004 and commenced operations in
August 2004, accordingly, there are no comparable prior period 2004
operating results. * REIT taxable income, a non-GAAP financial
measurement, for the quarter totaled $16.9 million, or $0.41 per
diluted common share. REIT taxable income for the six month period
ended June 30, 2005 totaled $32.2 million, or $0.79 per diluted
common share. See attached schedule for reconciliation of GAAP net
income to REIT taxable income. * Securities portfolio of $5.1
billion as of June 30, 2005, a 4.1% increase compared to $4.9
billion as of March 31, 2005, and a 200.0% increase compared to
$1.7 billion as of December 31, 2004. * Loan portfolio of $2.0
billion as of June 30, 2005, a 53.8% increase compared to $1.3
billion as of March 31, 2005, and a 185.7% increase compared to
$0.7 billion as of December 31, 2004. * Investment portfolio
weighted average amortized cost value, as a percentage of par
value, of 99.82% as of June 30, 2005, compared to 99.89% as of
March 31, 2005. * Closed a $275 million secured credit facility,
participants include J.P. Morgan Chase Bank, N.A., Citicorp North
America, Inc., and Bank of America, N.A. * Completed the ramp-up of
KKR Financial CLO 2005-1, Ltd., the Company's first $1 billion
collateralized loan obligation transaction. KKR Financial Corp.
reported second quarter results for the quarter ended June 30,
2005. KKR Financial Corp. (the "Company" or "KKR Financial")
reported net income for the three month and six month periods ended
June 30, 2005 of $8.5 million and $14.6 million, respectively, or
$0.21 and $0.36 per diluted common share, respectively. REIT
taxable income, a non-GAAP financial measurement, for the three
month and six month periods ended June 30, 2005 totaled $16.9
million and $32.2 million, respectively, or $0.41 and $0.79 per
diluted common share, respectively. See attached schedule for
reconciliation of GAAP net income to REIT taxable income. The
Company was formed in July 2004, and commenced operations in August
2004; accordingly, there are no comparable prior period 2004
operating results. We filed our Form 10-Q for the quarterly period
ended June 30, 2005, with the Securities and Exchange Commission
today, August 1, 2005. We encourage you to carefully read our Form
10-Q which contains the our condensed consolidated financial
statements and footnotes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations. We will
host a dial-in recorded message reviewing our second quarter 2005
results on Tuesday, August 2, 2005, at 10:00 a.m. EDT. The recorded
message can be accessed by dialing 888-203-1112 (Domestic) or
719-457-0820 (International) and entering pass code 3673314. A
replay of the recorded message will be available through Tuesday,
August 16, 2005. A web cast of the recorded message will be
available at http://www.kkrfinancial.com/. The web cast of the
recorded call will be available through Tuesday, August 16, 2005,
at 8:00 p.m. (EDT). Results of Operations We are pleased to report
net income for the quarter ended June 30, 2005, of $8.5 million or
$0.21 per diluted common share, a 39.3% increase over net income
for the quarter ended March 31, 2005, of $6.1 million or $0.15 per
diluted common share. Net income for the six month period ended
June 30, 2005, totaled $14.6 million or $0.36 per diluted common
share. Net income includes share-based compensation expense for the
three and six month periods ended June 30, 2005, totaling $7.3 and
$12.1 million, respectively, or $0.18 and $0.30 per diluted common
share, respectively. REIT taxable income, a non-GAAP financial
measurement, for the three and six month period ended June 30,
2005, totaled $16.9 million and $32.2 million respectively, or
$0.41 and $0.79 per diluted common share, respectively. See
attached schedule for reconciliation of GAAP net income to REIT
taxable income. Investment Portfolio During the three month period
ended June 30, 2005, our investment portfolio increased by 12.7%
from $6.3 billion as of March 31, 2005 to $7.1 billion as of June
30, 2005. For the six month period ended June 30, 2005, our
investment portfolio increased by 208.7% from $2.3 billion as of
December 31, 2004. As of June 30, 2005, the aggregate estimated
fair value of our investment portfolio exceeded the aggregate
amortized cost of our portfolio by $5.4 million. As of June 30,
2005, the aggregate net unamortized purchase discount (i.e.,
aggregate purchase discounts exceed aggregate purchase premiums on
our investment portfolio) related to our investment portfolio was
$12.7 million and the weighted average amortized cost, as a
