- Current report filing (8-K)
January 15 2010 - 4:16PM
Edgar (US Regulatory)
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported):
January 12, 2010
KKR
Financial Holdings LLC
(Exact Name of Registrant
as specified in its charter)
Delaware
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001-33437
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11-3801844
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(State or other Jurisdiction
of Incorporation)
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(Commission File Number)
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(I.R.S. Employer
Identification No.)
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555 California Street, 50
th
Floor, San Francisco, California
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94104
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(Address of principal executive office)
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(Zip Code)
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415-315-3620
Registrants
telephone number, including area code
N/A
(Former
name or former address, if changed since last report.)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (
see
General Instruction A.2. below):
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant
to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR 240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR 240.13.e-4(c))
Item 1.01
Entry
into a Material Definitive Agreement.
Underwriting Agreement
On
January 12, 2010, KKR Financial Holdings LLC (the Company) entered into
an underwriting agreement (the Underwriting Agreement) with KKR Financial
Advisors LLC and Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and J.P. Morgan Securities Inc., as representatives (the Representatives)
of the underwriters (collectively, the Underwriters) to issue and sell $150
million aggregate principal amount of 7.50% Convertible Senior Notes due January 15,
2017 (the Notes) in a public offering pursuant to a Registration Statement on
Form S-3 (Registration No. 333-143451) (the Registration Statement)
and a related prospectus, including the related prospectus supplement, filed
with the Securities and Exchange Commission.
Pursuant to the Underwriting Agreement, the Company granted the
Underwriters an option to purchase up to an additional $22.5 million aggregate
principal amount of Notes solely to cover over-allotments, which on January 12,
2010, the Representatives exercised in full.
The Underwriting Agreement is attached hereto as Exhibit 1.1.
Indenture
The
Notes were issued pursuant to an indenture, dated as of January 15, 2010,
between the Company and Wells Fargo Bank, National Association, as trustee (the
Base Indenture), and a supplemental indenture thereto dated as of January 15,
2010 (the Supplemental Indenture and, together with the Base Indenture, the Indenture). Terms of the Indenture are described in the
section entitled Description of Notes of the prospectus supplement, dated January 12,
2010, filed with the Securities and Exchange Commission by the Company on January 13,
2010 pursuant to Rule 424(b)(5) under the Securities Act of 1933, as
amended (the Prospectus Supplement), which is incorporated herein by
reference.
The
Notes bear interest at a rate of 7.50% per year on the principal amount,
accruing from January 15, 2010. Interest is payable semiannually in arrears on
January 15 and July 15 of each year, beginning on July 15,
2010. The Notes will mature on January 15,
2017 unless previously redeemed, repurchased or converted in accordance with
their terms prior to such date.
Holders
of the Notes may convert their Notes at the applicable conversion rate (as
described below) at any time prior to the close of business on the business day
immediately preceding the stated maturity date subject to the Companys right
to terminate the conversion rights of the Notes (as described below). The Company may satisfy its obligation with
respect to Notes tendered for conversion by delivering to the holder either
cash, common shares, no par value, issued by the Company (the Shares) or a
combination thereof. Accordingly, upon
conversion of a Note, accrued and unpaid interest will be deemed to be paid in
full, rather than cancelled, extinguished or forfeited.
The
initial conversion rate for each $1,000 principal amount of Notes is 122.2046
of Shares. This is equivalent to an
initial conversion price of approximately $8.18 per Share. In addition, if certain fundamental change
transactions occur, if the Company elects to redeem the Notes or terminate the
conversion rights (as described below), then, in each case, the Company will
2
increase
the conversion rate for a holder who elects to convert its Notes in connection
with such a transaction, redemption or termination in certain circumstances as
described in the Prospectus Supplement.
The conversion rate may also be adjusted under certain other
circumstances, including the payment of a quarterly cash distribution in excess
of $0.05 per Share, but will not be adjusted for accrued and unpaid interest on
the Notes.
The
Company may elect to terminate the conversion rights effective on or after January 15,
2013 if the closing sale price of the Shares exceeds 150% of the conversion
price then in effect for 20 or more trading days in a period of 30 consecutive
trading days ending on the trading day prior to the date the Company provides
notice of its election to terminate the conversion rights.
