Exhibit 99.1
Investor Contact |
| Media Contact |
Laurie Poggi |
| Peter McKillop/Kristi Huller |
Kohlberg Kravis Roberts & Co. L.P. |
| media@kkr.com |
415-315-3718 |
| 212-750-8300 |
KKR Financial Holdings LLC Announces First Quarter 2009 Financial Results
SAN FRANCISCO, CA, May 7, 2009—KKR Financial Holdings LLC (NYSE: KFN) (“KFN” or the “Company”) today announced its results for the first quarter ended March 31, 2009.
First Quarter 2009 Results
KFN reported a net loss of $13.0 million, or $(0.09) per diluted common share for the quarter ended March 31, 2009, as compared to net income of $14.0 million, or $0.12 per diluted common share for the quarter ended March 31, 2008. The Company’s results for the first quarter ended March 31, 2009 included net realized and unrealized losses on corporate debt investments totaling $60.2 million, a provision for loan losses of $27.0 million, net realized and unrealized losses on investments in residential mortgage-backed securities totaling $19.4 million and a gain on debt restructuring of $34.6 million related to the restructuring of Wayzata Funding LLC (“Wayzata”) described below.
Book Value Per Common Share
The Company’s book value per common share outstanding was $4.59 and $4.40 as of March 31, 2009 and December 31, 2008, respectively.
KKR Financial CLO 2009-1, Ltd.
On March 31, 2009, the Company completed the restructuring of Wayzata, its market value CLO transaction. As a result of the restructuring, substantially all of Wayzata’s assets have been transferred to KKR Financial CLO 2009-1, Ltd. (“CLO 2009-1”), a newly formed special purpose company, which issued $560.8 million aggregate principal amount of senior notes due April 2017 and $154.3 million aggregate principal amount of subordinated notes due April 2017 to the existing Wayzata note holders, in exchange for cancellation of the Wayzata notes, due November 2012, previously held by each of them. CLO 2009-1 has been structured as a cash flow transaction and does not contain the market value provisions contained in Wayzata. The portfolio manager of CLO 2009-1 is an affiliate of KKR Financial Advisors LLC (the “Manager”) which manages the Company pursuant to a management agreement. The notes issued by CLO 2009-1 are secured by the same collateral that secured the Wayzata facility, consisting primarily of senior secured leveraged loans. As was the case with Wayzata, the Company and an affiliate of the Manager currently own all of the subordinated notes issued by the CLO. The subordinated notes entitle the Company to receive a pro rata portion of all excess cash flows from the portfolio after all senior obligations of CLO 2009-1 have been paid in full or otherwise satisfied, including all outstanding principal of the senior notes and interest thereon accruing at a rate of 3-month LIBOR plus 4.25%.
As a result of the transaction, the Company recorded a gain on the debt restructuring of $34.6 million which reflects the reduction of the reported amount of debt held by an affiliate of the Manager upon the replacement of Wayzata with CLO 2009-1 on March 31, 2009.
Information for Investors: Conference Call and Webcast
The Company will host a conference call and audio webcast to review its first quarter 2009 results on Thursday, May 7, 2009, at 5:00 p.m. EST. The conference call can be accessed by dialing 877-852-6576 (Domestic) or 719-325-4823 (International); a pass code is not required. A replay will be available through Thursday, May 21, 2009 by dialing 888-203-1112 (Domestic) and 719-457-0820 (International) / pass code 4630465. Supplemental materials that will be discussed during the call, as well as a live webcast of the call, will be accessible on the Company’s website, at www.kkr.com/kam/kfn_webcasts_presentations_and_important_documents.cfm via a link from the Investor Relations section. A replay of the audio 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 that invests in multiple asset classes. 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.
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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although KKR Financial Holdings LLC 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 source new investments, the availability and cost of capital for future investments, competition within the specialty finance sector, economic conditions, credit loss experience, availability of financing, maintenance of sufficient liquidity, and other risks disclosed from time to time in the Company’s filings with the SEC.