percentage of aggregate par value, of our investment portfolio was
99.82% as of June 30, 2005, compared to 99.89% as of March 31,
2005. We have been able to successfully maintain the aggregate
amortized cost value of our investment portfolio below aggregate
par value due to our ability to purchase a substantial amount of
our corporate and commercial real estate investments in primary
market transactions at a cost of par. Commencing on the date we
made our first investment, we have sought to position the Company
so as to not be negatively impacted by an overall higher interest
rate environment or in a flatter interest rate curve environment by
investing in floating rate and hybrid rate investments which as of
June 30, 2005, totaled 58.9% and 39.1% of our investment portfolio,
respectively. Fixed rate loans and securities total 2.0% of our
investment portfolio as of June 30, 2005. Equally important, our
floating rate residential loans and residential adjustable rate
mortgage ("ARM") securities reset monthly and substantially all of
our floating rate corporate and commercial real estate loans and
securities reset at least quarterly. We have also fixed our
borrowings used to fund our hybrid ARM security investments using
interest rate swaps and interest rate corridors which are accounted
for as cash flow hedges under GAAP. We purchased $1.4 billion and
$5.4 billion par amount of investments during the three and six
month periods ended June 30, 2005, respectively. For the period
from August 12, 2004 (Inception) through December 31, 2004, we
purchased $2.3 billion par amount of investments. The table below
summarizes our investment portfolio purchases for the periods
indicated and includes the par amount, or face amount, of the
securities and loans that were purchased. Investment Portfolio
Purchases (Amounts in thousands) August 12, Three month Six month
2004 (Inception) period ended period ended through June 30, June
30, December 31, 2005 2005 2004 Par Par Par Amount % Amount %
Amount % (Unaudited) Securities: Residential ARM Securities $73,423
5.3% $739,205 13.8% $1,604,594 69.1% Residential Hybrid ARM
Securities 299,040 21.9 2,935,532 54.7 -- -- Corporate Debt
Securities 106,500 7.8 218,505 4.1 24,500 1.1 Commercial Real
Estate Debt Securities -- -- 10,000 0.2 12,000 0.5 Total Securities
Principal Balance 478,963 35.0 3,903,242 72.8 1,641,094 70.7 Loans:
Residential Mortgage Loans 189,781 13.9 436,501 8.1 229,855 9.9
Corporate Loans 592,150 43.3 916,701 17.1 400,774 17.3 Commercial
Real Estate Loans 106,750 7.8 106,750 2.0 50,000 2.1 Total Loans
Principal Balance 888,681 65.0 1,459,952 27.2 680,629 29.3 Grand
Total Principal Balance $1,367,644 100.0% $5,363,194 100.0%
$2,321,723 100.0% The table above excludes purchases of $8.8
million and $24.7 million of common and preferred stock during the
three and six month periods ended June 30, 2005, respectively, and
$31.2 million during the period from August 12, 2004 (Inception)
through December 31, 2004. Capital On June 29, 2005, we completed
our initial public offering of 37,500,000 shares of our common
stock (the "IPO Shares"). We sold 37,471,250 shares (the "Company
Shares") at a price to the public of $24.00 per share and selling
stockholders sold 28,750 shares at a price to the public of $24.00
per share. The net proceeds to us from the sale of the Company
Shares, after deducting the underwriting discount and estimated
offering expenses, were approximately $848.9 million.
Securitization Transactions On March 30, 2005, we closed KKR
Financial CLO 2005-1, Ltd. ("CLO 2005-1"), a $1.0 billion
collateralized loan obligation transaction that provides us with
secured financing for investments consisting of corporate loans and
certain other loans and securities. As of June 30, 2005, we had
completed the ramp-up of CLO 2005-1 with $1.0 billion of funding
and commitments. We are currently scheduled to price KKR Financial
CLO 2005-2, Ltd. ("CLO 2005-2"), our second $1.0 billion
collateralized loan obligation transaction, that will provide us
with secured financing for investments consisting of corporate
loans, certain other loans and securities, in September 2005 and we
are scheduled to close CLO 2005-2 in October 2005. Secured Credit
Facility During June 2005 we entered into a $275 million secured
credit facility that matures on June 15, 2006, with affiliates of
J.P. Morgan Securities Inc. and Citigroup Global Markets Inc. as
agents, joint bookrunners, arrangers and lenders under that
facility. Participants in the secured credit facility include J.P.