The
Company may also redeem the Notes for cash at any time if the Company
determines that it is necessary to preserve the real estate investment trust (REIT)
status of any of its subsidiaries. The
redemption price will equal 100% of the principal amount of the Notes to be
redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
The
ability of a holder to convert the Notes into Shares is restricted by the
Companys operating agreement. Among
other things, the operating agreement provides that, subject to certain
exceptions, no person may beneficially or constructively own Shares in excess
of 9.8% in value or number, whichever is more restrictive, of the Companys
outstanding Shares. This limitation is
intended to help the Company protect the qualification of any REIT
subsidiary. The Indenture provides that,
notwithstanding any other provision of the Indenture or Notes, no holder of
Notes will be entitled to convert such Notes to the extent that receipt of
Shares would violate the 9.8% limit on share ownership contained in the Companys
operating agreement.
Upon
a change in control or a termination of trading, as defined in the Indenture,
the holders may require the Company to repurchase all or a portion of their
Notes at a repurchase price equal to 100% of the principal amount of the Notes,
plus accrued and unpaid interest to the repurchase date.
The
Notes are the Companys senior, unsecured obligations and rank equally in right
of payment with all of the Companys existing and future indebtedness that is
not contractually subordinated to the Notes.
However, the Notes are effectively subordinated to all of the Companys
existing and future secured debt, to the extent of the assets securing such
debt, and are structurally subordinated to all indebtedness and preferred
equity of the Companys subsidiaries.
The Indenture does not limit the amount of indebtedness that the Company
or any of its subsidiaries may incur.
The
following events are considered Events of Default, which may result in the
acceleration of the maturity of the Notes:
·
default in the
payment of any principal amount or any redemption price or repurchase price due
with respect to the Notes, when the same becomes due and payable;
·
default in
payment of any interest under the Notes, which default continues for 30 days;
3
·
default in the
delivery when due of amounts owing upon conversion, whether due in cash, common
shares or a combination thereof, upon exercise of a holders conversion right
in accordance with the Indenture;
·
the Companys
failure to provide notice of the occurrence of a fundamental change when
required under the Indenture which default continues for 5 days;
·
the Companys
failure to comply with any other term, covenant or agreement in the Notes or
the Indenture upon the Companys receipt of written notice of such default from
the trustee or from holders of not less than 25% in aggregate principal amount
of the Notes, and the failure to cure (or obtain a waiver of) such default
within 60 days after receipt of such notice;
·
default after
the expiration of any applicable grace period in the payment of principal when
due on, or resulting in acceleration of, indebtedness of the Company or certain
subsidiaries for borrowed money where the aggregate principal amount with
respect to which the default or acceleration has occurred exceeds $60 million
and such indebtedness is not discharged, or such default in payment or
acceleration is not cured or rescinded, prior to written notice of acceleration
of the Notes;
·
failure by the
Company or certain subsidiaries to pay final judgments entered by a court or
courts of competent jurisdiction aggregating in excess of $60 million, which
judgments are not paid, discharged or stayed for a period of 30 days after such
judgments become final and non-appealable; and
·
certain events
of bankruptcy, insolvency or reorganization affecting the Company or any of its
subsidiaries.
The
summary of the foregoing transactions is qualified in its entirety by reference
to the text of the Base Indenture, the Supplemental Indenture and related
global note, which are included as Exhibits 4.1, 4.2 and 4.3, respectively,
hereto and are incorporated herein by reference.
Item
2.03.
Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet
Arrangement of a Registrant.
The
information set forth above under Item 1.01 of this Current Report on Form 8-K
is hereby incorporated by reference into this Item 2.03.
Item 9.01
Financial Statements and
Exhibits.
(d)
Exhibits
The following documents are
attached as exhibits to this Current Report on Form 8-K:
Exhibit
Number
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Description
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1.1
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Underwriting
Agreement, dated as of January 12, 2010, among the Company, KKR
Financial Advisors LLC and Citigroup Global Markets Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
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4
4.1
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Indenture,
dated as of January 15, 2010, between the Company and Wells Fargo Bank,
National Association.
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4.2
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Supplemental
Indenture, dated as of January 15, 2010, between the Company and Wells
Fargo Bank, National Association.
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4.3
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Form of
7.50% Convertible Senior Note due January 15, 2017 (included in
Exhibit 4.2 hereto).
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99.1
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Opinion
of Richards, Layton & Finger, P.A., relating to the validity of the
Shares.
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99.2
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Opinion
of Simpson Thacher & Bartlett LLP, relating to the validity of the
Notes.
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5
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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KKR
FINANCIAL HOLDINGS LLC
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By:
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/s/
JEFFREY B. VAN HORN
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Name:
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Jeffrey
B. Van Horn
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Title:
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Chief Financial Officer
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Date:
January 15, 2010
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