SAN FRANCISCO, Aug. 4 /PRNewswire-FirstCall/ -- KKR Financial
Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced
its results for the second quarter ended June 30, 2010.
Second Quarter 2010 Highlights
- Net income for the three months ended June 30, 2010 of $81.0
million, or $0.51 per diluted
common share.
- Declared a cash distribution of $0.12 per common share for the second quarter of
2010.
- During May 2010, the Company
replaced its $150.0 million secured
credit facility, due to mature in November
2011, with a $250.0 million
four year secured revolving credit facility, due to mature in
May 2014.
For the three and six months ended June
30, 2010, KFN reported net income of $81.0 million, or $0.51 per diluted common share, and $210.5 million, or $1.33 per diluted common share, respectively. For
the three and six months ended June 30,
2009, net income totaled $20.6
million, or $0.14 per diluted
common share, and $7.6 million, or
$0.05 per diluted common share,
respectively.
KFN's second quarter 2010 results reflect net investment income
of $76.8 million and other income of
$23.2 million, partially offset by
other non-investment expenses of $18.9
million. Other income totaling $23.2
million consists of the following: (i) net realized and
unrealized gains on investments of $28.9
million primarily due to realized gains from the sale of
certain corporate debt securities; (ii) net realized and
unrealized losses from derivative positions and foreign exchange
totaling $5.9 million; (iii) net
realized and unrealized losses on investments in residential
mortgage-backed securities totaling $4.1
million; and (iv) other income primarily from holdings
related fees totaling $4.2
million.
Portfolio Review and CLO Subsidiaries
The Company's portfolio primarily consists of corporate debt
securities and below investment grade corporate loans, often
referred to as syndicated bank loans or leveraged loans. These
investments have an aggregate par balance of $8.1 billion and an aggregate estimated fair
value of $7.2 billion as of
June 30, 2010.
The majority of the Company's portfolio is held through its
collateralized loan obligation ("CLO") subsidiaries that are
structured as on-balance sheet securitizations and are used as long
term financing for its portfolio assets. As of June 30, 2010, the Company's CLOs held corporate
debt securities and loans with an aggregate par of $7.4 billion and an estimated fair value of
$6.7 billion. In comparison, the
Company's CLOs held corporate debt securities and loans with an
aggregate par of $7.3 billion
(estimated fair value of $6.7
billion) and an aggregate par of $7.4 billion (estimated fair value of
$6.6 billion) as of March 31, 2010 and December 31, 2009, respectively.
As of June 30, 2010, the Company's
corporate debt securities and loans not held in CLOs had an
aggregate par of $681.5 million and
an estimated fair value of $532.9
million. In comparison, the aggregate par value of the
Company's corporate debt securities and loans not held in CLOs
totaled $719.5 million (estimated
fair value of $582.6 million) and
$759.6 million (estimated fair value
of $588.5 million) as of March 31, 2010 and December 31, 2009, respectively.
Distributions
On August 4, 2010, the Company's
board of directors declared a cash distribution for the quarter
ended June 30, 2010 on the Company's
common shares of $0.12 per share. The
distribution is payable on September 1,
2010 to common shareholders of record as of the close of
business on August 18, 2010.
Book Value
The Company's book value per common share decreased to
$8.08 as of June 30, 2010 from $8.31 as of March 31,
2010. The decline in book value per share is primarily
attributable to a decline in accumulated other comprehensive
income, a component of shareholders' equity, due to a reduction in
the estimated fair values of corporate debt securities and certain
interest rate swaps designated by the Company as cash-flow
hedges.
Information for Investors: Conference Call and
Webcast
The Company will host a conference call and audio webcast to
review its results for the second quarter ended June 30, 2010 on August 4,
2010, at 5:00 p.m. EDT. The conference call may be
accessed by dialing (800) 401-3551 (Domestic) or (913) 312-0713
(International); a pass code is not required. A telephonic replay
of the call will be available through August
18, 2010 by dialing (888) 203-1112 (Domestic) and (719)
457-0820 (International) / pass code 7047639. Supplemental
materials that will be discussed during the call and the live audio
web cast will be available in the Investor Relations section of the
Company's website at http://www.kkr.com/kfn_ir/kfn_events.cfm. An
audio replay of the web cast 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 KKR
Asset Management LLC (formerly known as 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 June 30, 2010, filed
with the SEC on August 4, 2010.