Morgan Chase Bank, N.A., Citicorp North America, Inc., and Bank of
America, N.A. The secured credit facility bears interest at either
(i) an alternate base rate per annum equal to the greater of (a)
the prime rate in effect on such day, and (b) the federal funds
effective rate in effect on such day plus 1/2 of 1% or (ii) an
interest rate per annum equal to the rate of 30- day LIBOR plus 1%.
KKR Financial is a specialty finance company that invests in
multiple asset classes and uses leverage to generate competitive
leveraged risk- adjusted returns. The Company currently makes
investments in the following asset classes: (i) residential
mortgage loans and mortgage-backed securities; (ii) corporate loans
and debt securities; (iii) commercial real estate loans and debt
securities; (iv) asset-backed securities; and (v) equity
securities. The Company also makes opportunistic investments in
other asset classes from time to time. The Company was organized as
a Maryland corporation on July 7, 2004, and commenced operations on
August 12, 2004. The Company is structured as a real estate
investment trust and KKR Financial Advisors LLC manages the Company
pursuant to a management agreement. KKR Financial Corp. and KKR
Financial Advisors LLC are affiliates of Kohlberg Kravis Roberts
& Co. L.P. Statements in this press release which are not
historical fact may be deemed forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Although KKR Financial
Corp. believes the expectations reflected in any forward-looking
statements are based on reasonable assumptions, the Company can
give no assurance that its expectations will be attained. Factors
that could cause actual results to differ materially from the
Company's expectations include completion of pending investments,
continued ability to originate new investments, the mix of
originations and prepayment levels, the availability and cost of
capital for future investments, competition within the specialty
finance sector, economic conditions, credit loss experience, and
other risks disclosed from time to time in the Company's filings
with the Securities and Exchange Commission. KKR Financial Corp.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Three
Months Ended, Six Months Ended June 30, June 30, March 31, 2005
2005 2005 % Change (in thousands, except per share amounts) Net
investment income: Securities interest income $69,918 $46,048
$23,870 92.9% Loan interest income 31,360 20,739 10,621 95.3
Dividend income 1,467 933 534 74.7 Other interest income 1,197 943
254 271.3 Total investment income 103,942 68,663 35,279 94.6
Interest expense (68,730) (48,281) (20,449) 136.1 Net investment
income 35,212 20,382 14,830 37.4 Other income (loss): Net realized
and unrealized gain on derivatives 2,345 2,169 176 1,132.4 Net
realized gain on investments 815 472 343 37.6 Other (loss) income
(463) (782) 319 (345.1) Total other income (loss) 2,697 1,859 838
122.8 Non-investment expenses: Management compensation to related
party 18,739 10,731 8,008 34.0 Professional services 1,185 788 397
98.5 Insurance expense 433 216 217 (0.5) Directors expenses 351 152
199 (23.6) General and administrative expenses 1,477 858 619 38.6
Total non-investment expenses 22,185 12,745 9,440 35.0 Income
before income tax expense 15,724 9,496 6,228 52.5 Income tax
expense 1,106 994 112 787.5 Net income $14,618 $8,502 $6,116 39.0%
Net income per common share: Basic $0.37 $0.21 $0.15 37.6% Diluted
$0.36 $0.21 $0.15 36.7% Weighted-average number of common shares
outstanding: Basic 40,004 40,212 39,796 1.0% Diluted 40,689 40,994
40,301 1.7% Distributions per common share $0.65 $0.40 $0.25 60.0%
KKR Financial Corp. RECONCILATION OF GAAP NET INCOME TO REIT
TAXABLE INCOME (UNAUDITED) Estimated For the Estimated For
Estimated For Period from the Three the Six August 12, 2004 Months
Ended Months Ended (Inception) through June 30, 2005 June 30, 2005
December 31, 2004 (in thousands, except per share amounts) Per Per
