Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 05, 2015 | |
Document and Entity Information | ||
Entity Registrant Name | KKR Financial Holdings LLC | |
Entity Central Index Key | 1,386,926 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 100 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets | ||
Cash and cash equivalents | $ 489,279 | $ 163,405 |
Restricted cash and cash equivalents | 348,383 | 447,507 |
Securities, at estimated fair value | 447,438 | 638,605 |
Corporate loans, at estimated fair value | 5,444,004 | 6,506,564 |
Equity investments, at estimated fair value ($126,357 and $61,543 pledged as collateral as of September 30, 2015 and December 31, 2014, respectively) | 279,346 | 181,378 |
Oil and gas properties, net | 115,865 | 120,274 |
Interests in joint ventures and partnerships, at estimated fair value | 655,655 | 718,772 |
Derivative assets | 34,766 | 33,566 |
Interest and principal receivable | 24,664 | 54,598 |
Receivable for investments sold | 34,169 | 57,306 |
Other assets | 25,874 | 29,650 |
Total assets | 7,899,443 | 8,951,625 |
Liabilities | ||
Collateralized loan obligation secured notes, at estimated fair value | 4,709,138 | 5,501,099 |
Collateralized loan obligation warehouse facility | 26,063 | 0 |
Senior notes | 413,394 | 414,524 |
Junior subordinated notes | 248,160 | 246,907 |
Payable for investments purchased | 221,873 | 206,221 |
Accounts payable, accrued expenses and other liabilities | 45,358 | 14,893 |
Accrued interest payable | 22,436 | 19,402 |
Related party payable | 4,792 | 5,404 |
Derivative liabilities | 49,662 | 55,127 |
Total liabilities | 5,740,876 | 6,463,577 |
Equity | ||
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both September 30, 2015 and December 31, 2014 | 0 | 0 |
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both September 30, 2015 and December 31, 2014 | 0 | 0 |
Paid-in-capital | 2,764,061 | 2,764,061 |
Accumulated deficit | (691,447) | (376,182) |
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity | 2,072,614 | 2,387,879 |
Noncontrolling interests | 85,953 | 100,169 |
Total equity | 2,158,567 | 2,488,048 |
Total liabilities and equity | $ 7,899,443 | $ 8,951,625 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Equity investments, at estimated fair value, pledged as collateral (in dollars) | $ 126,357 | $ 61,543 |
Preferred shares, no par value (in dollars per share) | ||
Preferred shares, shares authorized | 50,000,000 | 50,000,000 |
Preferred shares, shares issued | 14,950,000 | 14,950,000 |
Preferred shares, shares outstanding | 14,950,000 | 14,950,000 |
Common shares, no par value (in dollars per share) | ||
Common shares, shares authorized | 500,000,000 | 500,000,000 |
Common shares, shares issued | 100 | 100 |
Common shares, shares outstanding | 100 | 100 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||||
Revenues | |||||
Loan interest income | $ 62,743 | $ 81,944 | $ 135,627 | $ 210,203 | |
Securities interest income | 15,297 | 14,323 | 19,410 | 47,146 | |
Oil and gas revenue | 3,876 | 17,929 | 49,859 | 13,055 | |
Other | 7,193 | 10,560 | 14,173 | 22,182 | |
Total revenues | 89,109 | 124,756 | 219,069 | 292,586 | |
Investment costs and expenses | |||||
Interest expense | 47,422 | 47,682 | 83,578 | 161,589 | |
Oil and gas production costs | 248 | 6,701 | 14,561 | 498 | |
Oil and gas depreciation, depletion and amortization | 1,404 | 5,968 | 17,102 | 4,409 | |
Other | 1,278 | 989 | 1,763 | 3,959 | |
Total investment costs and expenses | 50,352 | 61,340 | 117,004 | 170,455 | |
Other income (loss) | |||||
Net realized and unrealized gain (loss) on investments | (232,549) | (127,418) | (73,318) | (219,058) | |
Net realized and unrealized gain (loss) on derivatives and foreign exchange | (10,304) | 152 | (9,012) | (3,545) | |
Net realized and unrealized gain (loss) on debt | 54,860 | (1,453) | (26,849) | (33,933) | |
Other income (loss) | 2,544 | 3,034 | 4,381 | 9,958 | |
Total other income (loss) | (185,449) | (125,685) | (104,798) | (246,578) | |
Other expenses | |||||
Related party management compensation | 9,449 | 12,544 | 22,950 | 29,486 | |
General, administrative and directors' expenses | 1,779 | 2,041 | 4,454 | 9,265 | |
Professional services | 319 | 313 | 1,858 | 2,233 | |
Total other expenses | 11,547 | 14,898 | 29,262 | 40,984 | |
Income (loss) before income taxes | (158,239) | (77,167) | (31,995) | (165,431) | |
Income tax expense (benefit) | 94 | 34 | 62 | 1,170 | |
Net income (loss) | (158,333) | (77,201) | (32,057) | (166,601) | |
Net income (loss) attributable to noncontrolling interests | (6,676) | 816 | 816 | (15,452) | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | (151,657) | (78,017) | (32,873) | (151,149) | |
Preferred share distributions | 6,891 | 6,891 | 13,782 | 20,673 | |
Net income (loss) available to common shares | $ (158,548) | $ (84,908) | $ (46,655) | $ (171,822) | |
Predecessor Company | |||||
Revenues | |||||
Loan interest income | $ 114,096 | ||||
Securities interest income | 13,081 | ||||
Oil and gas revenue | 61,782 | ||||
Other | 28,283 | ||||
Total revenues | 217,242 | ||||
Investment costs and expenses | |||||
Interest expense | 64,362 | ||||
Oil and gas production costs | 14,772 | ||||
Oil and gas depreciation, depletion and amortization | 22,471 | ||||
Other | 220 | ||||
Total investment costs and expenses | 101,825 | ||||
Other income (loss) | |||||
Net realized and unrealized gain (loss) on investments | 61,553 | ||||
Net realized and unrealized gain (loss) on derivatives and foreign exchange | (9,783) | ||||
Net realized and unrealized gain (loss) on debt | 0 | ||||
Other income (loss) | 4,564 | ||||
Total other income (loss) | 56,334 | ||||
Other expenses | |||||
Related party management compensation | 29,841 | ||||
General, administrative and directors' expenses | 8,891 | ||||
Professional services | 26,877 | ||||
Total other expenses | 65,609 | ||||
Income (loss) before income taxes | 106,142 | ||||
Income tax expense (benefit) | 162 | ||||
Net income (loss) | 105,980 | ||||
Net income (loss) attributable to noncontrolling interests | 0 | ||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 105,980 | ||||
Preferred share distributions | 6,891 | ||||
Net income (loss) available to common shares | $ 99,089 | ||||
Net income (loss) per common share: | |||||
Basic (in dollars per share) | $ 0.48 | ||||
Diluted (in dollars per share) | $ 0.48 | ||||
Weighted-average number of common shares outstanding: | |||||
Basic (in shares) | 204,276 | ||||
Diluted (in shares) | 204,276 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||||
Net income (loss) | $ (158,333) | $ (77,201) | $ (32,057) | $ (166,601) | |
Other comprehensive income (loss): | |||||
Unrealized gains (losses) on securities available-for-sale | 0 | 0 | 0 | 0 | |
Unrealized gains (losses) on cash flow hedges | 0 | 0 | 0 | 0 | |
Total other comprehensive income (loss) | 0 | 0 | 0 | 0 | |
Comprehensive income (loss) | (158,333) | (77,201) | (32,057) | (166,601) | |
Less: Comprehensive income (loss) attributable to noncontrolling interests | 0 | 0 | 0 | 0 | |
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | $ (158,333) | $ (77,201) | $ (32,057) | $ (166,601) | |
Predecessor Company | |||||
Net income (loss) | $ 105,980 | ||||
Other comprehensive income (loss): | |||||
Unrealized gains (losses) on securities available-for-sale | (5,253) | ||||
Unrealized gains (losses) on cash flow hedges | (5,442) | ||||
Total other comprehensive income (loss) | (10,695) | ||||
Comprehensive income (loss) | 95,285 | ||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | 0 | ||||
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | $ 95,285 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands | Total | Preferred Shares | Preferred Shares Paid-In Capital | Common Shares | Common Shares Paid-In Capital | Accumulated Other Comprehensive Loss | Accumulated Deficit | Noncontrolling interests |
Balance (Predecessor Company) at Dec. 31, 2013 | $ 2,527,734 | $ 361,622 | $ 2,953,495 | $ (15,652) | $ (771,731) | |||
Balance (in shares) (Predecessor Company) at Dec. 31, 2013 | 14,950,000 | 204,824,159 | ||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Net income (loss) | Predecessor Company | 105,980 | 105,980 | ||||||
Distributions declared on preferred shares | Predecessor Company | (6,891) | (6,891) | ||||||
Distributions declared on common shares | Predecessor Company | (45,061) | (45,061) | ||||||
Other comprehensive income (loss) | Predecessor Company | (10,695) | (10,695) | ||||||
Share-based compensation expense related to restricted common shares | Predecessor Company | 1,018 | 1,018 | ||||||
Balance (Predecessor Company) at Apr. 30, 2014 | 2,572,085 | 361,622 | 2,954,513 | (26,347) | (717,703) | |||
Balance (Successor Company) at Apr. 30, 2014 | 2,572,085 | 361,622 | 2,954,513 | (26,347) | (717,703) | $ 0 | ||
Balance (in shares) (Predecessor Company) at Apr. 30, 2014 | 14,950,000 | 204,824,159 | ||||||
Balance (in shares) (Successor Company) at Apr. 30, 2014 | 14,950,000 | 204,824,159 | ||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Purchase accounting adjustments | Successor Company | 191,371 | 17,361 | (570,040) | 26,347 | 717,703 | |||
Balance (Successor Company) at May. 01, 2014 | 2,763,456 | 378,983 | 2,384,473 | 0 | 0 | 0 | ||
Balance (in shares) (Successor Company) at May. 01, 2014 | 14,950,000 | 204,824,159 | ||||||
Balance (Predecessor Company) at Apr. 30, 2014 | 2,572,085 | 361,622 | 2,954,513 | (26,347) | (717,703) | |||
Balance (Successor Company) at Apr. 30, 2014 | 2,572,085 | 361,622 | 2,954,513 | (26,347) | (717,703) | 0 | ||
Balance (in shares) (Predecessor Company) at Apr. 30, 2014 | 14,950,000 | 204,824,159 | ||||||
Balance (in shares) (Successor Company) at Apr. 30, 2014 | 14,950,000 | 204,824,159 | ||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Reverse stock split (in shares) | Successor Company | (204,824,059) | |||||||
Contribution of assets of previously unconsolidated entities | Successor Company | 65,063 | 65,063 | ||||||
Net income (loss) | Successor Company | (32,057) | (32,873) | 816 | |||||
Distributions declared on preferred shares | Successor Company | (13,782) | (13,782) | ||||||
Distributions to Parent | Successor Company | (392,923) | (392,923) | ||||||
Contributions from Parent | Successor Company | 291,529 | 291,529 | ||||||
Capital contributions from Parent | Successor Company | 192 | 192 | ||||||
Other comprehensive income (loss) | Successor Company | 0 | |||||||
Balance (Successor Company) at Sep. 30, 2014 | 2,681,478 | 378,983 | 2,384,665 | $ 0 | (148,049) | 65,879 | ||
Balance (in shares) (Successor Company) at Sep. 30, 2014 | 14,950,000 | 100 | ||||||
Balance (Successor Company) at Dec. 31, 2014 | 2,488,048 | 378,983 | 2,385,078 | (376,182) | 100,169 | |||
Balance at Dec. 31, 2014 | 2,488,048 | |||||||
Balance (in shares) (Successor Company) at Dec. 31, 2014 | 14,950,000 | 100 | ||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Contribution of assets of previously unconsolidated entities | Successor Company | 1,236 | 1,236 | ||||||
Net income (loss) | Successor Company | (166,601) | (151,149) | (15,452) | |||||
Distributions declared on preferred shares | Successor Company | (20,673) | (20,673) | ||||||
Distributions to Parent | Successor Company | (141,566) | (141,566) | ||||||
Distributions to Parent | (141,600) | |||||||
Other comprehensive income (loss) | Successor Company | 0 | |||||||
Balance (Successor Company) at Sep. 30, 2015 | 2,158,567 | $ 378,983 | $ 2,385,078 | (691,447) | $ 85,953 | |||
Balance at Sep. 30, 2015 | 2,158,567 | |||||||
Balance (in shares) (Successor Company) at Sep. 30, 2015 | 14,950,000 | 100 | ||||||
Increase (Decrease) in Shareholders' Equity | ||||||||
Cumulative effect adjustment from adoption of accounting guidance | Successor Company | $ (1,877) | $ (1,877) |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | ||
Cash flows from financing activities | |||||||
Cash and cash equivalents at beginning of period | $ 163,405 | ||||||
Cash and cash equivalents at end of period | $ 489,279 | 489,279 | $ 163,405 | ||||
Successor Company | |||||||
Net income (loss) | (158,333) | $ (77,201) | $ (32,057) | (166,601) | |||
Net income (loss) | (151,657) | (78,017) | (32,873) | (151,149) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Net realized and unrealized (gain) loss on derivatives and foreign exchange | 10,304 | (152) | 9,012 | 3,545 | |||
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests | 0 | (15,452) | |||||
Write-off of debt issuance costs | 0 | 0 | |||||
Lower of cost or estimated fair value adjustment on corporate loans held for sale | 0 | 0 | |||||
Impairment charges | 0 | 0 | |||||
Share-based compensation | 0 | 0 | |||||
Net realized and unrealized (gain) loss on investments | 73,318 | 234,510 | |||||
Depreciation and net amortization | 16,817 | 22,915 | |||||
Net realized and unrealized (gain) loss on debt | (54,860) | 1,453 | 26,849 | 33,933 | |||
Changes in assets and liabilities: | |||||||
Interest receivable | 1,124 | 24,170 | |||||
Other assets | (13,639) | (32,759) | |||||
Related party payable | 7,648 | (612) | |||||
Accounts payable, accrued expenses and other liabilities | (20,894) | 28,235 | |||||
Accrued interest payable | 131 | 3,034 | |||||
Net cash provided by (used in) operating activities | 67,493 | 134,918 | |||||
Cash flows from investing activities | |||||||
Principal payments from corporate loans | 479,322 | 1,160,687 | |||||
Principal payments from securities | 20,174 | 11,841 | |||||
Proceeds from sales of corporate loans | 533,310 | 1,142,796 | |||||
Proceeds from sales of securities | 16,085 | 152,707 | |||||
Proceeds from equity and other investments | 65,996 | 48,915 | |||||
Purchases of corporate loans | (686,994) | (1,391,722) | |||||
Purchases of securities | (62,258) | (9,387) | |||||
Purchases of equity and other investments | (110,742) | (56,171) | |||||
Net change in proceeds, purchases and settlements of derivatives | (12,116) | 21,643 | |||||
Net change in restricted cash and cash equivalents | (18,411) | 99,124 | |||||
Net cash provided by (used in) investing activities | 224,366 | 1,180,433 | |||||
Cash flows from financing activities | |||||||
Issuance of collateralized loan obligation secured notes | 524,035 | 595,056 | |||||
Retirement of collateralized loan obligation secured notes | (778,866) | (1,445,941) | |||||
Distributions on common shares | (74,598) | (141,566) | |||||
Distributions on preferred shares | [1] | (6,891) | (20,673) | ||||
Distributions to Parent | (25,900) | 0 | |||||
Capital distributions to noncontrolling interests | 0 | (2,728) | |||||
Contributions from Parent | 235,759 | 235,759 | 0 | ||||
Capital contributions from Parent | 192 | 0 | |||||
Capital contributions from noncontrolling interests | 0 | 3,964 | |||||
Other capitalized costs | (4,552) | (3,652) | |||||
Net cash provided by (used in) financing activities | (110,721) | (989,477) | |||||
Net increase (decrease) in cash and cash equivalents | 181,138 | 325,874 | |||||
Cash and cash equivalents at beginning of period | 210,413 | 163,405 | |||||
Cash and cash equivalents at end of period | 489,279 | 391,551 | $ 210,413 | 391,551 | 489,279 | 163,405 | |
Supplemental cash flow information | |||||||
Cash paid for interest | 65,835 | 123,224 | |||||
Net cash paid (refunded) for income taxes | 93 | (1,988) | |||||
Non-cash investing and financing activities | |||||||
Assets distributed to Parent | (292,425) | 0 | |||||
Assets contributed from Parent | 55,770 | 0 | |||||
Natural resources assets transferred out | (179,203) | (114,546) | 0 | ||||
Interest in Trinity transferred in | 114,546 | 0 | |||||
Preferred share distributions declared, not yet paid | $ 6,891 | $ 6,891 | 6,891 | 6,891 | |||
Loans transferred from held for investment to held for sale | 0 | 0 | |||||
Predecessor Company | |||||||
Net income (loss) | 105,980 | ||||||
Net income (loss) | 105,980 | ||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||
Net realized and unrealized (gain) loss on derivatives and foreign exchange | 9,783 | ||||||
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests | 0 | ||||||
Write-off of debt issuance costs | 1,472 | ||||||
Lower of cost or estimated fair value adjustment on corporate loans held for sale | (5,038) | ||||||
Impairment charges | 4,391 | ||||||
Share-based compensation | 1,018 | ||||||
Net realized and unrealized (gain) loss on investments | (60,906) | ||||||
Depreciation and net amortization | 15,832 | ||||||
Net realized and unrealized (gain) loss on debt | 0 | ||||||
Changes in assets and liabilities: | |||||||
Interest receivable | (6,753) | ||||||
Other assets | (19,668) | ||||||
Related party payable | (1,815) | ||||||
Accounts payable, accrued expenses and other liabilities | 27,211 | ||||||
Accrued interest payable | (1,470) | ||||||
Net cash provided by (used in) operating activities | 70,037 | ||||||
Cash flows from investing activities | |||||||
Principal payments from corporate loans | 906,166 | ||||||
Principal payments from securities | 21,223 | ||||||
Proceeds from sales of corporate loans | 36,595 | ||||||
Proceeds from sales of securities | 44,373 | ||||||
Proceeds from equity and other investments | 48,911 | ||||||
Purchases of corporate loans | (886,230) | ||||||
Purchases of securities | (78,106) | ||||||
Purchases of equity and other investments | (104,301) | ||||||
Net change in proceeds, purchases and settlements of derivatives | (7,265) | ||||||
Net change in restricted cash and cash equivalents | (299,579) | ||||||
Net cash provided by (used in) investing activities | (318,213) | ||||||
Cash flows from financing activities | |||||||
Issuance of collateralized loan obligation secured notes | 648,197 | ||||||
Retirement of collateralized loan obligation secured notes | (221,914) | ||||||
Distributions on common shares | (45,061) | ||||||
Distributions on preferred shares | [1] | (13,782) | |||||
Distributions to Parent | 0 | ||||||
Capital distributions to noncontrolling interests | 0 | ||||||
Contributions from Parent | 0 | ||||||
Capital contributions from Parent | 0 | ||||||
Capital contributions from noncontrolling interests | 0 | ||||||
Other capitalized costs | (3,918) | ||||||
Net cash provided by (used in) financing activities | 301,422 | ||||||
Net increase (decrease) in cash and cash equivalents | 53,246 | ||||||
Cash and cash equivalents at beginning of period | 157,167 | 210,413 | $ 157,167 | ||||
Cash and cash equivalents at end of period | 210,413 | ||||||
Supplemental cash flow information | |||||||
Cash paid for interest | 53,576 | ||||||
Net cash paid (refunded) for income taxes | 157 | ||||||
Non-cash investing and financing activities | |||||||
Assets distributed to Parent | 0 | ||||||
Assets contributed from Parent | 0 | ||||||
Natural resources assets transferred out | 0 | ||||||
Interest in Trinity transferred in | 0 | ||||||
Preferred share distributions declared, not yet paid | 0 | ||||||
Loans transferred from held for investment to held for sale | 348,808 | ||||||
Other Credit Facilities | Successor Company | |||||||
Cash flows from financing activities | |||||||
Proceeds from credit facilities | 60,100 | 0 | |||||
Repayment of credit facilities | (40,000) | 0 | |||||
Other Credit Facilities | Predecessor Company | |||||||
Cash flows from financing activities | |||||||
Proceeds from credit facilities | 13,300 | ||||||
Repayment of credit facilities | (75,400) | ||||||
CLO Warehouse Facility | Successor Company | |||||||
Cash flows from financing activities | |||||||
Proceeds from credit facilities | 0 | 216,063 | |||||
Repayment of credit facilities | $ 0 | $ (190,000) | |||||
CLO Warehouse Facility | Predecessor Company | |||||||
Cash flows from financing activities | |||||||
Proceeds from credit facilities | 0 | ||||||
Repayment of credit facilities | $ 0 | ||||||
[1] | For the four months ended April 30, 2014, $6.9 million of distributions on preferred shares was previously presented as "preferred share distribution payable" within operating activities of the condensed consolidated statements of cash flows. |
Condensed Consolidated Stateme8
Condensed Consolidated Statements of Cash Flows (Parenthetical) $ in Millions | 4 Months Ended |
Apr. 30, 2014USD ($) | |
Distributions On Preferred Shares Presented Within Operating Activities | Predecessor Company | |