Schedule I
KKR Financial Holdings
LLC
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except
per share information)
|
|
|
|
For the three
months ended
June 30,
2010
|
|
For the three
months ended
June 30,
2009
|
|
For the six
months ended
June 30,
2010
|
|
For the six
months ended
June 30,
2009
|
|
|
Net investment
income:
|
|
|
|
|
|
|
|
|
|
|
Loan interest income
|
|
$
|
94,002
|
|
$
|
121,919
|
|
$
|
185,998
|
|
$
|
251,123
|
|
|
Securities interest
income
|
|
26,400
|
|
23,252
|
|
53,661
|
|
52,104
|
|
|
Other interest income
|
|
1,964
|
|
132
|
|
2,057
|
|
749
|
|
|
Total investment
income
|
|
122,366
|
|
145,303
|
|
241,716
|
|
303,976
|
|
|
Interest expense
|
|
(38,851)
|
|
(72,403)
|
|
(70,351)
|
|
(162,285)
|
|
|
Interest expense to
affiliates
|
|
(6,740)
|
|
(5,379)
|
|
(11,281)
|
|
(11,184)
|
|
|
Provision for loan
losses
|
|
—
|
|
(12,808)
|
|
—
|
|
(39,795)
|
|
|
Net investment income
|
|
76,775
|
|
54,713
|
|
160,084
|
|
90,712
|
|
|
Other income
(loss):
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain
(loss) on investments
|
|
28,939
|
|
(46,553)
|
|
64,362
|
|
(106,757)
|
|
|
Net realized and unrealized
(loss) gain on derivatives and foreign exchange
|
|
(5,850)
|
|
26,505
|
|
(7,268)
|
|
38,901
|
|
|
Net realized and unrealized loss
on residential mortgage-backed securities, residential mortgage
loans, and residential mortgage-backed securities issued, carried
at estimated fair value
|
|
(4,111)
|
|
(7,445)
|
|
(9,256)
|
|
(26,864)
|
|
|
Net realized and unrealized gain
(loss) on securities sold, not yet purchased
|
|
—
|
|
2,479
|
|
(756)
|
|
3,916
|
|
|
Net gain on restructuring and
extinguishment of debt
|
|
—
|
|
6,892
|
|
39,999
|
|
41,463
|
|
|
Other income
|
|
4,218
|
|
1,578
|
|
7,222
|
|
2,911
|
|
|
Total other income
(loss):
|
|
23,196
|
|
(16,544)
|
|
94,303
|
|
(46,430)
|
|
|
Non-investment
expenses:
|
|
|
|
|
|
|
|
|
|
|
Related party management
compensation
|
|
14,476
|
|
10,304
|
|
34,967
|
|
21,516
|
|
|
General, administrative and
directors expenses
|
|
3,216
|
|
2,975
|
|
6,566
|
|
5,378
|
|
|
Professional services
|
|
1,230
|
|
2,090
|
|
2,294
|
|
5,475
|
|
|
Loan servicing
|
|
—
|
|
2,056
|
|
—
|
|
4,192
|
|
|
Total non-investment
expenses
|
|
18,922
|
|
17,425
|
|
43,827
|
|
36,561
|
|
|
Income before income tax
expense
|
|
81,049
|
|
20,744
|
|
210,560
|
|
7,721
|
|
|
Income tax expense
|
|
(21)
|
|
(135)
|
|
(37)
|
|
(88)
|
|
|
Net income
|
|
$
|
81,028
|
|
$
|
20,609
|
|
|
210,523
|
|
$
|
7,633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.51
|
|
$
|
0.14
|
|
$
|
1.33
|
|
$
|
0.05
|
|
|
Diluted
|
|
$
|
0.51
|
|
$
|
0.14
|
|
$
|
1.33
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
156,997
|
|
151,202
|
|
156,997
|
|
150,462
|
|
|
Diluted
|
|
157,423
|
|
151,202
|
|
157,210
|
|
150,462
|
|
|
Distributions declared per
common share
|
|
$
|
0.10
|
|
$
|
—
|
|
$
|
0.17
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule II
KKR Financial Holdings
LLC
CONDENSED CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
(Amounts in thousands, except
share information)
|
|
|
|
June 30,
2010