Per Amount Share Amount Share Amount Share Reported net income
(loss) $8,502 $0.21 $14,618 $0.36 $(6,709) $(0.17) Interest income
and expense (21) -- 89 -- -- -- Share-based compensation 7,334 0.18
12,080 0.30 (17,651) (0.44) Depreciation of fixed assets 57 -- 109
-- -- -- Gains (losses) on sales of assets to third parties (81) --
(81) -- -- -- Tax gains (losses) on inter-company sales and
transfers 133 -- 4,386 0.11 -- -- Realized and unrealized
derivative gains (losses) 119 -- (369) (0.01) 543 0.01 Unrealized
losses (gains) on foreign currency translations 2,344 0.06 2,536
0.06 -- Income tax expense (benefit) 994 0.02 1,106 0.03 (228) --
Total taxable income (loss)(1) 19,381 0.47 34,474 0.85 (24,045)
(0.60) Undistributed taxable income of domestic taxable REIT
subsidiary (2,486) (0.06) (2,265) (0.06) -- -- REIT taxable income
(loss)(1) $16,895 $0.41 $32,209 $0.79 $(24,045) $(0.60)
Weighted-average diluted shares outstanding during the period
40,994 40,689 39,796 (1) Total taxable income and REIT taxable
income are non-GAAP financial measurements and do not purport to be
an alternative to net income (loss) determined in accordance with
GAAP as a measure of operating performance or to cash flows from
operating activities determined in accordance with GAAP as a
measure of liquidity. Total taxable income is the aggregate amount
of taxable income generated by us and by our domestic and foreign
taxable REIT subsidiaries. REIT taxable income excludes the
undistributed taxable income of our domestic taxable REIT
subsidiary, which is not included in REIT taxable income until
distributed to us. There is no requirement that our domestic
taxable REIT subsidiary distribute its earnings to us. REIT taxable
income, however, includes the taxable income of our foreign taxable
REIT subsidiaries because we will generally be required to
recognize and report their taxable income on a current basis. These
non-GAAP financial measurements are important to us because we are
structured as a REIT and the Internal Revenue Code requires that we
pay substantially all of our taxable income in the form of
distributions to our stockholders. The non-GAAP financial
measurements of total taxable income and REIT taxable income are
critical in the determination of the amount of the minimum
distributions that we must pay to our stockholders so as to comply
with the rules set forth in the Internal Revenue Code. Because not
all companies use identical calculations, this presentation of
total taxable income and REIT taxable income may not be comparable
to other similarly titled measures prepared and reported by of
other companies. KKR Financial Corp. CONDENSED CONSOLIDATED BALANCE
SHEET (UNAUDITED) (amounts in thousands) % Change June 30, 2005
from June 30, March 31, Dec. 31, March 31, Dec. 31, 2005 2005(1)
2004 2005 2004 Assets Cash and cash equivalents $14,435 $53,091
$7,219 (72.8)% 100.0% Restricted cash and cash equivalents 31,465
352,196 1,321 (91.1) 2,281.9 Securities available- for-sale 373,362
87,146 167,058 328.4 123.5 Securities available- for-sale, pledged
as collateral 4,683,901 4,850,099 1,484,222 (3.4) 215.6 Loans held
for investment 2,042,124 1,313,622 682,757 55.5 199.1 Derivative
assets 9,899 25,423 223 (61.1) 4,339.0 Interest receivable 22,074
17,708 2,694 24.7 719.4 Principal receivable 421 511 -- (17.6) --
Deferred tax asset -- 116 228 (100.0) (100.0) Other assets 2,672
1,639 1,618 63.0 65.1 Total assets $7,180,353 $6,701,551 $2,347,340
7.1% 205.9% Liabilities and stockholders equity Liabilities
Borrowings: Repurchase agreements $4,771,756 $5,246,059 $1,558,274
(9.0)% 206.2% CLO senior notes payable 696,448 666,021 -- 4.6 --
Demand loan 40,511 36,875 27,875 9.9 45.3 Total borrowings
5,508,715 5,948,955 1,586,149 (7.4) 247.3 Accounts payable, accrued
expenses and other liabilities 46,989 877 1,157 5,257.9 3,961.3
Distribution payable 16,400 10,251 -- 60.0 -- Accrued interest