Schedule I
KKR Financial Holdings LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share information)
|
| For the three |
| For the three |
| ||
|
| months ended |
| months ended |
| ||
|
| March 31, 2009 |
| March 31, 2008 |
| ||
Net investment income: |
|
|
|
|
| ||
Securities interest income |
| $ | 28,852 |
| $ | 39,809 |
|
Loan interest income |
| 129,204 |
| 216,537 |
| ||
Dividend income |
| 261 |
| 816 |
| ||
Other interest income |
| 356 |
| 11,076 |
| ||
Total investment income |
| 158,673 |
| 268,238 |
| ||
Interest expense |
| (89,882 | ) | (154,065 | ) | ||
Interest expense to affiliates |
| (5,805 | ) | (27,818 | ) | ||
Provision for loan losses |
| (26,987 | ) | — |
| ||
Net investment income |
| 35,999 |
| 86,355 |
| ||
Other loss: |
|
|
|
|
| ||
Net realized and unrealized gain (loss) on derivatives and foreign exchange |
| 12,396 |
| (47,016 | ) | ||
Net realized and unrealized loss on investments |
| (60,204 | ) | (13,759 | ) | ||
Net realized and unrealized loss on residential mortgage-backed securities, residential mortgage loans, and residential mortgage-backed securities issued, carried at estimated fair value |
| (19,419 | ) | (9,178 | ) | ||
Net realized and unrealized gain on securities sold, not yet purchased |
| 1,437 |
| 6,986 |
| ||
Gain on debt restructuring |
| 34,571 |
| — |
| ||
Other income |
| 1,333 |
| 4,956 |
| ||
Total other loss |
| (29,886 | ) | (58,011 | ) | ||
|
|
|
|
|
| ||
Non-investment expenses: |
|
|
|
|
| ||
Related party management compensation |
| 11,212 |
| 9,159 |
| ||
General, administrative and directors expenses |
| 2,403 |
| 4,523 |
| ||
Professional services |
| 3,385 |
| 1,857 |
| ||
Loan servicing |
| 2,136 |
| 2,569 |
| ||
Total non-investment expenses |
| 19,136 |
| 18,108 |
| ||
(Loss) income from continuing operations before income tax benefit |
| (13,023 | ) | 10,236 |
| ||
Income tax benefit |
| 47 |
| — |
| ||
(Loss) income from continuing operations |
| (12,976 | ) | 10,236 |
| ||
Income from discontinued operations |
| — |
| 3,747 |
| ||
Net (loss) income |
| $ | (12,976 | ) | $ | 13,983 |
|
|
|
|
|
|
| ||
Net (loss) income per common share: |
|
|
|
|
| ||
Basic |
|
|
|
|
| ||
(Loss) income per share from continuing operations |
| $ | (0.09 | ) | $ | 0.09 |
|
Income per share from discontinued operations |
| $ | — |
| $ | 0.03 |
|
Net (loss) income per share |
| $ | (0.09 | ) | $ | 0.12 |
|
Diluted |
|
|
|
|
| ||
(Loss) income per share from continuing operations |
| $ | (0.09 | ) | $ | 0.09 |
|
Income per share from discontinued operations |
| $ | — |
| $ | 0.03 |
|
Net (loss) income per share |
| $ | (0.09 | ) | $ | 0.12 |
|
|
|
|
|
|
| ||
Weighted-average number of common shares outstanding: |
|
|
|
|
| ||
Basic |
| 149,714 |
| 115,048 |
| ||
Diluted |
| 149,714 |
| 115,599 |
| ||
Schedule II
KKR Financial Holdings LLC
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
| March 31, |
| December 31, |
| ||
Assets |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 55,363 |
| $ | 41,430 |
|
Restricted cash and cash equivalents |
| 378,832 |
| 1,233,585 |
| ||
Securities available-for-sale, $479,120 and $553,441 pledged as collateral as of March 31, 2009 and December 31, 2008, respectively |
| 482,210 |
| 555,965 |
| ||
Corporate loans, net of allowance for loan losses of $507,762 and $480,775 as of March 31, 2009 and December 31, 2008, respectively |
| 7,114,124 |
| 7,246,797 |
| ||
Residential mortgage-backed securities, at estimated fair value, $87,883 and $102,814 pledged as collateral as of March 31, 2009 and December 31, 2008, respectively |
| 87,883 |
| 102,814 |
| ||
Residential mortgage loans, at estimated fair value |
| 2,260,759 |
| 2,620,021 |
| ||
Corporate loans held for sale |
| 259,901 |
| 324,649 |
| ||
Derivative assets |
| 9,557 |
| 73,869 |
| ||
Interest and principal receivable |
| 77,406 |
| 116,788 |
| ||
Reverse repurchase agreements |
| 80,156 |
| 88,252 |
| ||
Other assets |
| 104,027 |
| 110,912 |
| ||
Total assets |
| $ | 10,910,218 |
| $ | 12,515,082 |
|
Liabilities |
|
|
|
|
| ||
Collateralized loan obligation senior secured notes |
| $ | 6,383,928 |
| $ | 7,487,611 |
|
Collateralized loan obligation junior secured notes to affiliates |
| 627,301 |
| 655,313 |
| ||
Secured revolving credit facility |
| 267,569 |
| 275,633 |
| ||
Convertible senior notes |
| 291,500 |
| 291,500 |
| ||
Junior subordinated notes |
| 288,671 |
| 288,671 |
| ||
Residential mortgage-backed securities issued, at estimated fair value |
| 2,113,587 |
| 2,462,882 |
| ||
Accounts payable, accrued expenses and other liabilities |
| 32,893 |
| 60,124 |
| ||
Accrued interest payable |
| 29,750 |
| 61,119 |
| ||
Accrued interest payable to affiliates |
| 3,106 |
| 3,987 |
| ||
Related party payable |
| 3,025 |
| 2,876 |
| ||
Securities sold, not yet purchased |
| 82,545 |
| 90,809 |
| ||
Derivative liabilities |
| 93,123 |
| 171,212 |
| ||
Total liabilities |
| 10,216,998 |
| 11,851,737 |
| ||
Shareholders’ Equity |
|
|
|
|
| ||
Preferred shares, no par value, 50,000,000 shares authorized and none issued and outstanding at March 31, 2009 and December 31, 2008 |
| — |
| — |
| ||
Common shares, no par value, 250,000,000 shares authorized, and 150,889,325 and 150,881,500 shares issued and outstanding at March 31, 2009 and December 31, 2008, respectively |
| — |
| — |
| ||
Paid-in-capital |
| 2,550,846 |
| 2,550,849 |
| ||
Accumulated other comprehensive loss |
| (225,928 | ) | (268,782 | ) | ||
Accumulated deficit |
| (1,631,698 | ) | (1,618,722 | ) | ||
Total shareholders’ equity |
| 693,220 |
| 663,345 |
| ||
Total liabilities and shareholders’ equity |
| $ | 10,910,218 |
| $ | 12,515,082 |
|