|
|
December 31,
2009
|
|
|
Assets
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
141,844
|
|
$
|
97,086
|
|
|
Restricted cash and cash
equivalents
|
|
236,987
|
|
342,706
|
|
|
Securities available-for-sale,
$799,993 and $740,949 pledged as collateral as of June
30, 2010 and December 31, 2009,
respectively
|
|
840,507
|
|
755,686
|
|
|
Corporate loans, net of
allowance for loan losses of $210,218 and $237,308 as of June
30, 2010 and December 31, 2009, respectively
|
|
5,621,416
|
|
5,617,925
|
|
|
Corporate loans held for
sale
|
|
895,205
|
|
925,718
|
|
|
Residential mortgage-backed
securities, at estimated fair value, $4,210 and $47,572 pledged as
collateral as of June 30, 2010 and December 31, 2009,
respectively
|
|
107,081
|
|
47,572
|
|
|
Residential mortgage loans, at
estimated fair value
|
|
—
|
|
2,097,699
|
|
|
Equity
investments, at estimated fair value, $16,359 and $110,812 pledged
as collateral as of June 30, 2010 and December 31,
2009, respectively
|
|
86,131
|
|
120,269
|
|
|
Derivative assets
|
|
5,014
|
|
15,784
|
|
|
Interest and principal
receivable
|
|
72,774
|
|
98,313
|
|
|
Reverse repurchase
agreements
|
|
—
|
|
80,250
|
|
|
Other assets
|
|
79,255
|
|
100,997
|
|
|
Total assets
|
|
$
|
8,086,214
|
|
$
|
10,300,005
|
|
|
Liabilities
|
|
|
|
|
|
|
Collateralized loan obligation
secured notes
|
|
$
|
5,629,988
|
|
$
|
5,667,716
|
|
|
Collateralized loan obligation
junior secured notes to affiliates
|
|
375,502
|
|
533,786
|
|
|
Senior secured credit
facility
|
|
50,176
|
|
175,000
|
|
|
Convertible senior
notes
|
|
343,590
|
|
275,800
|
|
|
Junior subordinated
notes
|
|
283,517
|
|
283,517
|
|
|
Residential mortgage-backed
securities issued, at estimated fair value
|
|
—
|
|
2,034,772
|
|
|
Accounts payable, accrued
expenses and other liabilities
|
|
12,445
|
|
7,240
|
|
|
Accrued interest
payable
|
|
23,728
|
|
25,297
|
|
|
Accrued interest payable to
affiliates
|
|
4,616
|
|
2,911
|
|
|
Related party payable
|
|
11,698
|
|
3,367
|
|
|
Securities sold, not yet
purchased
|
|
—
|
|
77,971
|
|
|
Derivative
liabilities
|
|
70,827
|
|
45,970
|
|
|
Total liabilities
|
|
6,806,087
|
|
9,133,347
|
|
|
Shareholders'
Equity
|
|
|
|
|
|
|
Preferred shares, no par value,
50,000,000 shares authorized and none issued and
outstanding at June 30,
2010 and December 31, 2009
|
|
—
|
|
—
|
|
|
Common shares, no par value,
500,000,000 shares authorized, and 158,359,757 and
158,359,757 shares issued and
outstanding at June 30, 2010 and December 31,
2009, respectively
|
|
—
|
|
—
|
|
|
Paid-in-capital
|
|
2,576,813
|
|
2,563,634
|
|
|
Accumulated other comprehensive
income
|
|
69,416
|
|
152,728
|
|
|
Accumulated deficit
|
|
(1,366,102)
|
|
(1,549,704)
|
|
|
Total shareholders'
equity
|
|
1,280,127
|
|
1,166,658
|
|
|
Total liabilities and
shareholders' equity
|
|
$
|
8,086,214
|
|
$
|
10,300,005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact
|
|
Laurie Poggi
|
|
415-315-3718
|
|
|
|
Media Contact
|
|
Peter McKillop/Kristi
Huller
|
|
media@kkr.com
|
|
212-750-8300
|
|
|
|
|
SOURCE KKR Financial Holdings LLC
Copyright g. 4 PR Newswire