payable 10,274 4,307 771 138.5 1,232.6 Payable to manager and
related party liabilities 1,717 1,727 1,765 (0.6) (2.7) Income tax
liability 878 -- -- -- -- Derivative liabilities 1,660 255 750
551.0 121.3 Total liabilities 5,586,633 5,966,372 1,590,592 (6.4)
251.2 Stockholders' equity Preferred stock -- -- -- -- -- Common
stock 785 410 410 91.5 91.5 Additional paid-in- capital 1,635,721
781,741 779,740 109.2 109.8 Deferred compensation (13,780) (15,669)
(18,413) (12.1) (25.2) Accumulated other comprehensive income
(loss) (10,264) (20,459) 1,720 (49.8) (1,289.5) Accumulated deficit
(18,742) (10,844) (6,709) 72.8 179.4 Total stockholders' equity
1,593,720 735,179 756,748 116.8 110.6 Total liabilities and
stockholders' equity $7,180,353 $6,701,551 $2,347,340 7.1% 205.9%
(1) The pro-forma consolidated balance sheet as of March 31, 2005
reflects the effect of the distribution declared made by the board
of directors on April 5, 2005 of a $0.25 per share of common stock,
which was paid on April 18, 2005 to stockholders of record as of
April 5, 2005. KKR Financial Corp. SUMMARY FINANCIAL DATA
(UNAUDITED) (amounts in thousands, except per share amounts) Six
Months Three Months Ended, Ended June 30, June 30, March 31, 2005
2005 2005 % Change Net Income: $14,618 $8,502 $6,116 39.0% Diluted
REIT earnings per common share 0.36 0.21 0.15 40.0 REIT Taxable
Income:(1) $32,209 $16,895 $15,314 10.3% Diluted REIT taxable
income per common share 0.79 0.41 0.38 7.9 Profitability Ratio
Information:(2) Return on equity 3.9% 4.6% 3.3% 39.4% Return on
assets 0.5% 0.5% 0.5% -- Efficiency ratio 20.8 18.1 26.1 (30.7)
Share Information: Common shares outstanding 78,471 78,471 41,004
91.4 Basic EPS common shares outstanding 40,004 40,212 39,796 1.0
Diluted EPS common shares outstanding 40,689 40,994 40,301 1.7
Distributions per common share $0.65 $0.40 $0.25 60.0 Investment
Portfolio Information:(3) Residential mortgage securities
$4,767,392 $4,767,392 $4,744,421 0.5 Residential loans 649,036
649,036 478,049 35.8 Total residential 5,416,428 5,416,428
5,222,470 3.7 Corporate securities 209,708 209,708 118,974 76.3
Corporate loans 1,237,611 1,237,611 785,573 57.5 Total corporate
1,447,319 1,447,319 904,547 60.0 Commercial real estate securities
22,049 22,049 22,036 0.1 Commercial real estate loans 155,477
155,477 50,000 211.0 Total commercial real estate 177,526 177,526
72,036 146.4 Asset-backed securities 5,038 5,038 5,000 0.8
Preferred and common stocks 53,076 53,076 46,814 13.4 Total
investment portfolio 7,099,386 7,099,386 6,250,867 13.6 Balance
Sheet Information: Investment portfolio $7,099,387 $7,099,387
$6,250,867 13.6 Total assets 7,180,353 7,180,353 6,701,551 7.1
Total borrowings 5,508,715 5,508,715 5,948,955 (7.4) Total
liabilities 5,586,633 5,586,633 5,966,372 (6.4) Stockholders'
equity 1,593,720 1,593,720 735,179 116.8 Book value per common
share 20.31 20.31 17.93 13.3 Leverage 3.5x 3.5x 8.1x (56.8)
Statement of Operations Information: Investment income $103,942
$68,663 $35,279 94.6 Other income 2,697 1,859 838 122.1 Total
income 106,639 70,522 36,117 95.3 Interest expense (68,730)
(48,281) (20,449) 136.1 Share-based compensation expense (12,080)
(7,334) (4,746) 54.5 Management fees (6,719) (3,383) (3,336) 1.4
Other expenses (3,386) (2,028) (1,358) 49.3 Total non-investment
expenses (22,185) (12,745) (9,440) 35.0 Income before income tax
expense 15,724 9,496 6,228 52.5 Income tax expense (1,106) (994)
112 787.5 Net income 14,618 8,502 6,116 39.0% (1) Non-GAAP
financial measurement. See attached schedule for reconciliation of
GAAP net income to REIT taxable income. (2) All ratios computed on
an annualized basis. The efficiency ratio is defined as
non-interest expense divided by total revenue. (3) Carrying value
(fair value for securities available-for-sale and amortized cost
for loans). KKR Financial Corp. INVESTMENT PORTFOLIO BY INTEREST
RATE TYPE AS OF JUNE 30, 2005 (UNAUDITED) (amounts in thousands)
