SAN FRANCISCO, April 29 /PRNewswire-FirstCall/ -- KKR Financial
Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced
its results for the first quarter ended March 31, 2010.
First Quarter 2010 Highlights
- Net income for the first quarter ended March 31, 2010 of
$129.5 million, or $0.82 per diluted common share, as compared to a
net loss for the first quarter ended March 31, 2009 of
$13.0 million, or $(0.09) per diluted common share.
- Book value per common share of $8.31 as of March 31, 2010, as compared to
book value per common share of $7.37
as of December 31, 2009.
- Unrestricted cash and cash equivalents increased to
$240.5 million as of March 31,
2010, as compared to $97.1 million as of December 31,
2009.
- Distribution of $0.10 per common
share declared for the first quarter of 2010.
KFN's first quarter 2010 results reflect net investment income
of $83.3 million and other income of
$71.1 million, partially offset by
other non-investment expenses of $24.9
million. Other income totaling $71.1
million primarily consists of the following:
(i) realized gains on extinguishment of debt totaling
$38.7 million from the purchase of
$83.0 million of mezzanine and
subordinate notes issued by KKR Financial CLO 2007-1, Ltd. ("CLO
2007-1") and KKR Financial CLO 2007-A, Ltd. ("CLO 2007-A") for an
aggregate purchase price of approximately $44.3 million; (ii) realized gains on
extinguishment of debt totaling $1.3
million from the repurchase and retirement of $95.2 million par amount of 7.0% convertible
senior notes maturing in July 2012 (the "7.0% Notes");
(iii) net realized and unrealized gains on investments
totaling $35.4 million; (iv) net
realized and unrealized losses on investments in residential
mortgage-backed securities totaling $5.1
million; and (v) net realized and unrealized losses
from derivative positions and foreign exchange totaling
$1.4 million.
Debt Transactions
During the first quarter ended March 31, 2010, in an open
market auction, the Company purchased $10.3
million of mezzanine notes issued by CLO 2007-A for
$5.5 million and $72.7 million of mezzanine and subordinate notes
issued by CLO 2007-1 for $38.8
million. These transactions resulted in the Company
recording an aggregate gain on extinguishment of debt totaling
$38.7 million.
On January 15, 2010, the Company
issued $172.5 million of 7.5%
convertible senior notes due January 15,
2017. The Company received net proceeds from this offering,
totaling $167.3 million.
During the quarter ended March 31, 2010, the Company
repurchased and retired $95.2 million par amount of its 7.0% Notes,
reducing the amount outstanding from $275.8 million as of December 31, 2009
to $180.6 million as of
March 31, 2010. These transactions resulted in the Company
recording a gain of $1.3 million,
which was partially offset by a write-off of $0.6 million of unamortized debt issuance costs
during the first quarter of 2010. In addition, during the quarter
ended March 31, 2010, the Company paid down $25.0 million of its senior secured credit
facility due 2011, reducing the amount outstanding from
$175.0 million as of
December 31, 2009 to $150.0 million as of March 31,
2010.
Distributions
On April 29, 2010, the Company's board of directors
declared a cash distribution for the quarter ended March 31,
2010 on the Company's common shares of $0.10 per share. The distribution is payable on
May 28, 2010 to common shareholders of record as of the close
of business on May 14, 2010.
Book Value per Common Share
The Company's book value per common share was $8.31 as of March 31, 2010, as compared to
$7.37 as of December 31,
2009.
Information for Investors: Conference Call and
Webcast
The Company will host a conference call and audio webcast to
review its first quarter end March 31, 2010 results on
April 29, 2010, at 5:00 p.m. EDT. The conference call may
be accessed by dialing (888) 765-5574 (Domestic) or (913) 312-1302
(International); a pass code is not required. A telephonic replay
of the call will be available through May 13, 2010 by dialing
(888) 203-1112 (Domestic) and (719) 457-0820 (International) / pass
code 9334508. Supplemental materials that will be discussed during
the call and the live audio webcast will be available in the
Investor Relations section of the Company's website at
http://www.kkr.com/kam/kfn_webcasts_presentations_and_important_documents.cfm.
An audio replay of the webcast will be archived in the Investor
Relations section of the Company's website.
About KKR Financial Holdings LLC
KKR Financial Holdings LLC is a publicly traded specialty
finance company. KFN's core business strategy focuses on corporate
debt throughout the capital structure with a particular emphasis on
debt issued by large capitalization firms with broad geographic and
product offerings. KFN executes its core business strategy through
its majority-owned subsidiaries. Additionally, KFN has made or may
make investments in other asset classes including natural resources
and real estate. KKR Financial Holdings LLC is externally managed
by KKR Financial Advisors LLC, a wholly-owned subsidiary of
Kohlberg Kravis Roberts & Co. (Fixed Income) LLC, which is
a wholly-owned subsidiary of Kohlberg Kravis Roberts & Co.
L.P. Additional information regarding KKR Financial Holdings LLC is
available at http://www.kkr.com.
"Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995: This press release contains
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward-looking statements are based on information available to
the Company as of the date of this press release and actual results
may differ. These forward-looking statements involve known and
unknown risks, uncertainties and other factors beyond the Company's
control. Any forward-looking statements speak only as of the
date of this press release and the Company expressly disclaims any
obligation to update or revise any of them to reflect actual
results, any changes in expectations or any change in events. If
the Company does update one or more forward-looking statements, no
inference should be drawn that it will make additional updates with
respect to those or other forward-looking statements. For
additional information concerning risks, uncertainties and other
factors that may cause actual results to differ from those
anticipated in the forward-looking statements, and risks to the
Company's business in general, please refer to the Company's SEC
filings, including its Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, filed with the SEC on
March 1, 2010 and its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2010, filed
with the SEC on April 29, 2010.