Preferred share distribution payable | $ 6.9 |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2015 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | ORGANIZATION KKR Financial Holdings LLC together with its subsidiaries (the “Company” or “KFN”) is a specialty finance company with expertise in a range of asset classes. The Company’s core business strategy is to leverage the proprietary resources of KKR Financial Advisors LLC (the “Manager”) with the objective of generating current income. The Company’s holdings primarily consist of below investment grade syndicated corporate loans, also known as leveraged loans, high yield debt securities, interests in joint ventures and partnerships, and royalty interests in oil and gas properties. The corporate loans that the Company holds are typically purchased via assignment or participation in the primary or secondary market. The majority of the Company’s holdings consist of corporate loans and high yield debt securities held in collateralized loan obligation (“CLO”) transactions that are structured as on‑balance sheet securitizations and are used as long term financing for the Company’s investments in corporate debt. The senior secured debt issued by the CLO transactions is primarily owned by unaffiliated third party investors and the Company owns the majority of the subordinated notes in the CLO transactions. The Company executes its core business strategy through its majority‑owned subsidiaries, including CLOs. The Manager, a wholly‑owned subsidiary of KKR Credit Advisors (US) LLC, manages the Company pursuant to an amended and restated management agreement (as amended the “Management Agreement”). KKR Credit Advisors (US) LLC is a wholly‑owned subsidiary of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), which is a subsidiary of KKR & Co. L.P. (“KKR & Co.”). On April 30, 2014, the Company became a subsidiary of KKR & Co., whereby KKR & Co. acquired all of the Company’s outstanding common shares through an exchange of equity through which the Company’s shareholders received 0.51 common units representing the limited partnership interests of KKR & Co. for each common share of KFN (the “Merger Transaction”). Following the Merger Transaction, KKR Fund Holdings L.P. (“KKR Fund Holdings”), a subsidiary of KKR & Co., became the sole holder of all of the outstanding common shares of the Company and is the parent of the Company (the “Parent”). As of the close of trading on April 30, 2014, the Company’s common shares were delisted on the New York Stock Exchange (“NYSE”). The Company’s 7.375% Series A LLC Preferred Shares (“Series A LLC Preferred Shares”), senior notes and junior subordinated notes remain outstanding and the Company continues to file periodic reports under the Securities Exchange Act of 1934, as amended. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and entities established to complete secured financing transactions that are considered to be variable interest entities (“VIEs”) and for which the Company is the primary beneficiary. Also included in the condensed consolidated financial statements are the financial results of certain entities, which are not considered VIEs, but in which the Company is presumed to have control. The ownership interests held by third parties are reflected as noncontrolling interests in the accompanying financial statements. As further described in Note 3 to these condensed consolidated financial statements, the Merger Transaction was accounted for using the acquisition method of accounting, which required that the assets purchased and the liabilities assumed all be reported in the acquirer’s financial statements at their fair value, with any excess of net assets over the purchase price being reported as a bargain purchase gain. The application of the acquisition method of accounting represented a push down of accounting basis to the Company, whereby it was also required to record the assets and liabilities at fair value as of the date of the Merger Transaction. This change in accounting basis resulted in the termination of the prior reporting entity and a corresponding creation of a new reporting entity. Accordingly, the Company’s condensed consolidated financial statements and transactional records prior to the effective date, or May 1, 2014 (the “Effective Date”), reflect the historical accounting basis of assets and liabilities and are labeled “Predecessor Company,” while such records subsequent to the Effective Date are labeled “Successor Company” and reflect the push down basis of accounting for the new estimated fair values in the Company’s condensed consolidated financial statements. This change in accounting basis is represented in the condensed consolidated financial statements by a vertical black line which appears between the columns entitled “Predecessor Company” and “Successor Company” on the statements and in the relevant notes. The black line signifies that the amounts shown for the periods prior to and subsequent to the Merger Transaction are not comparable. In addition to the new accounting basis established for assets and liabilities, purchase accounting also required the reclassification of any retained earnings or accumulated deficit from periods prior to the acquisition and the elimination of any accumulated other comprehensive income or loss to be recognized within the Company’s equity section of the Company’s condensed consolidated financial statements. Accordingly, the Company’s accumulated deficit at September 30, 2015 and December 31, 2014 represent only the results of operations subsequent to April 30, 2014, the date of the Merger Transaction. For the following assets not carried at fair value, as presented under the Predecessor Company, the Company adopted the fair value option of accounting as of the Effective Date: (i) corporate loans held for investment at amortized cost, net of an allowance for loan losses, (ii) corporate loans held for sale at lower of cost or estimated fair value and (iii) certain other investments at cost. In addition, the Company elected the fair value option of accounting for its CLO secured notes. As such, the accounting policies followed by the Company in the preparation of its condensed consolidated financial statements for the Successor period present all financial assets and CLO secured notes at estimated fair value. The initial fair value presentation was a result of the push down basis of accounting, while the prospective fair value presentation was for the primary purpose of reporting values more closely aligned with KKR & Co.’s method of accounting. In August 2014, the Financial Accounting Standards Board ("FASB") amended existing standards to provide an entity that consolidates a collateralized financing entity (“CFE”) that had elected the fair value option for the financial assets and financial liabilities of such CFE, an alternative to current fair value measurement guidance. In accordance with this guidance, beginning January 1, 2015, the Company elected to measure the financial liabilities of its consolidated CLOs using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. Refer to "Borrowings" below for further discussion. The Company applied the guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2015 totaling $1.9 million . Unrealized gains and losses for the financial assets and liabilities carried at estimated fair value are reported in net realized and unrealized gain (loss) on investments and net realized and unrealized gain (loss) on debt, respectively, in the condensed consolidated statements of operations. Unrealized gains or losses primarily reflect the change in instrument values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. For the Successor period, upon the sale of a corporate loan or debt security, the net realized gain or loss is computed using the specific identification method. Comparatively, for the Predecessor period, the realized net gain or loss was computed on a weighted average cost basis. In addition, for the Successor period, all purchases and sales of assets are recorded on the trade date. Comparatively, for the Predecessor periods, corporate loans were recorded on the settlement date. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing its estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While the Company believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are appropriate, actual results could differ from those estimates. Consolidation KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”), KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”) and KKR CLO 11, Ltd ("CLO 11") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During July 2015, the Company called KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and repaid aggregate senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, the Company called KKR Financial CLO 2006-1, Ltd ("CLO 2006-1") and repaid all senior and mezzanine notes outstanding. These entities are VIEs which the Company consolidates as the Company has determined it has the power to direct the activities that most significantly impact these entities’ economic performance and the Company has both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities. In CLO transactions, subordinated notes have the first risk of loss and conversely, the residual value upside of the transactions. The Company finances the majority of its corporate debt investments through its CLOs. As of September 30, 2015 , the Company’s CLOs held $5.7 billion par amount, or $5.3 billion estimated fair value, of corporate debt investments. As of December 31, 2014, the Company's CLOs held $6.9 billion par amount, or $6.5 billion estimated fair value, of corporate debt investments. The assets in each CLO can be used only to settle the debt of the related CLO. As of September 30, 2015 and December 31, 2014, the aggregate par amount of CLO debt totaled $4.7 billion and $5.6 billion , respectively, held by unaffiliated third parties. The Company consolidates all non‑VIEs in which it holds a greater than 50 percent voting interest. Specifically, the Company consolidates majority owned entities for which the Company is presumed to have control. The ownership interests of these entities held by third parties are reflected as noncontrolling interests in the accompanying financial statements. The Company began consolidating a majority of these non‑VIE entities as a result of the asset contributions from its Parent during the second half of 2014. For certain of these entities, the Company previously held a percentage ownership, but following the incremental contributions from its Parent, were presumed to have control. In addition, the Company has noncontrolling interests in joint ventures and partnerships that do not qualify as VIEs and do not meet the control requirements for consolidation as defined by GAAP. All inter‑company balances and transactions have been eliminated in consolidation. Fair Value Option In connection with the application of acquisition accounting related to the Merger Transaction, the Successor Company elected the fair value option of accounting for its financial assets and CLO secured notes for the primary purpose of reporting values that more closely aligned with KKR & Co.’s method of accounting. Related unrealized gains and losses are reported in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors including the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets and liabilities, and are as follows: Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3: Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument is new, whether the instrument is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels 1 , 2 , and/or 3 , which the Company recognizes at the end of the reporting period. Many financial assets and liabilities have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the Company and others are willing to pay for an asset. Ask prices represent the lowest price that the Company and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid‑ask prices, the Company does not require that fair value always be a predetermined point in the bid‑ask range. The Company’s policy is to allow for mid‑market pricing and adjusting to the point within the bid‑ask range that meets the Company’s best estimate of fair value. Depending on the relative liquidity in the markets for certain assets, the Company may transfer assets to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are not available. The valuation techniques used for the assets and liabilities that are valued using Level 3 of the fair value hierarchy are described below. Securities and Corporate Loans, at Estimated Fair Value: Securities and corporate loans, at estimated fair value are initially valued at transaction price and are subsequently valued using market data for similar instruments (e.g., recent transactions or broker quotes), comparisons to benchmark derivative indices or valuation models. Valuation models are based on yield analysis techniques, where the key inputs are based on relative value analyses, which incorporate similar instruments from similar issuers. In addition, an illiquidity discount is applied where appropriate. Equity and Interests in Joint Ventures and Partnerships, at Estimated Fair Value: Equity and interests in joint ventures and partnerships, at estimated fair value, are initially valued at transaction price and are subsequently valued using observable market prices, if available, or internally developed models in the absence of readily observable market prices. Interests in joint ventures and partnerships include certain equity investments related to the oil and gas, commercial real estate and specialty lending sectors. Valuation models are generally based on market comparables and discounted cash flow approaches, in which various internal and external factors are considered. Factors include key financial inputs and recent public and private transactions for comparable investments. Key inputs used for the discounted cash flow approach, which incorporates significant assumptions and judgment, include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) exit multiples. Natural resources investments are generally valued using a discounted cash flow analysis. Key inputs used in this methodology that require estimates include the weighted average cost of capital. In addition, the valuations of natural resources investments generally incorporate both commodity prices as quoted on indices and long‑term commodity price forecasts, which may be substantially different from, and are currently higher than, commodity prices on certain indices for equivalent future dates. Long‑term commodity price forecasts are utilized to capture the value of the investments across a range of commodity prices within the portfolio associated with future development and to reflect price expectations. Upon completion of the valuations conducted using these approaches, a weighting is ascribed to each approach and an illiquidity discount is applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within the range suggested by the two approaches. Over-the-counter (“OTC”) Derivative Contracts: OTC derivative contracts may include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities and equity prices. OTC derivatives are initially valued using quoted market prices, if available, or models using a series of techniques, including closed‑form analytic formulae, such as the Black‑Scholes option‑pricing model, and/or simulation models in the absence of quoted market prices. Many pricing models employ methodologies that have pricing inputs observed from actively quoted markets, as is the case for generic interest rate swap and option contracts. Residential Mortgage-Backed Securities, at Estimated Fair Value: RMBS are initially valued at transaction price and are subsequently valued using a third party valuation servicer. The most significant inputs to the valuation of these instruments are default and loss expectations and constant prepayment rates. Collateralized Loan Obligation Secured Notes: As of January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. The Company considered the fair value of these financial assets, which were classified as Level 2 assets, as more observable than the fair value of these financial liabilities, which were classified as Level 3 liabilities. As a result of this new basis of measurement, the Company's CLO secured notes were transferred from Level 3 to Level 2 during the first quarter of 2015. Prior to this adoption, CLO secured notes were initially valued at transaction price and subsequently valued using a third party valuation servicer. The approach used to estimate the fair values was the discounted cash flow method, which included consideration of the cash flows of the debt obligation based on projected quarterly interest payments and quarterly amortization. The debt obligations were discounted based on the appropriate yield curve given the debt obligation's respective maturity and credit rating. The most significant inputs to the valuation of these instruments were default and loss expectations and discount margins. Key unobservable inputs that have a significant impact on the Company’s Level 3 valuations as described above are included in Note 10 to these condensed consolidated financial statements. The Company utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. These unobservable pricing inputs and assumptions may differ by asset and in the application of the Company’s valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if the Company only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. Valuation Process Investments are generally valued based on quotations from third party pricing services, unless such a quotation is unavailable or is determined to be unreliable or inadequately representing the fair value of the particular assets. In that case, valuations are based on either valuation data obtained from one or more other third party pricing sources, including broker dealers, or will reflect the valuation committee’s good faith determination of estimated fair value based on other factors considered relevant. The Company utilizes a valuation committee, whose members consist of certain employees of the Manager. The valuation committee is responsible for coordinating and consistently implementing the Company’s quarterly valuation policies, guidelines and processes. The valuation process involved in Level 3 measurements for assets and liabilities is completed on a quarterly basis and is designed to subject the valuation of Level 3 investments to an appropriate level of consistency, oversight and review. For assets classified as Level 3, valuations may be performed by the relevant investment professionals or by independent third parties with input from the relevant investment professionals and are based on various factors including evaluation of financial and operating data, company specific developments, market discount rates and valuations of comparable companies and model projections. Asset valuations are approved by the valuation committee, which may be assisted by a subcommittee for the valuation of certain investments. Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash held in banks and highly liquid investments with original maturities of three months or less. Interest income earned on cash and cash equivalents is recorded in other within total revenues on the condensed consolidated statements of operations. Restricted Cash and Cash Equivalents Restricted cash and cash equivalents represent amounts that are held by third parties under certain of the Company’s financing and derivative transactions. Interest income earned on restricted cash and cash equivalents is recorded in other within total revenues on the condensed consolidated statements of operations. On the condensed consolidated statements of cash flows, net additions or reductions to restricted cash and cash equivalents are classified as an investing activity as restricted cash and cash equivalents reflect the receipts from collections or sales of investments, as well as payments made to acquire investments held by third parties. Securities Securities Available‑for‑Sale The Predecessor and Successor Company both classify certain of their investments in securities as available‑for‑sale as the Companies may sell them prior to maturity and do not hold them principally for the purpose of selling them in the near term. These investments are carried at estimated fair value. The Successor Company elected the fair value option of accounting for its securities, with changes in estimated fair value reported in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. Comparatively, the Predecessor Company reported all unrealized gains and losses in accumulated other comprehensive loss on the condensed consolidated balance sheets. The Predecessor Company monitored its available‑for‑sale securities portfolio for impairments. A loss was recognized when it was determined that a decline in the estimated fair value of a security below its amortized cost was other‑than‑temporary. The Company considered many factors in determining whether the impairment of a security was deemed to be other‑than‑ temporary, including, but not limited to, the length of time the security had a decline in estimated fair value below its amortized cost and the severity of the decline, the amount of the unrealized loss, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. In addition, for debt securities, the Company considered its intent to sell the debt security, the Company’s estimation of whether or not it expected to recover the debt security’s entire amortized cost if it intended to hold the debt security, and whether it was more likely than not that the Company would have been required to sell the debt security before its anticipated recovery. For equity securities, the Company also considered its intent and ability to hold the equity security for a period of time sufficient for a recovery in value. The amount of the loss that was recognized when it was determined that a decline in the estimated fair value of a security below its amortized cost was other‑than‑temporary was dependent on certain factors. If the security was an equity security or if the security was a debt security that the Company intended to sell or estimated that it was more likely than not that the Company would be required to sell before recovery of its amortized cost, then the impairment amount recognized in earnings was the entire difference between the estimated fair value of the security and its amortized cost. For debt securities that the Company did not intend to sell or estimated that it was not more likely than not to be required to sell before recovery, the impairment was separated into the estimated amount relating to credit loss and the estimated amount relating to all other factors. Only the estimated credit loss amount was recognized in earnings, with the remainder of the loss amount recognized in accumulated other comprehensive loss. Unamortized premiums and unaccreted discounts on securities available‑ for‑sale were recognized in interest income over the contractual life, adjusted for actual prepayments, of the securities using the effective interest method. Other Securities, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for certain of their securities for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these securities. All securities, at estimated fair value are included within securities on the condensed consolidated balance sheets. Estimated fair values are based on quoted market prices, when available, on estimates provided by independent pricing sources or dealers who make markets in such securities, or internal valuation models when external sources of fair value are not available. In accounting for the Merger Transaction, the difference between the estimated fair value, as of the Effective Date, and the par amount became the new premium or discount to be amortized or accreted over the remaining terms, adjusted for actual prepayments, of the securities using the effective interest method. Residential Mortgage‑Backed Securities, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for their residential mortgage investments for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these investments. RMBS, at estimated fair value are included within securities on the condensed consolidated balance sheets. Equity Investments, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for certain of their equity investments, at estimated fair value, including private equity investments received through restructuring debt transactions or issued by an entity in which the Company may have significant influence. The Companies elected the fair value option for certain of their equity investments for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these investments. Equity investments carried at estimated fair value are presented separately on the condensed consolidated balance sheets. Interests in Joint Ventures and Partnerships The Predecessor and Successor Company both elected the fair value option of accounting for certain of their interests in joint ventures and partnerships. The Companies elected the fair value option of accounting for certain of their noncontrolling interests in joint ventures and partnerships for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these interests. Interests in joint ventures and partnerships are presented separately on the condensed consolidated balance sheets. Equity Method Investments The Company holds certain investments where the Company does not control the investee and where the Company is not the primary beneficiary, but can exert significant influence over the financial and operating policies of the investee. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the investee unless predominant evidence to the contrary exists. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of an investee may also require significant judgment based on the facts and circumstances surrounding each individual investment. Factors include investor voting or other rights, any influence the Company may have on the governing board of the investee and the relationship between the Company and other investors in the entity. The Company elected the fair value option to account for these equity investments with any changes in estimated fair value recorded in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. Corporate Loans, Net In connection with the Company’s application of acquisition accounting related to the Merger Transaction and to align more closely with KKR & Co.’s method of accounting, the Company elected to carry all of its corporate loans at estimated fair value as of the Effective Date, with changes in estimated fair value recorded in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. As presented under the Predecessor Company, corporate loans had previously been accounted for based on the following three categories: (i) corporate loans held for investment, which were measured based on their principal plus or minus unaccreted purchase discounts and unamortized purchase premiums, net of an allowance for loan losses; (ii) corporate loans held for sale, which were measured at lower of cost or estimated fair value; and (iii) corporate loans at estimated fair value, which were measured at fair value. As such, the disclosures related to loans held for investment and loans held for sale pertain to the Predecessor Company. Corporate Loans Prior to the Effective Date, corporate loans were generally held for investment and the Company initially recorded corporate loans at their purchase prices. The Company subsequently accounted for corporate loans based on their outstanding principal plus or minus unaccreted purchase discounts and unamortized purchase premiums and corporate loans that the Company transferred to held for sale were transferred at the lower of cost or estimated fair value. As of the Effective Date, the Company initially recorded corporate loans at their purchase prices and subsequently accounts for all corporate loans at estimated fair value. Interest income on corporate loans includes interest at stated coupon rates adjusted for accreti |
MERGER TRANSACTION
MERGER TRANSACTION | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
MERGER TRANSACTION | MERGER TRANSACTION On December 16, 2013, the Company announced the signing of a definitive merger agreement pursuant to which KKR & Co. had agreed to acquire all of the Company’s outstanding common shares through an exchange of equity through which the Company’s shareholders would receive 0.51 common units representing the limited partnership interests of KKR & Co. for each common share of KFN. On April 30, 2014, the date of the Merger Transaction, the transaction was approved by the Company’s common shareholders and the merger was completed, resulting in KFN becoming a subsidiary of KKR & Co. The merger was a taxable transaction for the Company’s common shareholders for U.S. federal income tax purposes. Pursuant to the merger agreement, on the date of the Merger Transaction, (i) each outstanding option to purchase a KFN common share was cancelled, as the exercise price per share applicable to all outstanding options exceeded the cash value of the number of KKR & Co. common units that a holder of one KFN common share was entitled to in the merger, (ii) each outstanding restricted KFN common share (other than those held by the Manager) was converted into 0.51 KKR & Co. common units having the same terms and conditions as applied immediately prior to the effective time, and (iii) each phantom share under KFN’s Non‑Employee Directors’ Deferred Compensation and Share Award Plan was converted into a phantom share in respect of 0.51 KKR & Co. common units and otherwise remains subject to the terms of the plan. The Merger Transaction was recorded under the acquisition method of accounting by KKR & Co. and pushed down to the Company by allocating the total purchase consideration of $2.4 billion to the cost of the assets purchased and the liabilities assumed based on their estimated fair values at the date of the Merger Transaction. The excess of the total estimated fair values of the assets acquired and liabilities assumed over the purchase price and value of the preferred shares, which constitute noncontrolling interests in the Company, was recorded as a bargain purchase gain by KKR & Co. In connection with the Merger Transaction, the Company recognized approximately $24.2 million of total transaction costs. Of this total, $22.7 million was recorded during the four months ended April 30, 2014 within general, administrative and directors’ expenses on the condensed consolidated statements of operations. These costs included the contingent consideration owed to the Company’s financial and legal advisors upon the merger closing. The following table summarizes the estimated fair values assigned to the assets purchased and liabilities assumed (amounts in thousands): Assets acquired: Cash and cash equivalents $ 210,413 Restricted cash and cash equivalents 649,967 Securities 541,149 Corporate loans 6,649,054 Equity investments 297,054 Oil and gas properties, net 505,238 Interests in joint ventures and partnerships 491,324 Derivative assets 26,383 Interest and principal receivable 35,992 Other assets 208,144 Total assets 9,614,718 Liabilities assumed: Collateralized loan obligation secured notes 5,663,666 Credit facilities 63,189 Senior notes 415,538 Junior subordinated notes 245,782 Accounts payable, accrued expenses and other liabilities 357,084 Accrued interest payable 17,647 Derivative liabilities 88,356 Total liabilities 6,851,262 Fair value of preferred shares 378,983 Fair value of net assets acquired 2,384,473 Less: Purchase price 2,369,559 Bargain purchase gain(1) $ 14,914 (1) Represents the excess of the fair value of the net assets acquired over the purchase price and value of the preferred shares, which constitute noncontrolling interests in the Company. This difference was recorded as an adjustment to the Company’s additional paid‑in‑capital as of the Effective Date. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The estimated fair values of assets acquired and liabilities assumed were primarily based on information that was available as of the Merger Transaction date. The methodology used to estimate the fair values to apply purchase accounting are summarized below. The carrying values of cash, restricted cash, interest and principal receivable, credit facilities, accounts payable, accrued expenses and other liabilities, and accrued interest payable represented the fair values. Fair value measurements for financial instruments and other assets included (i) market data for similar instruments (e.g. recent transactions or broker quotes), comparisons to benchmark derivative indices or valuation models for corporate loans and securities, (ii) third party valuation servicers for residential mortgage‑backed securities, (iii) observable market prices, if available, or internally developed models, for equity investments, oil and gas properties, interests in joint ventures and partnerships, and (iv) quoted market prices, if available, or models using a series of techniques for derivative assets and liabilities. The fair value measurements for the liabilities assumed included (i) third party valuation servicers for the collateralized loan obligation secured notes and junior subordinated notes and (ii) observable market prices for the senior notes. |
SECURITIES
SECURITIES | 9 Months Ended |
Sep. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
SECURITIES | SECURITIES In connection with the Merger Transaction and as of the Effective Date, the Company accounts for all of its securities, including RMBS, at estimated fair value. Prior to the Effective Date, the Company accounted for securities based on the following categories: (i) securities available-for-sale, which were carried at estimated fair value, with unrealized gains and losses reported in accumulated other comprehensive loss; (ii) other securities, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations; and (iii) RMBS, at estimated fair value, with unrealized gains and losses recorded in the condensed consolidated statements of operations. Successor Company The following table summarizes the Company’s securities as of September 30, 2015 and December 31, 2014, which are carried at estimated fair value (amounts in thousands): September 30, 2015 December 31, 2014 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Securities, at estimated fair value $ 531,990 $ 485,932 $ 447,438 $ 721,094 $ 654,257 $ 638,605 Total $ 531,990 $ 485,932 $ 447,438 $ 721,094 $ 654,257 $ 638,605 Net Realized and Unrealized Gains (Losses) Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands): Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Net realized gains (losses) $ (3,227 ) $ (9,127 ) $ (103 ) $ 632 Net (increase) decrease in unrealized losses (15,523 ) (20,598 ) (4,645 ) 6,178 Net (increase) decrease in unrealized losses $ (18,750 ) $ (29,725 ) $ (4,748 ) $ 6,810 Defaulted Securities As of September 30, 2015 , the Company had no corporate debt securities in default. As of December 31, 2014, the Company had a corporate debt security from one issuer in default with an estimated fair value of $8.7 million , which was on non-accrual status. Concentration Risk The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2015 , approximately 85% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by Preferred Proppants LLC, LCI Helicopters Limited and JC Penney Corp. Inc, which combined represented $199.3 million, or approximately 50% of the estimated fair value of the Company’s corporate debt securities. As of December 31, 2014, approximately 70% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by Preferred Proppants LLC, JC Penney Corp. Inc, and LCI Helicopters Limited, which combined represented $213.6 million , or approximately 37% of the estimated fair value of the Company’s corporate debt securities. Pledged Assets Note 8 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged securities for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Pledged as collateral for collateralized loan obligation secured debt $ 186,598 $ 262,085 Total $ 186,598 $ 262,085 Predecessor Company Under the Predecessor Company, the majority of unrealized losses were considered to be temporary impairments due to market factors and were not reflective of credit deterioration. The Company considered many factors when evaluating whether impairment was other-than-temporary. For securities available-for-sale that were determined to be temporarily impaired, the Company did not intend to sell or believed that it was more likely than not that the Company would be required to sell any of its securities available-for-sale prior to recovery. In addition, based on the analyses performed by the Company on each of its securities available-for-sale, the Company believed that it was able to recover the entire amortized cost amount of these securities available-for-sale. During the four months ended April 30, 2014, the Company recognized losses totaling $4.4 million for securities available-for-sale that it determined to be other-than-temporarily impaired. The Company intended to sell these securities and as a result, the entire amount of the loss was recorded through earnings in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. Securities available-for-sale sold at a loss typically included those that the Company determined to be other-than-temporarily impaired or had a deterioration in credit quality. The Company recorded gross realized gains of $2.5 million and gross realized losses of zero for the four months ended April 30, 2014. Troubled Debt Restructurings As discussed above in Note 2 to these condensed consolidated financial statements, beginning the Effective Date, the Company accounted for all of its securities at estimated fair value with unrealized gains and losses recorded in the condensed consolidated financial statements. Accordingly, TDR disclosure pertains to the Predecessor Company. During the four months ended April 30, 2014, the Company modified a security with an amortized cost of $24.1 million related to a single issuer in a restructuring that qualified as a TDR. The TDR involving this security, along with corporate loans related to the same issuer, were converted into a combination of equity carried at estimated fair value and cash. Post-modification, the equity securities received from the security TDR had an estimated fair value of $16.1 million. Refer to “Troubled Debt Restructurings” section within Note 5 to these condensed consolidated financial statements for further discussion on the loan TDRs related to this single issuer. As of April 30, 2014, no securities modified as TDRs were in default within a twelve month period subsequent to their original restructuring. |
CORPORATE LOANS AND ALLOWANCE F
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES | 9 Months Ended |
Sep. 30, 2015 | |
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES | CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES In connection with the Merger Transaction and as of the Effective Date, the Company accounts for all of its corporate loans at estimated fair value. Prior to the Effective Date, the Company accounted for loans based on the following categories: (i) corporate loans held for investment, which were measured based on their principal plus or minus unaccreted purchase discounts and unamortized purchase premiums, net of an allowance for loan losses; (ii) corporate loans held for sale, which were measured at lower of cost or estimated fair value; and (iii) corporate loans, at estimated fair value, which were measured at fair value. Successor Company The following table summarizes the Company’s corporate loans, at estimated fair value as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Corporate loans, at estimated fair value $ 5,864,706 $ 5,740,766 $ 5,444,004 $ 6,907,373 $ 6,710,570 $ 6,506,564 Total $ 5,864,706 $ 5,740,766 $ 5,444,004 $ 6,907,373 $ 6,710,570 $ 6,506,564 Net Realized and Unrealized Gains (Losses) Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following tables present the Company’s realized and unrealized gains (losses) from corporate loans (amounts in thousands): Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Net realized gains (losses) $ (546 ) $ (22,807 ) $ 6,353 $ 1,637 Net (increase) decrease in unrealized losses (147,107 ) (92,283 ) (128,749 ) (102,888 ) Net realized and unrealized gains (losses) $ (147,653 ) $ (115,090 ) $ (122,396 ) $ (101,251 ) For the corporate loans measured at estimated fair value under the fair value option of accounting, $122.4 million and $136.7 million of net losses were attributable to changes in instrument specific credit risk for the three and nine months ended September 30, 2015 , respectively. For the three and five months ended September 30, 2014, $61.0 million and $42.1 million , respectively, of net losses were attributable to changes in instrument specific credit risk. Gains and losses attributable to changes in instrument specific credit risk were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates and general market conditions. In addition, gains and losses attributable to those loans on non-accrual status or specifically identified as more volatile based on financial or operating performance, restructuring or other factors, were considered instrument specific. Non-Accrual Loans A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on non-accrual status regardless of whether or not such loan is considered past due. As of September 30, 2015 , the Company held a total par value and estimated fair value of $432.6 million and $153.9 million , respectively, of non-accrual loans carried at estimated fair value. As of September 30, 2015 , the Company held a total par value and estimated fair value of $362.2 million and $139.6 million , respectively, of 90 or more days past due loans carried at estimated fair value, all of which were on non-accrual status and in default as of September 30, 2015 . As of December 31, 2014, the Company held a total par value and estimated fair value of $580.1 million and $342.1 million, respectively, of non-accrual loans. As of December 31, 2014, the Company held a total par value and estimated fair value of $410.2 million and $266.9 million, respectively, of 90 or more days past due loans, all of which were on non‑ accrual status and in default as of December 31, 2014. Defaulted Loans As of September 30, 2015 , the Company held one corporate loan that was in default with a total estimated fair value of $139.6 million from one issuer. As of December 31, 2014, the Company held four corporate loans that were in default with a total estimated fair value of $266.9 million from two issuers. Concentration Risk The Company’s corporate loan portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2015 under the Successor Company where all corporate loans are carried at estimated fair value, approximately 33% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., Texas Competitive Electric Holdings Company LLC (“TXU”), and First Data Corp, which combined represented $506.9 million , or approximately 9% of the aggregate estimated fair value of the Company’s corporate loans. As of December 31, 2014 under the Successor Company where all corporate loans are carried at estimated fair value, approximately 38% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., TXU and First Data Corp., which combined represented $700.4 million , or approximately 11% of the aggregate estimated fair value of the Company’s corporate loans. Pledged Assets Note 8 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged loans for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Pledged as collateral for collateralized loan obligation secured debt $ 5,089,936 $ 6,205,292 Total $ 5,089,936 $ 6,205,292 Predecessor Company Allowance for Loan Losses As discussed above in Note 2 to these condensed consolidated financial statements, beginning the Effective Date, the new basis of accounting for corporate loans at estimated fair value eliminated the need for an allowance for loan losses. Accordingly, disclosure related to allowance for loan losses pertains to the Predecessor Company. As described in Note 2 to these condensed consolidated financial statements, the allowance for loan losses represented the Company’s estimate of probable credit losses inherent in its loan portfolio as of the balance sheet date. The Company’s allowance for loan losses consisted of two components, an allocated component and an unallocated component. The allocated component of the allowance for loan losses consisted of individual loans that were impaired. The unallocated component of the allowance for loan losses represented the Company’s estimate of losses inherent, but not identified, in its portfolio as of the balance sheet date. The following table summarizes the changes in the allowance for loan losses for the Company’s corporate loan portfolio (amounts in thousands): For the four months ended April 30, 2014 Allowance for loan losses: Beginning balance 224,999 Provision for loan losses — Charge-offs (1,458 ) Ending balance $ 223,541 The charge-offs recorded during the four months ended April 30, 2014 were comprised primarily of loans modified in TDRs. The Company recognized $4.5 million of interest income related to impaired loans with a related allowance recorded for the four months ended April 30, 2014. While all of the Company’s impaired loans were typically on non-accrual status, the Company’s non-accrual loans also included (i) other loans held for investment, (ii) corporate loans held for sale and (iii) loans carried at estimated fair value, which were not reflected in the table above. Any of these three classifications may have included those loans modified in a TDR, which were typically designated as being non-accrual (see “Troubled Debt Restructurings” section below). For the four months ended April 30, 2014, the amount of interest income recognized using the cash-basis method during the time within the period that the loans were