Portfolio Mix % Carrying Amortized Estimated By Estimated Value
Cost Fair Value Fair Value Floating Rate: Residential ARM Loans
$649,036 $649,036 $651,619 9.2% Residential ARM Securities
2,004,120 2,001,241 2,004,120 28.4 Corporate Loans 1,237,611
1,237,611 1,246,534 17.7 Corporate Debt Securities 111,291 112,769
111,291 1.6 Commercial Real Estate Loans 120,000 120,000 120,275
1.7 Commercial Real Estate Debt Securities 22,049 22,000 22,049 0.3
Total Floating Rate 4,144,107 4,142,657 4,155,888 58.9 Hybrid Rate:
Residential Hybrid ARM Securities 2,763,272 2,771,277 2,763,272
39.1 Total Hybrid Rate 2,763,272 2,771,277 2,763,272 39.1 Fixed
Rate: Corporate Debt Securities 103,455 103,869 103,455 1.5
Commercial Real Estate Loans 35,477 35,477 35,819 0.5 Total Fixed
Rate 138,932 139,346 139,274 2.0 Total(1) $7,046,311 $7,053,280
$7,058,434 100.0% (1) The table above excludes common and preferred
stock with fair value of $53.1 million and an amortized cost of
$52.8 million as of June 30, 2005. As of June 30, 2005, the
aggregate fair value of our investment portfolio exceeded the
aggregate amortized cost of our portfolio by $5.4 million. As of
June 30, 2005, the aggregate net unamortized purchase discount
related to our investment portfolio was $12.7 million. (2) The
table above summarizes the carrying value, amortized cost, and fair
value of our investment portfolio as of June 30, 2005, classified
by interest rate type. Carrying value is the value that investments
are recorded on our consolidated balance sheets and is fair value
for securities and amortized cost for loans. Estimated fair set
forth in the table below are as of June 30, 2005 and are based on
dealer quotes and/or nationally recognized pricing services. KKR
Financial Corp. INVESTMENT PORTFOLIO BY RATINGS AS OF JUNE 30,
2005(UNAUDITED) (amounts in thousands) SECURITIES Commercial
Residential Residential Corporate Real Estate ARM Hybrid ARM Debt
Debt Securities Securities Securities Securities Aaa/AAA $1,942,062
$2,707,903 $-- $-- Aa1/AA+ through Aa3/AA- 21,498 28,378 -- --
A1/A+ through A3/A- 15,499 17,970 -- -- Baa1/BBB+ through Baa3/BBB-
10,999 9,147 111,394 12,000 Ba1/BB+ through Ba3/BB- 4,628 3,603
5,000 10,000 B1/B+ through B3/B- 2,745 2,019 47,409 -- Caa1/CCC+
through Caa3/CCC- -- -- 23,033 -- Non-Rated 3,810 2,257 29,802 --
Total(1)(3) $2,001,241 $2,771,277 $216,638 $22,000 LOANS (amounts
in thousands) Residential Commercial Mortgage Corporate Real Estate
Loans(2) Loans Loans Aaa/AAA $-- $-- $-- Aa1/AA+ through Aa3/AA- --
-- -- A1/A+ through A3/A- -- -- -- Baa1/BBB+ through Baa3/BBB- --
-- -- Ba1/BB+ through Ba3/BB- -- 491,244 -- B1/B+ through B3/B- --
657,077 -- Caa1/CCC+ through Caa3/CCC- -- 14,883 50,000 Non-Rated
649,036 74,407 105,477 Total(3) $649,036 $1,237,611 $155,477 (1)
The table above excludes common and preferred stock with fair value
of $53.1 million and an amortized cost of $52.8 million as of June
30, 2005. As of June 30, 2005, the aggregate fair value of our
investment portfolio exceeded the aggregate amortized cost of our
portfolio by $5.4 million. As of June 30, 2005, the aggregate net
unamortized purchase discount related to our investment portfolio
was $12.7 million. (2) When residential mortgage loans are
securitized approximately 94% of the pool of residential mortgage
loans is rated Aaa/AAA with the remaining 6% of the residential
mortgage loan pool is tranched into securities rated from Aa1/AA+
through non-rated. (3) Amounts are amortized cost. Investor Contact
Media Contact Laurie Poggi Roanne Kulakoff and Joseph Kuo KKR
Financial LLC Kekst and Company 415-315-3718 212-521-4837 and
212-521-4863 DATASOURCE: KKR Financial Corp. CONTACT: investors,
Laurie Poggi of KKR Financial LLC, +1-415-315-3718; or media,
Roanne Kulakoff, +1-212-521-4837, or Joseph Kuo, +1-212-521-4863,
both of Kekst and Company, for KKR Financial LLC Web site:
http://www.kkrfinancial.com/
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