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Investor Contact
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Laurie Poggi
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415-315-3718
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Media Contact
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Peter McKillop/Kristi
Huller
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media@kkr.com
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212-750-8300
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Schedule I
KKR Financial Holdings
LLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except
per share information)
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For the three
months ended
March 31,
2010
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For the three
months ended
March 31,
2009
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Net
investment income:
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Loan
interest income
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$91,996
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$129,204
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Securities interest income
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27,261
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28,852
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Other
interest income
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93
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617
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Total
investment income
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119,350
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158,673
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Interest expense
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(31,500)
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(89,882)
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Interest expense to
affiliates
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(4,541)
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(5,805)
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Provision for loan losses
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—
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(26,987)
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Net
investment income
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83,309
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35,999
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Other income (loss):
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Net
realized and unrealized gain (loss) on investments
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35,423
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(60,204)
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Net
realized and unrealized (loss) gain on derivatives and foreign
exchange
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(1,418)
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12,396
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Net
realized and unrealized loss on residential mortgage-backed
securities, residential mortgage loans, and residential
mortgage-backed securities issued, carried at estimated fair
value
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(5,145)
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(19,419)
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Net
realized and unrealized (loss) gain on securities sold, not yet
purchased
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(756)
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1,437
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Net
gain on restructuring and extinguishment of debt
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39,999
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34,571
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Other
income
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3,004
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1,333
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Total
other income (loss)
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71,107
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(29,886)
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Non-investment
expenses:
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Related party management
compensation
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20,491
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11,212
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General, administrative and directors
expenses
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3,350
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2,403
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Professional services
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1,064
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3,385
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Loan
servicing
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—
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2,136
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Total
non-investment expenses
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24,905
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19,136
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Income
(loss) before income tax expense (benefit)
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129,511
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(13,023)
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Income
tax expense (benefit)
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16
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(47)
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Net
income (loss)
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$129,495
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$
(12,976)
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Net
income (loss) per common share:
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Basic
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$0.82
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$
(0.09)
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Diluted
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$0.82
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$(0.09)
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Weighted-average number of common
shares outstanding:
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Basic
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156,997
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149,714
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Diluted
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156,997
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149,714
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Schedule II
KKR Financial Holdings
LLC
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED)
(Amounts in thousands, except
share information)
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March 31,
2010
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December 31,
2009
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Assets
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Cash
and cash equivalents
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$240,529
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$97,086
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Restricted cash and cash
equivalents
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381,298
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342,706
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Securities available-for-sale,
$806,860 and $740,949 pledged as collateral as of March 31,
2010 and December 31, 2009, respectively
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829,691
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755,686
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Corporate loans, net of allowance for
loan losses of $216,080 and $237,308 as of March 31, 2010 and
December 31, 2009, respectively
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5,691,751
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5,617,925
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Corporate loans held for
sale
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733,072
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925,718
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Residential mortgage-backed
securities, at estimated fair value, $114,023 and $47,572 pledged
as collateral as of March 31, 2010 and December 31,
2009, respectively
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114,023
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47,572
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Residential mortgage loans, at
estimated fair value
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—
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2,097,699
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Equity
investments, at estimated fair value, $44,154 and $110,812 pledged
as collateral as of March 31, 2010 and December 31, 2009,
respectively
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63,488
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120,269
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Derivative assets
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1,303
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15,784
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Interest and principal
receivable
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64,221
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98,313
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Reverse repurchase
agreements
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—
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80,250
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Other
assets
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152,613
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100,997
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Total assets
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$8,271,989
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$10,300,005
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Liabilities
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Collateralized loan obligation secured
notes
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$5,631,866
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$5,667,716
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Collateralized loan obligation junior
secured notes to affiliates
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380,343
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533,786
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Senior
secured credit facility
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150,000
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175,000
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Convertible senior notes
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343,303
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275,800
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Junior
subordinated notes
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283,517
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283,517
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Residential mortgage-backed securities
issued, at estimated fair value
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—
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2,034,772
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Accounts payable, accrued expenses and
other liabilities
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83,768
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7,240
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Accrued interest payable
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16,597
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25,297
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Accrued interest payable to
affiliates
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2,150
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2,911
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Related party payable
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14,827
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3,367
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Securities sold, not yet
purchased
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—
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77,971
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Derivative liabilities
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49,998
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45,970
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Total liabilities
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6,956,369
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9,133,347
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Shareholders' Equity
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Preferred shares, no par value,
50,000,000 shares authorized and none issued and
outstanding at March 31, 2010 and December 31,
2009
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—
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—
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Common
shares, no par value, 500,000,000 shares authorized, and
158,359,757 and 158,359,757 shares issued and outstanding at
March 31, 2010 and December 31, 2009,
respectively
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—
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—
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Paid-in-capital
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2,576,501
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2,563,634
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Accumulated other comprehensive
income
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170,413
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152,728
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Accumulated deficit
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(1,431,294)
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(1,549,704)
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Total shareholders'
equity
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1,315,620
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1,166,658
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Total liabilities and shareholders'
equity
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$8,271,989
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$10,300,005
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SOURCE KKR Financial Holdings LLC