on nonaccrual status was $5.3 million , which included $4.5 million for non-accrual loans that were held for investment, $0.7 million for non-accrual loans held for sale and $0.1 million for non-accrual loans carried at estimated fair value. As described in Note 2 to these condensed consolidated financial statements, the Company estimated the unallocated components of the allowance for loan losses through a comprehensive review of its loan portfolio and identified certain loans that demonstrated possible indicators of impairments, including credit quality indicators. Loans at Estimated Fair Value For the corporate loans measured at estimated fair value under the fair value option of accounting, $2.8 million of net gains were attributable to changes in instrument specific credit risk for the four months ended April 30, 2014. Gains and losses attributable to changes in instrument specific credit risk were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates and general market conditions. In addition, gains and losses attributable to those loans on non-accrual status or specifically identified as more volatile based on financial or operating performance, restructuring or other factors, were considered instrument specific. Loans Held For Sale and the Lower of Cost or Fair Value Adjustment As discussed above in Note 2 to these condensed consolidated financial statements, beginning the Effective Date, the new basis of accounting for corporate loans at estimated fair value eliminated the need for the bifurcation between corporate loans held for investment and loans held for sale. Accordingly, related disclosure pertains to the Predecessor Company. During the four months ended April 30, 2014, the Company transferred $348.8 million amortized cost amount of loans from held for investment to held for sale. The transfers of certain loans to held for sale were due to the Company’s determination that credit quality of a loan in relation to its expected risk-adjusted return no longer met the Company’s investment objective and the determination by the Company to reduce or eliminate the exposure for certain loans as part of its portfolio risk management practices. During the four months ended April 30, 2014, the Company did no t transfer any loans held for sale back to loans held for investment. Transfers back to held for investment may have occurred as the circumstances that led to the initial transfer to held for sale were no longer present. Such circumstances may have included deteriorated market conditions often resulting in price depreciation or assets becoming illiquid, changes in restrictions on sales and certain loans amending their terms to extend the maturity, whereby the Company determined that selling the asset no longer met its investment objective and strategy. The Company recorded a $5.0 million reduction to the lower of cost or estimated fair value adjustment for the four months ended April 30, 2014 for certain loans held for sale, which had a carrying value of $546.1 million as of April 30, 2014. Troubled Debt Restructurings As discussed above in Note 2 to these condensed consolidated financial statements, as of the Effective Date, the Company accounts for all of its corporate loans at estimated fair value. Accordingly, required disclosure related to TDRs pertains to the Predecessor Company. Loans whose terms have been modified in a TDR were considered impaired, unless accounted for at fair value or the lower of cost or estimated fair value, and were typically placed on non-accrual status, but could have been moved to accrual status when, among other criteria, payment in full of all amounts due under the restructured terms was expected and the borrower had demonstrated a sustained period of repayment performance, typically 6 months . The following table presents the aggregate balance of loans whose terms had been modified in a TDR (dollar amounts in thousands): Four months ended April 30, 2014 Number of TDRs Pre-modification outstanding recorded investment(1) Post-modification outstanding recorded investment(1)(2) Troubled debt restructurings: Loans held for investment 1 $ 154,075 $ — Loans at estimated fair value 2 41,347 24,571 Total $ 195,422 $ 24,571 (1) Recorded investment is defined as amortized cost plus accrued interest. (2) Excludes equity securities received from the loans held for investment and/or loans at estimated fair value TDRs with an estimated fair value of $92.0 million and $12.3 million , from the two issuers, respectively. During the four months ended April 30, 2014, the Company modified an aggregate recorded investment of $195.4 million related to two issuers in restructurings which qualified as TDRs. These restructurings involved conversions of the loans into one of the following: (i) a combination of equity carried at estimated fair value and cash, or (ii) a combination of equity and loans carried at estimated fair value with extended maturities ranging from an additional three to five -year period and a higher spread of 4.0% . Prior to the restructurings, one of the TDRs described above was already identified as impaired and had specific allocated reserves, while the other two were loans carried at estimated fair value. Upon restructuring the impaired loans held for investment, the difference between the recorded investment of the pre-modified loans and the estimated fair value of the new assets plus cash received was charged-off against the allowance for loan losses. The TDRs resulted in $1.1 million of charge-offs, or 76% of the total $1.5 million of charge-offs recorded during the four months ended April 30, 2014. As of April 30, 2014, there were no commitments to lend additional funds to the issuers whose loans had been modified in a TDR and no loans modified as TDRs were in default within a twelve month period subsequent to their original restructuring. During the four months ended April 30, 2014, the Company modified $1.1 billion amortized cost of corporate loans that did not qualify as TDRs. These modifications involved changes in existing rates and maturities to prevailing market rates/maturities for similar instruments and did not qualify as TDRs as the respective borrowers were not experiencing financial difficulty or seeking (or granted) a concession as part of the modification. In addition, these modifications of non-troubled debt holdings were accomplished with modified loans that were not substantially different from the loans prior to modification. |
NATURAL RESOURCES ASSETS
NATURAL RESOURCES ASSETS | 9 Months Ended |
Sep. 30, 2015 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
NATURAL RESOURCES ASSETS | NATURAL RESOURCES ASSETS Natural Resources Properties As described in Note 2 to these condensed consolidated financial statements, as a result of the Merger Transaction and new accounting basis established for assets and liabilities, oil and gas properties were adjusted to reflect estimated fair value as of the Effective Date, but will continue to be carried at cost net of depreciation, depletion and amortization ("DD&A"). The following table summarizes the Company’s oil and gas properties as of September 30, 2015 and December 31, 2014 (amounts in thousands): As of September 30, 2015 As of December 31, 2014 Proved oil and natural gas properties (successful efforts method) $ 128,800 $ 128,800 Accumulated depreciation, depletion and amortization (12,935 ) (8,526 ) Oil and gas properties, net $ 115,865 $ 120,274 On September 30, 2014, the Company closed a transaction whereby certain of the Company’s entities holding natural resources assets were merged with certain investment entities of funds advised by KKR and partnerships held by wholly owned subsidiaries of Legend Production Holdings, LLC, a majority owned subsidiary of Riverstone Holdings LLC and the Carlyle Group, to create a new oil and gas company called Trinity River Energy, LLC (“Trinity”). As of September 30, 2015 , the Trinity asset, which was carried at estimated fair value, totaled $19.2 million and was classified as interests in joint ventures and partnerships, rather than oil and gas properties, net, on the Company’s condensed consolidated balance sheets. Development and Other Purchases The Company accounted for certain of its initial oil and natural gas properties as business combinations under the acquisition method of accounting, whereby the Company (i) conducted assessments of net assets acquired and recognized amounts for identifiable assets acquired and liabilities assumed at their estimated acquisition date fair values and (ii) expensed as incurred transaction and integration costs associated with the acquisitions. Separate from these acquisitions, the Company deployed capital to develop and purchase other interests and assets in the natural resources sector. During the third quarter of 2014, certain of the Company’s natural resources assets focused on development of oil and gas properties, with an approximate aggregate fair value of $179.2 million , were distributed to the Company’s Parent. During the nine months ended September 30, 2015 and five months ended September 30, 2014, the Successor Company capitalized zero and $30.9 million , respectively, of costs. In addition, during the four months ended April 30, 2014, the Predecessor Company capitalized $54.1 million of costs. These capitalized costs were as a result of purchasing natural resources assets or covering costs related to the development of oil and gas properties and were included in oil and gas properties, net on the condensed consolidated balance sheets. |
EQUITY METHOD INVESTMENTS
EQUITY METHOD INVESTMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENTS | EQUITY METHOD INVESTMENTS The Company holds certain investments where the Company does not control the investee and where the Company is not the primary beneficiary, but can exert significant influence over the financial and operating policies of the investee. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the investee unless predominant evidence to the contrary exists. Under the equity method of accounting, the Company records its proportionate share of net income or loss based on the investee’s financial results. Given that the Company elected the fair value option to account for these equity method investments, the Company’s share of the investee’s underlying net income or loss predominantly represents fair value adjustments in the investments. Changes in estimated fair value are recorded in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. As of September 30, 2015 and December 31, 2014, the Company had equity method investments, at estimated fair value, totaling $470.2 million and $534.7 million , respectively. For both periods, the equity method investments were comprised primarily of the following issuers with the respective ownership percentages: (i) Maritime Finance Company, which the Company holds approximately 31% through its ownership of KKR Nautilus Aggregator Limited and (ii) Mineral Acquisition Company, which the Company holds approximately 70% through its ownership of KKR Royalty Aggregator LLC. KKR Royalty Aggregator LLC is an investment company for accounting purposes and accordingly, does not consolidate Mineral Acquisition Company, which it wholly-owns. The Company consolidates both KKR Nautilus Aggregator Limited and KKR Royalty Aggregator LLC and reflects all ownership interests held by third parties as noncontrolling interests in its financial statements. Summarized Financial Information The following table shows summarized financial information for the Company’s equity method investment(s), which were reported under the fair value option of accounting and were determined to be significant as defined by accounting guidance, assuming 100% ownership (amounts in thousands): Successor Company Predecessor Company Natural Resources Natural Resources Nine months ended September 30, 2015 Five months ended September 30, 2014 Four months ended April 30, 2014 Revenues(1) $ 227,322 $ — $ — Expenses(1) $ 233,005 $ — $ — Net income (loss) $ 33,236 $ — $ — (1) Revenues and expenses exclude realized and unrealized gains and losses. |
BORROWINGS
BORROWINGS | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
BORROWINGS | BORROWINGS As described in Note 2 to these condensed consolidated financial statements, as a result of the Merger Transaction and new accounting basis established for assets and liabilities, all borrowings were adjusted to reflect estimated fair value as of the Effective Date. In addition, effective May 1, 2014, the Successor Company elected to account for its collateralized loan obligation secured notes at estimated fair value, with changes in estimated fair value recorded in the condensed consolidated statements of operations. Prior to the Effective Date, all liabilities were carried at amortized cost. As of January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. Certain information with respect to the Company’s borrowings as of September 30, 2015 is summarized in the following table (dollar amounts in thousands): Par Carrying Value(1) Weighted Average Borrowing Rate Weighted Average Remaining Maturity (in days) Collateral(2) CLO 2005-2 secured notes $ 140,212 $ 143,019 2.07 % 788 $ 239,807 CLO 2007-1 secured notes 1,627,249 1,660,963 1.99 2054 1,915,755 CLO 2007-1 subordinated notes(3) 134,468 100,762 12.80 2054 158,308 CLO 2007-A subordinated notes(3) 15,096 19,522 17.54 746 56,511 CLO 2011-1 senior debt 252,398 252,398 1.65 1781 322,741 CLO 2012-1 secured notes 367,500 365,283 2.42 3364 368,655 CLO 2012-1 subordinated notes(3) 18,000 12,736 15.79 3364 18,057 CLO 2013-1 secured notes 458,500 455,227 2.02 3576 480,853 CLO 2013-2 secured notes 339,250 337,240 2.49 3768 354,497 CLO 9 secured notes 463,750 458,925 2.30 4033 464,768 CLO 9 subordinated notes(3) 15,000 11,157 13.75 4033 15,033 CLO 10 secured notes 368,000 368,152 2.59 3729 388,438 CLO 11 secured notes 507,750 499,576 2.33 4215 502,168 CLO 11 subordinated notes(3) 28,250 24,178 — 4215 27,939 Total collateralized loan obligation secured debt 4,735,423 4,709,138 5,313,530 CLO warehouse facility(4) 26,063 26,063 1.83 76 136,554 8.375% Senior notes 258,750 289,968 8.38 9543 — 7.500% Senior notes 115,043 123,426 7.50 9668 — Junior subordinated notes 283,517 248,160 5.42 7676 — Total borrowings $ 5,418,796 $ 5,396,755 $ 5,450,084 (1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings. (2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO. (3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any. (4) Represents a $350.0 million CLO warehouse facility. Certain information with respect to the Company’s borrowings as of December 31, 2014 is summarized in the following table (dollar amounts in thousands): Par Carrying Value(1) Weighted Average Borrowing Rate Weighted Average Remaining Maturity (in days) Collateral(2) CLO 2005-1 senior secured notes $ 192,384 $ 192,260 1.84 % 847 $ 224,716 CLO 2005-2 senior secured notes 242,928 242,365 0.68 1061 381,362 CLO 2006-1 senior secured notes 166,841 166,710 1.28 1333 400,165 CLO 2007-1 senior secured notes 1,906,409 1,891,228 0.80 2327 2,182,078 CLO 2007-1 mezzanine notes 489,723 486,575 3.84 2327 560,538 CLO 2007-1 subordinated notes(3) 134,468 119,112 13.75 2327 153,912 CLO 2007-A subordinated notes(3) 15,096 25,921 88.02 1019 66,044 CLO 2011-1 senior debt 402,515 402,515 1.58 1323 508,625 CLO 2012-1 senior secured notes 367,500 364,063 2.33 3637 365,662 CLO 2012-1 subordinated notes(3) 18,000 12,986 16.86 3637 17,910 CLO 2013-1 senior secured notes 458,500 441,153 1.96 3849 477,691 CLO 2013-2 senior secured notes 339,250 331,383 2.21 4041 357,722 CLO 9 senior secured notes 463,750 449,349 2.28 4306 474,072 CLO 9 subordinated notes(3) 15,000 13,531 — 4306 15,334 CLO 10 senior notes 368,000 361,948 2.50 4002 343,090 Total collateralized loan obligation secured debt 5,580,364 5,501,099 6,528,921 8.375% Senior notes 258,750 290,861 8.38 9816 — 7.500% Senior notes 115,043 123,663 7.50 9941 — Junior subordinated notes 283,517 246,907 5.39 7949 — Total borrowings $ 6,237,674 $ 6,162,530 $ 6,528,921 (1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings. (2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO senior, mezzanine and subordinated notes are calculated pro rata based on the par amount for each respective CLO. (3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the year ended December 31, 2014, if any. CLO Debt For the CLO secured notes, which the Company measured based on the estimated fair value of the financial assets of its CLOs as of January 1, 2015, no gains (losses) were attributable to changes in instrument specific credit risk for the three and nine months ended September 30, 2015 . For the three and five months ended September 30, 2014, $1.5 million and $1.8 million , respectively, of net unrealized gains were attributable to changes in instrument specific credit risk related to the Company's CLO subordinated notes. For subordinated notes, which have no stated interest rate but are entitled to residual value upside of the transactions, the valuation is based on the performance of the underlying collateral held in the CLO and thus considered instrument specific. Prior to the Effective Date, the Company’s CLO secured notes were carried at amortized cost. Accordingly, no changes in estimated fair value on the CLO secured notes were recorded on the Company’s condensed consolidated statements of operations for the one month and four months ended April 30, 2014. The indentures governing the Company’s CLO transactions stipulate the reinvestment period during which the collateral manager, which is an affiliate of the Company’s Manager, can generally sell or buy assets at its discretion and can reinvest principal proceeds into new assets. CLO 2007‑A, CLO 2005‑2 and CLO 2007‑1 were no longer in their reinvestment periods as of September 30, 2015 . As a result, principal proceeds from the assets held in each of these transactions are generally used to amortize the outstanding balance of senior notes outstanding. CLO 2012-1, CLO 2013-1 and CLO 2013-2, CLO 9, CLO 10 and CLO 11 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018 and April 2019, respectively. Pursuant to the terms of the indentures governing our CLO transactions, the Company has the ability to call its CLO transactions after the end of the respective non-call periods. During July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, the Company called CLO 2006-1 and repaid aggregate senior and mezzanine notes totaling $181.8 million par amount. As described below in Note 9 to these consolidated financial statements, the Company used a pay-fixed, receive-variable interest rate swap to hedge interest rate risk associated with CLO 2006-1. In connection with the repayment of CLO 2006-1 notes, the related interest rate swap, with a contractual notional amount of $84.0 million , was terminated. During July 2014, the Company called CLO 2007-A and subsequently repaid aggregate senior and mezzanine notes totaling $494.9 million in 2014. During the three and nine months ended September 30, 2015 , $583.6 million and $1.1 billion , respectively, of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 senior notes were repaid, which included the repayment in full related to the calling of CLO 2005-1. Comparatively, during the three and five months ended September 30, 2014, $104.4 million and $301.3 million , respectively, of original CLO 2005-1, CLO 2005-2, CLO 2006-1 and CLO 2007-1 senior notes were repaid. During the four months ended April 30, 2014, $182.6 million of original CLO 2007-A, CLO 2005-1, CLO 2005-2 and CLO 2006-1 senior notes were repaid. CLO 2011-1 does not have a reinvestment period and all principal proceeds from holdings in CLO 2011-1 are used to amortize the transaction. During the three and nine months ended September 30, 2015 , $119.3 million and $150.1 million , respectively, of original CLO 2011-1 senior notes were repaid. Comparatively, during both the three and five months ended September 30, 2014, $46.6 million of original CLO 2011-1 senior notes were repaid, while during the four months ended April 30, 2014, $39.4 million of original CLO 2011-1 senior notes were repaid. During the three months ended September 30, 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million . During the nine months ended September 30, 2015, the Company issued $30.0 million par amount of CLO 2005-2 class E notes for proceeds of $30.2 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 million . On May 7, 2015 , the Company closed CLO 11, a $564.5 million secured financing transaction maturing on April 15, 2027 . The Company issued $507.8 million par amount of senior secured notes to unaffiliated investors, all of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.06% . The Company also issued $28.3 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 11 collateralize the CLO 11 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. On December 18, 2014, the Company closed CLO 10, a $415.6 million secured financing transaction maturing on December 15, 2025. The Company issued $368.0 million par amount of senior secured notes to unaffiliated investors, of which $343.0 million was floating rate with a weighted-average coupon of three-month LIBOR plus 2.09% and $25.0 million was fixed rate with a weighted-average coupon of 4.90% . The investments that are owned by CLO 10 collateralize the CLO 10 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. On September 16, 2014, the Company closed CLO 9, a $518.0 million secured financing transaction maturing on October 15, 2026. The Company issued $463.8 million par amount of senior secured notes to unaffiliated investors, all of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.01% . The Company also issued $15.0 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 9 collateralize the CLO 9 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. During the five months ended September 30, 2014, the Company issued $15.0 million par amount of CLO 2006-1 class E notes for proceeds of $15.0 million and $37.5 million par amount of CLO 2007-1 class E notes for proceeds of $37.6 million . During the four months ended April 30, 2014, the Company issued: (i) $61.1 million par amount of CLO 2007-A class D and E notes for proceeds of $61.3 million , (ii) $72.0 million par amount of CLO 2005-1 class D through F notes for proceeds of $71.5 million , (iii) $21.9 million par amount of CLO 2007-1 class E notes for proceeds of $21.9 million , (iv) $29.8 million par amount of CLO 2007-A class G notes for proceeds of $30.2 million and (v) $29.8 million par amount of CLO 2007-A class H notes for proceeds of $30.1 million . On January 23, 2014, the Company closed CLO 2013-2, a $384.0 million secured financing transaction maturing on January 23, 2026. The Company issued $339.3 million par amount of senior secured notes to unaffiliated investors, of which $319.3 million was floating rate with a weighted-average coupon of three-month LIBOR plus 2.16% and $20.0 million was fixed rate at 3.74% . The investments that are owned by CLO 2013-2 collateralize the CLO 2013-2 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. CLO Warehouse Facility On March 2, 2015, CLO 11 entered into a $ 570.0 million CLO warehouse facility ("CLO 11 Warehouse"), which matured upon the closing of CLO 11 on May 7, 2015. The CLO 11 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing were used to repay the CLO 11 Warehouse in full. Debt issued under the CLO 11 Warehouse was non-recourse to the Company beyond the assets of CLO 11 and bore interest at rates ranging from LIBOR plus 1.25% to 1.75% . Upon the closing of CLO 11 on May 7, 2015, the aggregate amount outstanding under the CLO 11 Warehouse was repaid. On July 22, 2015, KKR CLO 13, Ltd. ("CLO 13") entered into a $350.0 million CLO warehouse facility ("CLO 13 Warehouse"), which will mature upon the closing of CLO 13, which is expected in December 2015. The CLO 13 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing will be used to repay the CLO 13 Warehouse in full. Debt issued under the CLO 13 Warehouse was non-recourse to the Company beyond the assets of CLO 13 and bore interest at rates ranging from LIBOR plus 1.50% to 2.25% . Upon the closing of CLO 13, the aggregate amount outstanding under the CLO 13 Warehouse will be repaid. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company enters into derivative transactions in order to hedge its interest rate risk exposure to the effects of interest rate changes. Additionally, the Company enters into derivative transactions in the course of its portfolio management activities. The counterparties to the Company’s derivative agreements are major financial institutions with which the Company and its affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, the Company is potentially exposed to losses. The counterparties to the Company’s derivative agreements have investment grade ratings and, as a result, the Company does not anticipate that any of the counterparties will fail to fulfill their obligations. The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of September 30, 2015 and December 31, 2014 (amounts in thousands): As of September 30, 2015 As of December 31, 2014 Notional Estimated Fair Value Notional Estimated Fair Value Free-Standing Derivatives: Interest rate swaps $ 311,667 $ (47,504 ) $ 426,000 $ (54,071 ) Foreign exchange forward contracts and options (363,836 ) 32,127 (442,181 ) 27,428 Total rate of return swaps — — — (130 ) Options — 481 — 5,212 Total $ (14,896 ) $ (21,561 ) Cash Flow Hedges Interest Rate Swaps As described above in Note 2 to these condensed consolidated financial statements, in connection with the Merger Transaction and as of the Effective Date, the Company discontinued hedge accounting for its cash flow hedges and records changes in the estimated fair value of the derivative instruments in the condensed consolidated statements of operations. Accordingly, disclosures related to cash flow hedges pertain to the Predecessor Company. The Company uses interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs as well as certain of its floating rate junior subordinated notes. The Predecessor Company designated these interest rate swaps as cash flow hedges and changes in the estimated fair value of the interest rate swaps were recorded through accumulated other comprehensive income (loss), with gains or losses representing hedge ineffectiveness, if any, recognized in earnings during the reporting period. The following table presents the net gains (losses) recognized in other comprehensive income (loss) related to derivatives in cash flow hedging relationships for the four months ended April 30, 2014 (amounts in thousands): For the four months ended April 30, 2014 Net gains (losses) recognized in accumulated other comprehensive income (loss) on cash flow hedges $ (5,442 ) For all hedges where hedge accounting was applied, effectiveness testing and other procedures to ensure the ongoing validity of the hedges were performed at least quarterly. During the four months ended April 30, 2014, the Company did not recognize any ineffectiveness in income on the condensed consolidated statements of operations from its cash flow hedges. As of September 30, 2015 and December 31, 2014, the Successor Company had interest rate swaps with a notional amount of $311.7 million and $426.0 million, respectively, which were classified as free-standing derivatives, rather than cash flow hedges. Free-Standing Derivatives Free-standing derivatives are derivatives that the Company has entered into in conjunction with its investment and risk management activities, but for which the Company has not designated the derivative contract as a hedging instrument for accounting purposes. Such derivative contracts may include commodity derivatives, credit default swaps (“CDS”) and foreign exchange contracts and options. Free-standing derivatives also include investment financing arrangements (total rate of return swaps) whereby the Company receives the sum of all interest, fees and any positive change in fair value amounts from a reference asset with a specified notional amount and pays interest on such notional amount plus any negative change in fair value amounts from such reference asset. Gains and losses on free-standing derivatives are reported in net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Unrealized gains (losses) represent the change in fair value of the derivative instruments and are noncash items. Credit Default Swaps A CDS is a contract in which the contract buyer pays, in the case of a short position, or receives, in the case of long position, a periodic premium until the contract expires or a credit event occurs. In return for this premium, the contract seller receives a payment from or makes a payment to the buyer if there is a credit default or other specified credit event with respect to the issuer (also known as the reference entity) of the underlying credit instrument referenced in the CDS. Typical credit events include bankruptcy, dissolution or insolvency of the reference entity, failure to pay and restructuring of the obligations of the reference entity. The Company sells or purchases protection to replicate fixed income securities and to complement the spot market when cash securities of the referenced entity of a particular maturity are not available or when the derivative alternative is less expensive compared to other purchasing alternatives. In addition, the Company may purchase protection to hedge economic exposure to declines in value of certain credit positions. The Company purchases its protection from banks and broker dealers, other financial institutions and other counterparties. Foreign Exchange Derivatives The Company holds certain positions that are denominated in a foreign currency, whereby movements in foreign currency exchange rates may impact earnings if the United States dollar significantly strengthens or weakens against foreign currencies. In an effort to minimize the effects of these fluctuations on earnings, the Company will from time to time enter into foreign exchange options or foreign exchange forward contracts related to the assets denominated in a foreign currency. As of September 30, 2015 and December 31, 2014, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $363.8 million and $442.2 million , respectively, the majority of which related to certain of our foreign currency denominated assets. Free-Standing Derivatives Income (Loss) The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations (amounts in thousands): Successor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ — $ (8,489 ) $ (8,489 ) $ (5,297 ) $ 5,924 $ 627 Foreign exchange forward contracts and options(1) 12,872 (11,848 ) 1,024 27,107 (24,571 ) 2,536 Common stock warrants — (411 ) (411 ) — (2,412 ) (2,412 ) Total rate of return swaps — — — 304 130 434 Options — (2,428 ) (2,428 ) — (4,730 ) (4,730 ) Net realized and unrealized gains (losses) $ 12,872 $ (23,176 ) $ (10,304 ) $ 22,114 $ (25,659 ) $ (3,545 ) (1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. Successor Company Predecessor Company Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ — $ 2,892 $ 2,892 $ — $ 1,767 $ 1,767 $ — $ — $ — Commodity swaps 338 2,678 3,016 (1,194 ) (672 ) (1,866 ) (2,515 ) (5,856 ) (8,371 ) Credit default swaps(1) — — — — — — (2,167 ) 1,986 (181 ) Foreign exchange forward contracts and options(2) (11,489 ) 6,082 (5,407 ) (13,129 ) 5,124 (8,005 ) (2,068 ) 2,784 716 Common stock warrants 1,237 (1,077 ) 160 1,237 (1,082 ) 155 — 137 137 Total rate of return swaps (765 ) 392 (373 ) (596 ) 179 (417 ) (2,349 ) 284 (2,065 ) Options — (136 ) (136 ) — (646 ) (646 ) — (19 ) (19 ) Net realized and unrealized gains (losses) $ (10,679 ) $ 10,831 $ 152 $ (13,682 ) $ 4,670 $ (9,012 ) $ (9,099 ) $ (684 ) $ (9,783 ) (1) Includes related income and expense on the derivatives. (2) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. The Company has International Swaps and Derivatives Association ("ISDA") agreements or similar agreements with certain financial institutions which contain netting provisions. While these derivative instruments are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities on a gross basis in its condensed consolidated balance sheets. As of September 30, 2015 , if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $1.3 million net asset, net of $18.7 million collateral posted, (ii) $1.2 million net asset, net of $0.8 million collateral held and (iii) $6.4 million net asset, net of $25.7 million collateral held. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2015 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Not Carried at Estimated Fair Value As described above in Note 2 to these condensed consolidated financial statements, as of the Effective Date, the Successor Company accounts for its investments, as well as its collateralized loan obligation secured notes at estimated fair value. Comparatively, the Predecessor Company accounted for certain of its corporate loans and its collateralized loan obligation secured notes at amortized cost. The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of September 30, 2015 (amounts in thousands): Successor Company As of September 30, 2015 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 837,662 $ 837,662 $ 837,662 $ — $ — Liabilities: Senior notes 413,394 400,036 400,036 — — Junior subordinated notes 248,160 214,190 — — 214,190 The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2014 (amounts in thousands): Successor Company As of December 31, 2014 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 610,912 $ 610,912 $ 610,912 $ — $ — Liabilities: Senior notes 414,524 413,215 413,215 — — Junior subordinated notes 246,907 228,087 — — 228,087 Fair Value Measurements The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 , and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of Assets: Securities: Corporate debt securities $ — $ 189,183 $ 208,116 $ 397,299 Residential mortgage-backed securities — — 50,139 50,139 Total securities — 189,183 258,255 447,438 Corporate loans — 5,112,378 331,626 5,444,004 Equity investments, at estimated fair value 33,263 87,206 158,877 279,346 Interests in joint ventures and partnerships, at estimated fair value — — 655,655 655,655 Derivatives: Foreign exchange forward contracts and options — 34,285 — 34,285 Options — — 481 481 Total derivatives — 34,285 481 34,766 Total $ 33,263 $ 5,423,052 $ 1,404,894 $ 6,861,209 Liabilities: Collateralized loan obligation secured notes $ — $ 4,709,138 $ — $ 4,709,138 Derivatives: Interest rate swaps — 47,504 — 47,504 Foreign exchange forward contracts and options — 2,158 — 2,158 Total derivatives — 49,662 — 49,662 Total $ — $ 4,758,800 $ — $ 4,758,800 The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of December 31, 2014 Assets: Securities: Corporate debt securities $ — $ 266,387 $ 317,034 $ 583,421 Residential mortgage-backed securities — — 55,184 55,184 Total securities — 266,387 372,218 638,605 Corporate loans — 6,159,487 347,077 6,506,564 Equity investments, at estimated fair value 25,692 73,967 81,719 181,378 Interests in joint ventures and partnerships, at estimated fair value — — 718,772 718,772 Other assets — 4,645 — 4,645 Derivatives: Foreign exchange forward contracts and options — 28,354 — 28,354 Options — — 5,212 5,212 Total derivatives — 28,354 5,212 33,566 Total $ 25,692 $ 6,532,840 $ 1,524,998 $ 8,083,530 Liabilities: Collateralized loan obligation secured notes $ — $ — $ 5,501,099 $ 5,501,099 Derivatives: Interest rate swaps — 54,071 — 54,071 Foreign exchange forward contracts and options — 926 — 926 Total rate of return swaps — 130 — 130 Total derivatives — 55,127 — 55,127 Total $ — $ 55,127 $ 5,501,099 $ 5,556,226 Level 3 Fair Value Rollforward The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended September 30, 2015 (amounts in thousands): Successor Company Assets Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Beginning balance as of July 1, 2015 $ 225,891 $ 52,389 $ 341,047 $ 166,879 $ 739,597 $ 411 $ 2,910 Total gains or losses (for the period): Included in earnings(1) (11,727 ) 2,454 (6,882 ) (8,453 ) (63,887 ) (411 ) (2,429 ) Transfers into Level 3 — — — — — — — Transfers out of Level 3 — — — — — — — Purchases — — — — 3,767 — — Sales (9,086 ) — — — — — — Settlements 3,038 (4,704 ) (2,539 ) 451 (23,822 ) — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (11,727 ) $ 581 $ (6,882 ) $ (8,453 ) $ (63,887 ) $ (411 ) $ (2,429 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the nine months ended September 30, 2015 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Collateralized Loan Obligation Secured Notes Beginning balance as of January 1, 2015 $ 317,034 $ 55,184 $ 347,077 $ 81,719 $ 718,772 $ — $ 5,212 $ 5,501,099 Total gains or losses (for the period): Included in earnings(1) (23,486 ) 5,469 (64,930 ) (29,567 ) (84,045 ) (2,412 ) (4,731 ) — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — — — — — (5,501,099 ) Purchases — — 12,307 — 53,133 — — — Sales (89,665 ) — (25,511 ) — — — — — Settlements 4,233 (10,514 ) 62,683 106,725 (32,205 ) 2,412 — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 $ — Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (26,145 ) $ 758 $ (64,043 ) $ (28,871 ) $ (84,045 ) $ (2,412 ) $ (4,731 ) $ — (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of September 30, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statement for further discussion. The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three and five months ended September 30, 2014 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Collateralized Loan Obligations Secured Notes Beginning balance as of May 1, 2014 $ 156,500 $ 59,623 $ 294,218 $ 157,765 $ 472,467 $ 8,854 $ 6,684 $ 5,663,665 Total gains or losses (for the period): Included in earnings(1) 2,185 1,359 2,951 2,160 21,690 (1,798 ) (509 ) 28,669 Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — (1,230 ) — — — — Purchases 20,000 — 1,261 — 27,466 — — 52,594 Sales (3,966 ) — (2,912 ) — — — — — Settlements (5,127 ) (1,740 ) 4,764 (17,535 ) (6,067 ) — — (197,014 ) Ending balance as of June 30, 2014 $ 169,592 $ 59,242 $ 300,282 $ 141,160 $ 515,556 $ 7,056 $ 6,175 $ 5,547,914 Total gains or losses (for the period): Included in earnings(1) (7,751 ) 1,421 (10,084 ) (3,265 ) 8,639 (7,056 ) (137 ) 5,468 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases 29,780 — 1,327 — 15,381 — — 471,441 Sales (6,870 ) — — — (13,795 ) — — — Settlements 29,792 (3,517 ) (3,758 ) (96,125 ) 211,540 — — (581,237 ) Ending balance as of September 30, 2014 $ 214,543 $ 57,146 $ 287,767 $ 41,770 $ 737,321 $ — $ 6,038 $ 5,443,586 Change in unrealized gains or losses for the three months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (7,751 ) $ (185 ) $ (10,084 ) $ (3,265 ) $ 8,639 $ — $ (137 ) $ 5,324 Change in unrealized gains or losses for the five months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (5,566 ) $ 438 $ (7,092 ) $ 109 $ 26,272 $ — $ (646 ) $ 33,993 (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized gain (loss) on debt in the condensed consolidated statements of operations. (2) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available. The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the four months ended April 30, 2014 (amounts in thousands): Predecessor Company Securities Available- For-Sale Other Securities, at Estimated Fair Value Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Beginning balance as of January 1, 2014 $ 23,401 $ 107,530 $ 76,004 $ 152,800 $ 138,059 $ 415,247 $ 8,941 $ 6,794 Total gains or losses (for the period): Included in earnings(1) 22 3,059 3,088 (5,123 ) 9,076 22,377 (813 ) (302 ) Included in other comprehensive income 121 — — — — — — — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(3) — — — — (8,751 ) — — — Purchases — 25,000 — 8,822 — 42,683 — — Sales — — (17,810 ) — — — — — Settlements (16 ) (10,078 ) (2,529 ) (3,104 ) 120,593 14,113 — — Ending balance as of March 31, 2014 23,528 125,511 58,753 153,395 258,977 494,420 8,128 6,492 Total gains or losses (for the period): Included in earnings(1) 44 479 1,416 1,240 12,126 (24,158 ) 726 192 Included in other comprehensive income 33 — — — — — — — Transfers into Level 3(2) 6,937 — — — — — — — Transfers out of Level 3(3) — — — — (119,033 ) — — — Purchases — — — — — 1,615 — — Sales — — — — — — — — Settlements (32 ) — (546 ) 2,272 — (1,184 ) — — Ending balance as of April 30, 2014 $ 30,510 $ 125,990 $ 59,623 $ 156,907 $ 152,070 $ 470,693 $ 8,854 $ 6,684 Change in unrealized gains or losses for the period included in earnings for the four months ended April 30, 2014 for assets held at the end of the reporting period(1) $ 66 $ 2,683 $ 5,242 $ 4,445 $ 20,499 $ (1,781 ) $ (87 ) $ (110 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) Securities available-for-sale were transferred into Level 3 because observable market data was no longer available as a result of an asset-restructure. (3) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available as a result of asset-restructures. Certain interests in joint ventures and partnerships were transferred from Level 1 to Level 2 during the five months ended September 30, 2014 due to illiquid market conditions. There were no transfers between Level 1 and Level 2 for the Company’s financial assets and liabilities measured at fair value on a recurring and non-recurring basis for the three and nine months ended September 30, 2015 , three months ended September 30, 2014 and four months ended April 30, 2014. Valuation Techniques and Inputs for Level 3 Fair Value Measurements The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of September 30, 2015 (dollar amounts in thousands): Successor Company Balance as of Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 208,116 Yield analysis Yield 19% 6% - 23% Decrease Net leverage 7x 6x-12x Decrease EBITDA multiple 6x 5x - 10x Increase Discount margin 845 750bps – 1425bps Decrease Discounted cash flows Weighted average cost of capital 17% 17% Decrease Residential mortgage – backed securities $ 50,139 Discounted cash flows Probability of default 1% 0% - 3% Decrease Loss severity 35% 30% - 50% Decrease Constant prepayment rate 16% 12% - 18% (5 ) Corporate loans $ 331,626 Yield Analysis Yield 12% 3% - 20% Decrease Net leverage 6x 1x - 22x Decrease EBITDA multiple 8x 4x - 17x Increase Equity investments, at estimated fair value(6) $ 158,877 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 0% - 15% Decrease Weight ascribed to market comparables 62% 0% - 100% (7 ) Weight ascribed to discounted cash flows 38% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 5x 1x - 12x Increase Forward EBITDA multiple 8x 4x - 10x Increase Discounted cash flows Weighted average cost of capital 9% 7% - 14% Decrease LTM EBITDA exit multiple 9x 3x - 10x Increase Interests in joint ventures and partnerships(9) $ 655,655 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 34% 0% - 100% (7 ) Weight ascribed to discounted cash flows 66% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 6% - 11% Decrease LTM EBITDA multiple 8x 8x Increase Discounted cash flows Weighted average cost of capital 10% 7% - 20% Decrease Average price per BOE(10) $21.92 $16.85 - $24.81 Increase Yield analysis Yield 16% 16% Decrease Net leverage 5x 1x - 13x Decrease EBITDA multiple 10x 8x - 13x Increase Options(11) $ 481 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 10% Decrease Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) , Market comparables LTM EBITDA multiple 10x 10x Increase Forward EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 6x 6x Increase (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $7.0 million was valued solely using a discounted cash flow technique, while $46.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $168.2 million was valued solely using a discounted cash flow technique, while $33.0 million was valued solely using a market comparables technique and $18.4 million was valued solely using a yield analysis. (10) Natural resources assets with an estimated fair value of $134.4 million as of September 30, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2014 (dollar amounts in thousands): Successor Company Balance as of December 31, 2014 Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 317,034 Yield analysis Yield 17% 3% - 19% Decrease Net leverage 6x 5x - 12x Decrease EBITDA multiple 7x 4x - 11x Increase Discount margin 905bps 625bps - 1100bps Decrease Broker quotes Offered quotes 101 101 Increase Residential mortgage-backed securities $ 55,184 Discounted cash flows Probability of defaults 8% 0% - 21% Decrease Loss severity 26% 12% - 45% Decrease Constant prepayment rate 12% 4% - 19% (5 ) Corporate loans, at estimated fair value $ 347,077 Yield Analysis Yield 12% 3% - 21% Decrease Net leverage 6x 1x - 13x Decrease EBITDA multiple 9x 5x - 12x Increase Equity investments, at estimated fair value(6) $ 81,719 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 97% 0% - 100% (7 ) Weight ascribed to discounted cash flows 83% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 4x 1x - 12x Increase Forward EBITDA multiple 7x 4x - 11x Increase Discounted cash flows Weighted average cost of capital 13% 9% - 16% Decrease LTM EBITDA exit multiple 8x 5x - 10x Increase Interests in joint ventures and partnerships(9) $ 718,772 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 54% 0% - 100% (7 ) Weight ascribed to discounted cash flows 79% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 4% - 15% Decrease LTM EBITDA multiple 11x 10x - 13x Increase Control Premium 15% 15% Increase Discounted cash flows Weighted average cost of capital 12% 7% - 20% Decrease Average Price per BOE(10) $30.16 $21.46 - $35.67 Increase Options(11) $ 5,212 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) Market comparables LTM EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 11x 11x Increase Liabilities: Collateralized loan obligation secured notes $ 5,501,099 Yield analysis Discount margin 255bps 95bps - 1000bps Decrease Discounted cash flows Probability of default 3% 2% - 3% Decrease Loss Severity 32% 30% - 37% Decrease (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value , $9.5 million was valued solely using a discounted cash flow technique, while $67.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interests in joint ventures and partnerships, $207.6 million was valued solely using a discounted cash flow technique, while $20.4 million was valued solely using a market comparables technique. (10) Natural resources assets with an estimated fair value of $176.4 million as of December 31, 2014 were valued using commodity prices.Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 23% liquids and 77% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2015 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES Commitments The Company participates in certain contingent financing arrangements, whereby the Company is committed to provide funding of up to a specific predetermined amount at the discretion of the borrower or has entered into an agreement to acquire interests in certain assets. As of both September 30, 2015 and December 31, 2014, the Company had unfunded financing commitments for corporate loans totaling $9.5 million . The Company did not have any significant losses as of September 30, 2015 , nor does it expect any significant losses related to those assets for which it committed to fund. The Company participates in joint ventures and partnerships alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to the Company’s interests in joint ventures and partnerships that hold commercial real estate and natural resources investments, as well as specialty lending focused businesses. The Company estimated these future contributions to total approximately $177.3 million as of September 30, 2015 and $162.0 million as of December 31, 2014. Guarantees As of September 30, 2015 and December 31, 2014, the Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.5 billion and $457.3 million , respectively. Under non-recourse debt, the lender generally does not have recourse against any other assets owned by the borrower or any related parties of the borrower, except for certain specified exceptions listed in the respective loan documents including customary “bad boy” acts. In connection with certain of these investments, joint and several non-recourse “bad boy” guarantees were provided for losses relating solely to specified bad faith acts that damage the value of the real estate being used as collateral. In addition, completion guarantees were provided for certain properties to complete all or portions of development projects. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against it that have not yet occurred. However, based on prior experience, the Company expects the risk of material loss to be low. Contingencies From time to time, the Company is involved in various legal proceedings, lawsuits and claims incidental to the conduct of the Company’s business. The Company’s business is also subject to extensive regulation, which may result in regulatory proceedings against it. It is inherently difficult to predict the ultimate outcome, particularly in cases in which claimants seek substantial or unspecified damages, or where investigations or proceedings are at an early stage and the Company cannot predict with certainty the loss or range of loss that may be incurred; however, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s financial results in any particular period. Based on current discussion and consultation with counsel, management believes that the final resolution of these matters would not have a material impact on the Company’s condensed consolidated financial statements. From December 19, 2013 to January 31, 2014, multiple putative class action lawsuits were filed in the Superior Court of California, County of San Francisco, the United States District Court of the District of Northern California, and the Court of Chancery of the State of Delaware by KFN shareholders against KFN, the then individual members of KFN’s board of directors, KKR & Co., and certain of KKR & Co.’s affiliates in connection with KFN’s entry into a merger agreement pursuant to which it would become a subsidiary of KKR & Co. The Merger Transaction was completed on April 30, 2014. The actions filed in California state court were consolidated, and prior to the filing or designation of an operative complaint for the consolidated action, the consolidated action was voluntarily dismissed without prejudice on December 1, 2014. The complaint filed in the California federal court action, which was never served on the defendants, was voluntarily dismissed without prejudice on May 6, 2014. Of the Delaware actions, two were voluntarily dismissed without prejudice, and the remaining Delaware actions were consolidated. On February 21, 2014, a consolidated complaint was filed in the consolidated Delaware action which all defendants moved to dismiss on March 7, 2014. On October 14, 2014, the Delaware Court of Chancery granted defendants’ motions to dismiss with prejudice. On November 13, 2014, plaintiffs filed a notice of appeal in the Supreme Court of the State of Delaware, the oral argument for which was held on September 16, 2015. On October 2, 2015, the Supreme Court of the State of Delaware affirmed the Delaware Court of Chancery's dismissal. The consolidated complaint in the Delaware action alleged that the members of the KFN board of directors breached fiduciary duties owed to KFN shareholders by approving the proposed transaction for inadequate consideration; approving the proposed transaction in order to obtain benefits not equally shared by other KFN shareholders; entering into the merger agreement containing preclusive deal protection devices; and failing to take steps to maximize the value to be paid to the KFN shareholders. The Delaware action also alleged variously that KKR & Co., and certain of KKR & Co.’s affiliates aided and abetted the alleged breaches of fiduciary duties and that KKR & Co. was a controlling shareholder of KFN by means of a management agreement between KFN and KKR Financial Advisors LLC, and KKR & Co. breached a fiduciary duty it allegedly owed to KFN shareholders by causing KFN to enter into the merger agreement. The relief sought in the Delaware action included, among other things, declaratory relief concerning the alleged breaches of fiduciary duties, compensatory damages, attorneys’ fees and costs and other relief. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | SHAREHOLDERS’ EQUITY Preferred Shares The Company has 14.95 million of Series A LLC Preferred Shares issued and outstanding, which trade on the NYSE under the ticker symbol “KFN.PR”. Distributions on the Series A LLC Preferred Shares are cumulative and are payable, when, as, and if declared by the Company's board of directors, quarterly on January 15, April 15, July 15 and October 15 of each year at a rate per annum equal to 7.375% . Common Shares Pursuant to the merger agreement, on the date of the Merger Transaction (i) each outstanding option to purchase a KFN common share was cancelled, as the exercise price per share applicable to all outstanding options exceeded the cash value of the number of KKR & Co. common units that a holder of one KFN common share was entitled to in the merger, (ii) each outstanding restricted KFN common share (other than those held by the Company’s Manager) was converted into 0.51 KKR & Co. common units having the same terms and conditions as applied immediately prior to the effective time, and (iii) each phantom share under KFN’s Non‑Employee Directors’ Deferred Compensation and Share Award Plan was converted into a phantom share in respect of 0.51 KKR & Co. common units and otherwise remained subject to the terms of the plan. On January 2, 2015, these phantom shares were converted to KKR & Co. common units and cash. In addition, on June 27, 2014, the Company’s board of directors approved a reverse stock split whereby the number of the Company’s issued and outstanding common shares was reduced to 100 common shares, all of which are held solely by the Parent. As such, disclosure related to common shares below pertains to the Predecessor Company. On May 4, 2007, the Company adopted an amended and restated share incentive plan (the “2007 Share Incentive Plan”) that provided for the grant of qualified incentive common share options that met the requirements of Section 422 of the Code, non‑qualified common share options, share appreciation rights, restricted common shares and other share‑based awards. Share options and other share‑based awards could be granted to the Manager, directors, officers and any key employees of the Manager and to any other individual or entity performing services for the Company. The exercise price for any share option granted under the 2007 Share Incentive Plan could not be less than 100% of the fair market value of the common shares at the time the common share option was granted. Each option to acquire a common share must terminate no more than ten years from the date it was granted. As of April 30, 2014, the 2007 Share Incentive Plan authorized a total of 8,964,625 shares that could be used to satisfy awards under the 2007 Share Incentive Plan. The 2007 Share Incentive Plan was terminated in May 2015. As of September 30, 2015 , all restricted KFN common shares and KFN common share options outstanding at the time of the Merger Transaction (other than any restricted Company common shares held by the Manager) had been converted to grants in respect of KKR & Co. common units and there were no outstanding equity awards in respect of KFN common shares. The following table summarizes the restricted common share transactions that occurred prior to the Merger Transaction: Predecessor Company Manager Directors Total Unvested shares as January 1, 2014 584,634 85,194 669,828 Issued — — — Vested (243,648 ) — (243,648 ) Forfeited — — — Unvested shares as of April 30, 2014 340,986 85,194 426,180 The Company was required to value any unvested restricted common shares granted to the Manager at the current market price. The Company valued the unvested restricted common shares granted to the Manager at $11.54 per share at April 30, 2014. There was $2.2 million of total unrecognized compensation costs related to unvested restricted common shares granted as of April 30, 2014. These costs were expected to be recognized through 2016. The following table summarizes common share option transactions: Predecessor Company Number of Options Weighted Average Exercise Price Outstanding as of January 1, 2014 1,932,279 $ 20.00 Granted — — Exercised — — Forfeited — — Outstanding as of April 30, 2014 1,932,279 $ 20.00 As of April 30, 2014, 1,932,279 common share options were fully vested and exercisable. In connection with the Merger Transaction, each outstanding option to purchase a KFN common share was cancelled, as the exercise price per share applicable to all outstanding options exceeded the cash value of the number of KKR & Co. common units that a holder of one KFN common share was entitled to receive in the merger. The components of share-based compensation expense were as follows (amounts in thousands): Predecessor Company For the four months ended April 30, 2014 Restricted common shares granted to Manager $ 690 Restricted common shares granted to certain directors 328 Total share-based compensation expense $ 1,018 |
MANAGEMENT AGREEMENT AND RELATE
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2015 | |
Related Party Transactions [Abstract] | |
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS | MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS The Manager manages the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors. The Management Agreement expires on December 31 of each year, but is automatically renewed for a 1 year term each December 31 unless terminated upon the affirmative vote of at least two-thirds of the Company’s independent directors, or by a vote of the holders of a majority of the Company’s outstanding common shares, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination under this clause (2) by accepting a mutually acceptable reduction of management fees. The Manager must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the sum of the average annual base management fee and the average annual incentive fee for the two 12 -month periods immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination. The Management Agreement contains certain provisions requiring the Company to indemnify the Manager with respect to all losses or damages arising from acts not constituting bad faith, willful misconduct, or gross negligence. The Company has evaluated the impact of these guarantees on its condensed consolidated financial statements and determined that they are not material. The following table summarizes the components of related party management compensation on the Company’s condensed consolidated statements of operations, which are described in further detail below (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Base management fees, net $ 2,633 $ 8,096 $ 4,986 $ 10,927 $ 5,253 CLO management fees 6,816 21,390 7,558 12,023 11,016 Incentive fees — — — — 12,882 Manager share-based compensation — — — — 690 Total related party management compensation $ 9,449 $ 29,486 $ 12,544 $ 22,950 $ 29,841 Base Management Fees The Company pays its Manager a base management fee quarterly in arrears. During 2015 and 2014, certain related party fees received by affiliates of the Manager were credited to the Company via an offset to the base management fee (“Fee Credits”). Specifically, as described in further detail under “CLO Management Fees” below, a portion of the CLO management fees received by an affiliate of the Manager for certain of the Company’s CLOs were credited to the Company via an offset to the base management fee. In addition, during 2014, the Company invested in a transaction that generated placement fees paid to a minority-owned affiliate of KKR. In connection with this transaction, the Manager agreed to reduce the Company’s base management fee payable to the Manager for the portion of these placement fees that were earned by KKR as a result of this minority-ownership. The table below summarizes the aggregate base management fees (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Base management fees, gross $ 7,702 $ 24,029 $ 9,846 $ 16,534 $ 13,364 CLO management fees credit(1) (5,069 ) (15,933 ) (4,860 ) (5,607 ) (8,111 ) Other related party fees credit — — — — — Total base management fees, net $ 2,633 $ 8,096 $ 4,986 $ 10,927 $ 5,253 (1) See “CLO Management Fees” for further discussion. The Manager waived base management fees related to the $230.4 million common share offering and $270.0 million common share rights offering that occurred during the third quarter of 2007 until such time as the Company’s common share closing price on the NYSE was $20.00 or more for five consecutive trading days. Accordingly, the Manager permanently waived approximately $2.9 million during the four months ended April 30, 2014. CLO Management Fees An affiliate of the Manager entered into separate management agreements with the respective investment vehicles for all of the Company’s Cash Flow CLOs pursuant to which it is entitled to receive fees for the services it performs as collateral manager for all of these CLOs, except for CLO 2011 -1 . The collateral manager has the option to waive the fees it earns for providing management services for the CLO. Fees Waived The collateral manager waived CLO management fees totaling of $0.4 million and $1.5 million for CLO 2005-2 during the three and nine months ended September 30, 2015 , respectively. Comparatively, the collateral manager waived CLO management fees totaling $1.4 million and $3.0 million for CLO 2005-2 and CLO 2006-1 during the three and five months ended September 30, 2014, respectively, and $1.6 million during the four months ended April 30, 2014. The Company called CLO 2006-1 in February 2015. Fees Charged and Fee Credits The Company recorded management fees expense for CLO 2005‑1, CLO 2007‑1, CLO 2012‑1, CLO 2013‑1, CLO 2013‑2, CLO 9, CLO 10 and CLO 11 during 2015. The Company recorded management fees expense for CLO 2005-1, CLO 2007-1, CLO 2007-A, CLO 2012-1, CLO 2013-1 and CLO 2013-2 during 2014. CLO 2007-A was called in July 2014 and its last payment, which included CLO management fees, was made in October 2014. CLO 2005-1 was called in July 2015 and its last payment, which included CLO management fees, was made the same month. Beginning in June 2013, the Manager credited the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLO 2007-1, CLO 2007-A, CLO 2012-1, CLO 9 and CLO 11 via an offset to the base management fees payable to the Manager. As the Company owns less than 100% of the subordinated notes of these CLOs (with the remaining subordinated notes held by third parties), the Company received a Fee Credit equal only to the Company’s pro rata share of the aggregate CLO management fees paid by these CLOs. Specifically, the amount of the reimbursement for each of these CLOs was calculated by taking the product of (x) the total CLO management fees received by an affiliate of the Manager during the period for such CLO multiplied by (y) the percentage of the subordinated notes of such CLO held by the Company. The remaining portion of the CLO management fees paid by each of these CLOs was not credited to the Company, but instead resulted in a dollar-for-dollar reduction in the interest expense paid by the Company to the third party holder of the CLO’s subordinated notes. Similarly, the Manager credited the Company the CLO management fees from CLO 2013-1, CLO 2013-2 and CLO 10 based on the Company’s 100% ownership of the subordinated notes in the CLO. The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Charged and retained CLO management fees(1) $ 1,747 $ 5,457 $ 12,418 $ 17,630 $ 2,905 CLO management fees credit 5,069 15,933 (4,860 ) (5,607 ) 8,111 Total CLO management fees $ 6,816 $ 21,390 $ 7,558 $ 12,023 $ 11,016 (1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO. Subordinated note holders in CLOs have the first risk of loss and conversely, the residual value upside of the transactions. When CLO management fees are paid by a CLO, the residual economic interests in the CLO transaction are reduced by an amount commensurate with the CLO management fees paid. The Company records any residual proceeds due to subordinated note holders as interest expense on the condensed consolidated statements of operations. Accordingly, the increase in CLO management fees is directly offset by a decrease in interest expense. Incentive Fees The Manager earned incentive fees totaling zero for each of the three and nine months ended September 30, 2015 , and three and five months ended September 30, 2014. Incentive fees totaled $12.9 million for the four months ended April 30, 2014. Manager Share-Based Compensation As described above in Note 2, in connection with the Merger Transaction, the Predecessor Company’s common shares were converted into KKR & Co. common units. Prior to the Effective Date, the Company accounted for share‑based compensation issued to its directors and to its Manager using the fair value based methodology in accordance with relevant accounting guidance. Compensation cost related to restricted common shares issued to the Company’s directors was measured at its estimated fair value at the grant date, and was amortized and expensed over the vesting period on a straight‑line basis. Compensation cost related to restricted common shares and common share options issued to the Manager was initially measured at estimated fair value at the grant date, and was remeasured on subsequent dates to the extent the awards were unvested. The Company recognized share-based compensation expense related to restricted common shares granted to the Manager of $0.7 million for the four months ended April 30, 2014. Reimbursable General and Administrative Expenses Certain general and administrative expenses are incurred by the Company’s Manager on its behalf that are reimbursable to the Manager pursuant to the Management Agreement. The Company incurred reimbursable general and administrative expenses to its Manager totaling $0.7 million and $4.2 million for the three and nine months ended September 30, 2015 , respectively. The Company incurred reimbursable general and administrative expenses to its Manager totaling $0.8 million and $1.8 million for the three and five months ended September 30, 2014 and $2.8 million for the four months ended April 30, 2014. Expenses incurred by the Manager and reimbursed by the Company are reflected in general, administrative and directors expenses on the condensed consolidated statements of operations. Contributions and Distributions The Company has made certain distributions to its Parent, as the sole holder of its common shares. The Company distributed $52.1 million and $141.6 million for the three and nine months ended September 30, 2015 , respectively. Common shareholders of the Predecessor Company received a quarterly distribution in respect of the KKR & Co. common units that such holders received as a result of the Merger Transaction and held as of the record date, or May 9, 2014. The distribution on all KKR & Co. common units was $0.43 per common unit and was paid by KKR & Co. on May 23, 2014. The Company distributed $44.9 million in cash to its Parent in May 2014 in connection with this distribution. During the third quarter ended September 30, 2014, certain assets and cash were contributed from and distributed to the Parent. The table below summarizes the estimated fair value of contributions and distributions at the time of transfer, certain of which were different from the carrying value of assets transferred (amounts in thousands): Three months ended September 30, 2014 Cash $ 235,759 Securities 22,873 Loans 13,464 Interests in joint ventures and partnerships 19,433 Total contributions from Parent $ 291,529 Cash $ 14,370 Equity investments, at estimated fair value 101,042 Oil and gas properties, net 179,203 Total distributions to Parent $ 294,615 Affiliated Investments The Company has invested in corporate loans, debt securities and other investments of entities that are affiliates of KKR. As of September 30, 2015 , the aggregate par amount of these affiliated investments totaled $1.1 billion , or approximately 16% of the total investment portfolio, and consisted of 13 issuers. The total $1.1 billion in affiliated investments was comprised of $1.1 billion of corporate loans and $11.0 million of equity investments. As of December 31, 2014, the aggregate par amount of these affiliated investments totaled $1.7 billion , or approximately 20% of the total investment portfolio, and consisted of 19 issuers. The total $1.7 billion in affiliated investments was comprised of $1.6 billion of corporate loans, $9.5 million of corporate debt securities and $13.6 million of equity investments. In addition, the Company has invested in certain joint ventures and partnerships alongside KKR and its affiliates. As of September 30, 2015 and December 31, 2014, the estimated fair value of these interests in joint ventures and partnerships totaled $569.7 million and $618.6 million , respectively. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2015 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING Operating segments are defined as components of a company that engage in business activities that may earn revenues and incur expenses for which separate financial information is available and reviewed by the chief operating decision maker or group in determining how to allocate resources and assessing performance. The Company operates its business through the following reportable segments: credit (“Credit”), natural resources (“Natural Resources”) and other (“Other”). The Company’s reportable segments are differentiated primarily by their investment focuses. The Credit segment consists primarily of below investment grade corporate debt comprised of senior secured and unsecured loans, mezzanine loans, high yield bonds, private and public equity investments, and distressed and stressed debt securities. The Natural Resources segment consists of non-operated working and overriding royalty interests in oil and natural gas properties, as well as interests in joint ventures and partnerships focused on the oil and gas sector. The Other segment includes all other portfolio holdings, consisting solely of commercial real estate. The segments currently reported are consistent with the way decisions regarding the allocation of resources are made, as well as how operating results are reviewed by the Company. The Company evaluates the performance of its reportable segments based on several net income (loss) components. Net income (loss) includes (i) revenues, (ii) related investment costs and expenses, (iii) other income (loss), which is comprised primarily of unrealized and realized gains and losses on investments, debt and derivatives, and (iv) other expenses, including related party management compensation and general and administrative expenses. Certain corporate assets and expenses that are not directly related to the individual segments, including interest expense and related costs on borrowings, base management fees and professional services are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period-end. Certain other corporate assets and expenses, including prepaid insurance, incentive fees, insurance expenses, directors’ expenses and share-based compensation expense are not allocated to individual segments in the Company’s assessment of segment performance. Collectively, these items are included as reconciling items between reported segment amounts and consolidated totals. The following tables present the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations (amounts in thousands): Successor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Total revenues $ 79,698 $ 265,176 $ 3,876 $ 13,055 $ 5,535 $ 14,355 $ — $ — $ 89,109 $ 292,586 Total investment costs and expenses 47,948 163,246 2,016 6,062 388 1,147 — — 50,352 170,455 Total other income (loss) (149,952 ) (216,786 ) (36,236 ) (50,337 ) 739 20,545 — — (185,449 ) (246,578 ) Total other expenses 11,285 39,702 114 800 99 333 49 149 11,547 40,984 Income tax expense (benefit) 64 126 — — 30 1,044 — — 94 1,170 Net income (loss) $ (129,551 ) $ (154,684 ) $ (34,490 ) $ (44,144 ) $ 5,757 $ 32,376 $ (49 ) $ (149 ) $ (158,333 ) $ (166,601 ) Net income (loss) attributable to noncontrolling interests (2,727 ) (8,403 ) (3,949 ) (7,049 ) — — — — (6,676 ) (15,452 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (126,824 ) $ (146,281 ) $ (30,541 ) $ (37,095 ) $ 5,757 $ 32,376 $ (49 ) $ (149 ) $ (151,657 ) $ (151,149 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. Successor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Total revenues $ 98,413 $ 160,724 $ 17,929 $ 49,859 $ 8,414 $ 8,486 $ — $ — $ 124,756 $ 219,069 Total investment costs and expenses 46,412 81,822 14,617 34,674 311 508 — — 61,340 117,004 Total other income (loss) (132,098 ) (114,985 ) (1,514 ) (6,394 ) 7,927 16,581 — — (125,685 ) (104,798 ) Total other expenses 14,136 26,889 617 2,010 145 328 — 35 14,898 29,262 Income tax expense (benefit) 34 58 — — — 4 — — 34 62 Net income (loss) $ (94,267 ) $ (63,030 ) $ 1,181 $ 6,781 $ 15,885 $ 24,227 $ — $ (35 ) $ (77,201 ) $ (32,057 ) Net income (loss) attributable to noncontrolling interests 816 816 — — — — — — 816 816 Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (95,083 ) $ (63,846 ) $ 1,181 $ 6,781 $ 15,885 $ 24,227 $ — $ (35 ) $ (78,017 ) $ (32,873 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. Predecessor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Total revenues $ 134,255 $ 61,782 $ 21,205 $ — $ 217,242 Total investment costs and expenses 62,485 38,915 425 — 101,825 Total other income (loss) 76,046 (8,123 ) (11,589 ) — 56,334 Total other expenses 23,121 1,633 230 40,625 65,609 Income tax expense (benefit) 146 — 16 — 162 Net income (loss) $ 124,549 $ 13,111 $ 8,945 $ (40,625 ) $ 105,980 (1) Consists of certain expenses not allocated to individual segments including other expenses comprised of incentive fees of $12.9 million and merger related transaction costs of $22.7 million . The remaining reconciling items include insurance expenses, directors’ expenses and share-based compensation expense which are not allocated to individual segments. The following table shows total assets of our reportable segments reconciled to amounts reflected in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 (amounts in thousands): Successor Company Credit Natural Resources Other Reconciling Items Total Consolidated(1) As of September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 Total assets $ 7,412,244 $ 8,438,227 $ 252,618 $ 300,281 $ 234,581 $ 213,006 $ — $ 111 $ 7,899,443 $ 8,951,625 (1) Total consolidated assets as of September 30, 2015 included $86.0 million of noncontrolling interests, of which $53.1 million was related to the Credit segment and $32.9 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2014 included $100.2 million of noncontrolling interests, of which $62.7 million was related to the Credit segment and $37.4 million was related to the Natural Resources segment. |
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
EARNINGS PER COMMON SHARE | EARNINGS PER COMMON SHARE Earnings per common share is not provided for the Successor Company as the Company is now a subsidiary of KKR Fund Holdings, which owns 100 common shares of the Company constituting all of its outstanding common shares. The following table presents a reconciliation of basic and diluted net income (loss) per common share for the Predecessor Company (amounts in thousands, except per share information): Predecessor Company Four months ended April 30, 2014 Net income (loss) $ 105,980 Less: Preferred share distributions 6,891 Net income (loss) available to common shares $ 99,089 Less: Dividends and undistributed earnings allocated to participating securities 292 Net income (loss) allocated to common shares $ 98,797 Basic: Basic weighted average common shares outstanding 204,276 Net income (loss) per common share $ 0.48 Diluted: Diluted weighted average common shares outstanding(1) 204,276 Net income (loss) per common share $ 0.48 Distributions declared per common share $ 0.22 (1) Potential anti-dilutive common shares excluded from diluted earnings per share related to common share options were 1,932,279 . |
ACCUMULATED OTHER COMPREHENSIVE
ACCUMULATED OTHER COMPREHENSIVE LOSS | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity Note [Abstract] | |
ACCUMULATED OTHER COMPREHENSIVE LOSS | ACCUMULATED OTHER COMPREHENSIVE LOSS In connection with the Merger Transaction, accumulated other comprehensive loss is not provided for the Successor Company as changes in the estimated fair value of all securities and cash flow hedges are recorded in the condensed consolidated statements of operations, within net realized and unrealized gain (loss) on investments and net realized and unrealized gain (loss) on derivatives and foreign exchange, respectively. The components of changes in accumulated other comprehensive loss for the Predecessor Company were as follows (amounts in thousands): Predecessor Company Four months ended April 30, 2014 (1) Net unrealized gains on available-for-sale securities Net unrealized losses on cash flow hedges Total Beginning balance $ 23,567 $ (39,219 ) $ (15,652 ) Other comprehensive loss before reclassifications (2,614 ) (5,442 ) (8,056 ) Amounts reclassified from accumulated other comprehensive loss(2) (2,639 ) — (2,639 ) Net current-period other comprehensive loss (5,253 ) (5,442 ) (10,695 ) Ending balance $ 18,314 $ (44,661 ) $ (26,347 ) (1) The Company’s gross and net of tax amounts are the same. (2) Includes an impairment charge of $4.4 million for investments which were determined to be other-than-temporary for the four months ended April 30, 2014. Reclassified amounts were included in net realized and unrealized gain (loss) on investments on the condensed consolidated statements of operations. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On November 5, 2015, the Company's board of directors declared a cash distribution for the quarter ended September 30, 2015 on its common shares totaling $37.5 million , or $375,155 per common share. The distribution was paid on November 6, 2015 to common shareholders of record as of the close of business on November 5, 2015. On October 26, 2015, the Company's board of directors approved the receipt of a contribution from the Parent of certain general partner interests in an alternative credit fund. The estimated fair value of the contribution totaled approximately $251.7 million at the time of transfer and was completed on October 30, 2015. Separately, on October 26, 2015, the Company's board of directors approved the distribution of cash to the Parent totaling $251.7 million , which was paid on October 30, 2015. On September 24, 2015, the Company’s board of directors declared a cash distribution on its Series A LLC Preferred Shares totaling $6.9 million , or $0.460938 per share. The distribution was paid on October 15, 2015 to preferred shareholders as of the close of business on October 8, 2015. |
SUMMARY OF SIGNIFICANT ACCOUN26
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and entities established to complete secured financing transactions that are considered to be variable interest entities (“VIEs”) and for which the Company is the primary beneficiary. Also included in the condensed consolidated financial statements are the financial results of certain entities, which are not considered VIEs, but in which the Company is presumed to have control. The ownership interests held by third parties are reflected as noncontrolling interests in the accompanying financial statements. As further described in Note 3 to these condensed consolidated financial statements, the Merger Transaction was accounted for using the acquisition method of accounting, which required that the assets purchased and the liabilities assumed all be reported in the acquirer’s financial statements at their fair value, with any excess of net assets over the purchase price being reported as a bargain purchase gain. The application of the acquisition method of accounting represented a push down of accounting basis to the Company, whereby it was also required to record the assets and liabilities at fair value as of the date of the Merger Transaction. This change in accounting basis resulted in the termination of the prior reporting entity and a corresponding creation of a new reporting entity. Accordingly, the Company’s condensed consolidated financial statements and transactional records prior to the effective date, or May 1, 2014 (the “Effective Date”), reflect the historical accounting basis of assets and liabilities and are labeled “Predecessor Company,” while such records subsequent to the Effective Date are labeled “Successor Company” and reflect the push down basis of accounting for the new estimated fair values in the Company’s condensed consolidated financial statements. This change in accounting basis is represented in the condensed consolidated financial statements by a vertical black line which appears between the columns entitled “Predecessor Company” and “Successor Company” on the statements and in the relevant notes. The black line signifies that the amounts shown for the periods prior to and subsequent to the Merger Transaction are not comparable. In addition to the new accounting basis established for assets and liabilities, purchase accounting also required the reclassification of any retained earnings or accumulated deficit from periods prior to the acquisition and the elimination of any accumulated other comprehensive income or loss to be recognized within the Company’s equity section of the Company’s condensed consolidated financial statements. Accordingly, the Company’s accumulated deficit at September 30, 2015 and December 31, 2014 represent only the results of operations subsequent to April 30, 2014, the date of the Merger Transaction. For the following assets not carried at fair value, as presented under the Predecessor Company, the Company adopted the fair value option of accounting as of the Effective Date: (i) corporate loans held for investment at amortized cost, net of an allowance for loan losses, (ii) corporate loans held for sale at lower of cost or estimated fair value and (iii) certain other investments at cost. In addition, the Company elected the fair value option of accounting for its CLO secured notes. As such, the accounting policies followed by the Company in the preparation of its condensed consolidated financial statements for the Successor period present all financial assets and CLO secured notes at estimated fair value. The initial fair value presentation was a result of the push down basis of accounting, while the prospective fair value presentation was for the primary purpose of reporting values more closely aligned with KKR & Co.’s method of accounting. In August 2014, the Financial Accounting Standards Board ("FASB") amended existing standards to provide an entity that consolidates a collateralized financing entity (“CFE”) that had elected the fair value option for the financial assets and financial liabilities of such CFE, an alternative to current fair value measurement guidance. In accordance with this guidance, beginning January 1, 2015, the Company elected to measure the financial liabilities of its consolidated CLOs using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. Refer to "Borrowings" below for further discussion. The Company applied the guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of January 1, 2015 totaling $1.9 million . Unrealized gains and losses for the financial assets and liabilities carried at estimated fair value are reported in net realized and unrealized gain (loss) on investments and net realized and unrealized gain (loss) on debt, respectively, in the condensed consolidated statements of operations. Unrealized gains or losses primarily reflect the change in instrument values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. For the Successor period, upon the sale of a corporate loan or debt security, the net realized gain or loss is computed using the specific identification method. Comparatively, for the Predecessor period, the realized net gain or loss was computed on a weighted average cost basis. In addition, for the Successor period, all purchases and sales of assets are recorded on the trade date. Comparatively, for the Predecessor periods, corporate loans were recorded on the settlement date. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing its estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While the Company believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are appropriate, actual results could differ from those estimates. |
Consolidation | Consolidation KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”), KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”) and KKR CLO 11, Ltd ("CLO 11") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During July 2015, the Company called KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and repaid aggregate senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, the Company called KKR Financial CLO 2006-1, Ltd ("CLO 2006-1") and repaid all senior and mezzanine notes outstanding. These entities are VIEs which the Company consolidates as the Company has determined it has the power to direct the activities that most significantly impact these entities’ economic performance and the Company has both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities. In CLO transactions, subordinated notes have the first risk of loss and conversely, the residual value upside of the transactions. The Company finances the majority of its corporate debt investments through its CLOs. As of September 30, 2015 , the Company’s CLOs held $5.7 billion par amount, or $5.3 billion estimated fair value, of corporate debt investments. As of December 31, 2014, the Company's CLOs held $6.9 billion par amount, or $6.5 billion estimated fair value, of corporate debt investments. The assets in each CLO can be used only to settle the debt of the related CLO. As of September 30, 2015 and December 31, 2014, the aggregate par amount of CLO debt totaled $4.7 billion and $5.6 billion , respectively, held by unaffiliated third parties. The Company consolidates all non‑VIEs in which it holds a greater than 50 percent voting interest. Specifically, the Company consolidates majority owned entities for which the Company is presumed to have control. The ownership interests of these entities held by third parties are reflected as noncontrolling interests in the accompanying financial statements. The Company began consolidating a majority of these non‑VIE entities as a result of the asset contributions from its Parent during the second half of 2014. For certain of these entities, the Company previously held a percentage ownership, but following the incremental contributions from its Parent, were presumed to have control. In addition, the Company has noncontrolling interests in joint ventures and partnerships that do not qualify as VIEs and do not meet the control requirements for consolidation as defined by GAAP. All inter‑company balances and transactions have been eliminated in consolidation. |
Fair Value Option | Fair Value Option In connection with the application of acquisition accounting related to the Merger Transaction, the Successor Company elected the fair value option of accounting for its financial assets and CLO secured notes for the primary purpose of reporting values that more closely aligned with KKR & Co.’s method of accounting. Related unrealized gains and losses are reported in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. |
Fair Value of Financial Instruments | Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors including the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities in the condensed consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets and liabilities, and are as follows: Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2: Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability. Level 3: Inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of instrument, whether the instrument is new, whether the instrument is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels 1 , 2 , and/or 3 , which the Company recognizes at the end of the reporting period. Many financial assets and liabilities have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the Company and others are willing to pay for an asset. Ask prices represent the lowest price that the Company and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid‑ask prices, the Company does not require that fair value always be a predetermined point in the bid‑ask range. The Company’s policy is to allow for mid‑market pricing and adjusting to the point within the bid‑ask range that meets the Company’s best estimate of fair value. Depending on the relative liquidity in the markets for certain assets, the Company may transfer assets to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are not available. The valuation techniques used for the assets and liabilities that are valued using Level 3 of the fair value hierarchy are described below. Securities and Corporate Loans, at Estimated Fair Value: Securities and corporate loans, at estimated fair value are initially valued at transaction price and are subsequently valued using market data for similar instruments (e.g., recent transactions or broker quotes), comparisons to benchmark derivative indices or valuation models. Valuation models are based on yield analysis techniques, where the key inputs are based on relative value analyses, which incorporate similar instruments from similar issuers. In addition, an illiquidity discount is applied where appropriate. Equity and Interests in Joint Ventures and Partnerships, at Estimated Fair Value: Equity and interests in joint ventures and partnerships, at estimated fair value, are initially valued at transaction price and are subsequently valued using observable market prices, if available, or internally developed models in the absence of readily observable market prices. Interests in joint ventures and partnerships include certain equity investments related to the oil and gas, commercial real estate and specialty lending sectors. Valuation models are generally based on market comparables and discounted cash flow approaches, in which various internal and external factors are considered. Factors include key financial inputs and recent public and private transactions for comparable investments. Key inputs used for the discounted cash flow approach, which incorporates significant assumptions and judgment, include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) exit multiples. Natural resources investments are generally valued using a discounted cash flow analysis. Key inputs used in this methodology that require estimates include the weighted average cost of capital. In addition, the valuations of natural resources investments generally incorporate both commodity prices as quoted on indices and long‑term commodity price forecasts, which may be substantially different from, and are currently higher than, commodity prices on certain indices for equivalent future dates. Long‑term commodity price forecasts are utilized to capture the value of the investments across a range of commodity prices within the portfolio associated with future development and to reflect price expectations. Upon completion of the valuations conducted using these approaches, a weighting is ascribed to each approach and an illiquidity discount is applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within the range suggested by the two approaches. Over-the-counter (“OTC”) Derivative Contracts: OTC derivative contracts may include forward, swap and option contracts related to interest rates, foreign currencies, credit standing of reference entities and equity prices. OTC derivatives are initially valued using quoted market prices, if available, or models using a series of techniques, including closed‑form analytic formulae, such as the Black‑Scholes option‑pricing model, and/or simulation models in the absence of quoted market prices. Many pricing models employ methodologies that have pricing inputs observed from actively quoted markets, as is the case for generic interest rate swap and option contracts. Residential Mortgage-Backed Securities, at Estimated Fair Value: RMBS are initially valued at transaction price and are subsequently valued using a third party valuation servicer. The most significant inputs to the valuation of these instruments are default and loss expectations and constant prepayment rates. Collateralized Loan Obligation Secured Notes: As of January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. The Company considered the fair value of these financial assets, which were classified as Level 2 assets, as more observable than the fair value of these financial liabilities, which were classified as Level 3 liabilities. As a result of this new basis of measurement, the Company's CLO secured notes were transferred from Level 3 to Level 2 during the first quarter of 2015. Prior to this adoption, CLO secured notes were initially valued at transaction price and subsequently valued using a third party valuation servicer. The approach used to estimate the fair values was the discounted cash flow method, which included consideration of the cash flows of the debt obligation based on projected quarterly interest payments and quarterly amortization. The debt obligations were discounted based on the appropriate yield curve given the debt obligation's respective maturity and credit rating. The most significant inputs to the valuation of these instruments were default and loss expectations and discount margins. Key unobservable inputs that have a significant impact on the Company’s Level 3 valuations as described above are included in Note 10 to these condensed consolidated financial statements. The Company utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. These unobservable pricing inputs and assumptions may differ by asset and in the application of the Company’s valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if the Company only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. Valuation Process Investments are generally valued based on quotations from third party pricing services, unless such a quotation is unavailable or is determined to be unreliable or inadequately representing the fair value of the particular assets. In that case, valuations are based on either valuation data obtained from one or more other third party pricing sources, including broker dealers, or will reflect the valuation committee’s good faith determination of estimated fair value based on other factors considered relevant. The Company utilizes a valuation committee, whose members consist of certain employees of the Manager. The valuation committee is responsible for coordinating and consistently implementing the Company’s quarterly valuation policies, guidelines and processes. The valuation process involved in Level 3 measurements for assets and liabilities is completed on a quarterly basis and is designed to subject the valuation of Level 3 investments to an appropriate level of consistency, oversight and review. For assets classified as Level 3, valuations may be performed by the relevant investment professionals or by independent third parties with input from the relevant investment professionals and are based on various factors including evaluation of financial and operating data, company specific developments, market discount rates and valuations of comparable companies and model projections. Asset valuations are approved by the valuation committee, which may be assisted by a subcommittee for the valuation of certain investments. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash held in banks and highly liquid investments with original maturities of three months or less. Interest income earned on cash and cash equivalents is recorded in other within total revenues on the condensed consolidated statements of operations. |
Restricted Cash and Cash Equivalents | Restricted Cash and Cash Equivalents Restricted cash and cash equivalents represent amounts that are held by third parties under certain of the Company’s financing and derivative transactions. Interest income earned on restricted cash and cash equivalents is recorded in other within total revenues on the condensed consolidated statements of operations. On the condensed consolidated statements of cash flows, net additions or reductions to restricted cash and cash equivalents are classified as an investing activity as restricted cash and cash equivalents reflect the receipts from collections or sales of investments, as well as payments made to acquire investments held by third parties. |
Securities Available-for-Sale | Securities Available‑for‑Sale The Predecessor and Successor Company both classify certain of their investments in securities as available‑for‑sale as the Companies may sell them prior to maturity and do not hold them principally for the purpose of selling them in the near term. These investments are carried at estimated fair value. The Successor Company elected the fair value option of accounting for its securities, with changes in estimated fair value reported in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. Comparatively, the Predecessor Company reported all unrealized gains and losses in accumulated other comprehensive loss on the condensed consolidated balance sheets. The Predecessor Company monitored its available‑for‑sale securities portfolio for impairments. A loss was recognized when it was determined that a decline in the estimated fair value of a security below its amortized cost was other‑than‑temporary. The Company considered many factors in determining whether the impairment of a security was deemed to be other‑than‑ temporary, including, but not limited to, the length of time the security had a decline in estimated fair value below its amortized cost and the severity of the decline, the amount of the unrealized loss, recent events specific to the issuer or industry, external credit ratings and recent changes in such ratings. In addition, for debt securities, the Company considered its intent to sell the debt security, the Company’s estimation of whether or not it expected to recover the debt security’s entire amortized cost if it intended to hold the debt security, and whether it was more likely than not that the Company would have been required to sell the debt security before its anticipated recovery. For equity securities, the Company also considered its intent and ability to hold the equity security for a period of time sufficient for a recovery in value. The amount of the loss that was recognized when it was determined that a decline in the estimated fair value of a security below its amortized cost was other‑than‑temporary was dependent on certain factors. If the security was an equity security or if the security was a debt security that the Company intended to sell or estimated that it was more likely than not that the Company would be required to sell before recovery of its amortized cost, then the impairment amount recognized in earnings was the entire difference between the estimated fair value of the security and its amortized cost. For debt securities that the Company did not intend to sell or estimated that it was not more likely than not to be required to sell before recovery, the impairment was separated into the estimated amount relating to credit loss and the estimated amount relating to all other factors. Only the estimated credit loss amount was recognized in earnings, with the remainder of the loss amount recognized in accumulated other comprehensive loss. Unamortized premiums and unaccreted discounts on securities available‑ for‑sale were recognized in interest income over the contractual life, adjusted for actual prepayments, of the securities using the effective interest method. |
Other Securities, at Estimated Fair Value | Other Securities, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for certain of their securities for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these securities. All securities, at estimated fair value are included within securities on the condensed consolidated balance sheets. Estimated fair values are based on quoted market prices, when available, on estimates provided by independent pricing sources or dealers who make markets in such securities, or internal valuation models when external sources of fair value are not available. In accounting for the Merger Transaction, the difference between the estimated fair value, as of the Effective Date, and the par amount became the new premium or discount to be amortized or accreted over the remaining terms, adjusted for actual prepayments, of the securities using the effective interest method. |
Residential Mortgage-Backed Securities, at Estimated Fair Value | Residential Mortgage‑Backed Securities, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for their residential mortgage investments for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these investments. RMBS, at estimated fair value are included within securities on the condensed consolidated balance sheets. |
Equity Investments, at Estimate Fair Value | Equity Investments, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for certain of their equity investments, at estimated fair value, including private equity investments received through restructuring debt transactions or issued by an entity in which the Company may have significant influence. The Companies elected the fair value option for certain of their equity investments for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these investments. Equity investments carried at estimated fair value are presented separately on the condensed consolidated balance sheets. |
Interests in Joint Ventures and Partnerships | Interests in Joint Ventures and Partnerships The Predecessor and Successor Company both elected the fair value option of accounting for certain of their interests in joint ventures and partnerships. The Companies elected the fair value option of accounting for certain of their noncontrolling interests in joint ventures and partnerships for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these interests. Interests in joint ventures and partnerships are presented separately on the condensed consolidated balance sheets. |
Equity Method Investments | Equity Method Investments The Company holds certain investments where the Company does not control the investee and where the Company is not the primary beneficiary, but can exert significant influence over the financial and operating policies of the investee. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the investee unless predominant evidence to the contrary exists. The evaluation of whether the Company exerts control or significant influence over the financial and operational policies of an investee may also require significant judgment based on the facts and circumstances surrounding each individual investment. Factors include investor voting or other rights, any influence the Company may have on the governing board of the investee and the relationship between the Company and other investors in the entity. The Company elected the fair value option to account for these equity investments with any changes in estimated fair value recorded in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. |
Corporate Loans, Net | Corporate Loans, Net In connection with the Company’s application of acquisition accounting related to the Merger Transaction and to align more closely with KKR & Co.’s method of accounting, the Company elected to carry all of its corporate loans at estimated fair value as of the Effective Date, with changes in estimated fair value recorded in net realized and unrealized gain (loss) on investments in the condensed consolidated statements of operations. As presented under the Predecessor Company, corporate loans had previously been accounted for based on the following three categories: (i) corporate loans held for investment, which were measured based on their principal plus or minus unaccreted purchase discounts and unamortized purchase premiums, net of an allowance for loan losses; (ii) corporate loans held for sale, which were measured at lower of cost or estimated fair value; and (iii) corporate loans at estimated fair value, which were measured at fair value. As such, the disclosures related to loans held for investment and loans held for sale pertain to the Predecessor Company. Corporate Loans Prior to the Effective Date, corporate loans were generally held for investment and the Company initially recorded corporate loans at their purchase prices. The Company subsequently accounted for corporate loans based on their outstanding principal plus or minus unaccreted purchase discounts and unamortized purchase premiums and corporate loans that the Company transferred to held for sale were transferred at the lower of cost or estimated fair value. As of the Effective Date, the Company initially recorded corporate loans at their purchase prices and subsequently accounts for all corporate loans at estimated fair value. Interest income on corporate loans includes interest at stated coupon rates adjusted for accretion of purchase discounts and the amortization of purchase premiums. Unamortized premiums and unaccreted discounts are recognized in interest income over the contractual life, adjusted for actual prepayments, of the corporate loans using the effective interest method. Other than corporate loans measured at estimated fair value, corporate loans acquired with deteriorated credit quality are recorded at initial cost and interest income is recognized as the difference between the Company’s estimate of all cash flows that it will receive from the loan in excess of its initial investment on a level-yield basis over the life of the corporate loan (accretable yield) using the effective interest method. A corporate loan is typically placed on non-accrual status at such time as: (i) management believes that scheduled debt service payments may not be paid when contractually due; (ii) the corporate loan becomes 90 days delinquent; (iii) management determines the borrower is incapable of, or has ceased efforts toward, curing the cause of the impairment; or (iv) the net realizable value of the collateral securing the corporate loan decreases below the Company’s carrying value of such corporate loan. As such, corporate loans placed on non-accrual status may or may not be contractually past due at the time of such determination. While on non-accrual status, previously recognized accrued interest is reversed if it is determined that such amounts are not collectible and interest income is recognized using the cost-recovery method, cash-basis method or some combination of the two methods. A corporate loan is placed back on accrual status when the ultimate collectability of the principal and interest is no longer in doubt. Prior to the Effective Date, the Company may have modified corporate loans in transactions where the borrower was experiencing financial difficulty and a concession was granted to the borrower as part of the modification. These concessions may have included one or a combination of the following: a reduction of the stated interest rate; payment extensions; forgiveness of principal; or an exchange of assets. Such modifications typically qualified as troubled debt restructurings (“TDRs”). In order to determine whether the borrower was experiencing financial difficulty, an evaluation was performed including the following considerations: whether the borrower was or would have been in payment default on any of its debt in the foreseeable future without the modification; whether there was a potential for a bankruptcy filing; whether there was a going-concern issue; or whether the borrower was unable to secure financing elsewhere. Corporate loans whose terms had been modified in a TDR were considered impaired, unless accounted for at fair value or the lower of cost or estimated fair value, and were typically placed on non-accrual status, but could have been moved to accrual status when, among other criteria, payment in full of all amounts due under the restructured terms was expected and the borrower demonstrated a sustained period of repayment performance, typically 6 months . TDRs were separately identified for impairment disclosures and were measured at either the estimated fair value or the present value of estimated future cash flows using the respective corporate loan’s effective rate at inception. Impairments associated with TDRs were included within the allocated component of the Company’s allowance for loan losses. The Company may have also identified receivables that were newly considered impaired and disclosed the total amount of receivables and the allowance for credit losses as of the end of the period of adoption related to those receivables that were newly considered impaired. The corporate loans the Company invested in were generally deemed in default upon the non-payment of a single interest payment or as a result of the violation of a covenant in the respective corporate loan agreement. The Company charged-off a portion or all of its amortized cost basis in a corporate loan when it determined that it was uncollectible due to either: (i) the estimation based on a recovery value analysis of a defaulted corporate loan that less than the amortized cost amount would have been recovered through the agreed upon restructuring of the corporate loan or as a result of a bankruptcy process of the issuer of the corporate loan or (ii) the determination by the Company to transfer a corporate loan to held for sale with the corporate loan having an estimated fair value below the amortized cost basis of the corporate loan. In addition to TDRs, the Company may have also modified corporate loans which usually involved changes in existing interest rates combined with changes of existing maturities to prevailing market rates/maturities for similar instruments at the time of modification. Such modifications typically did not meet the definition of a TDR since the respective borrowers were neither experiencing financial difficulty nor were seeking a concession as part of the modification. |
Allowance for Loan Losses | Allowance for Loan Losses As a result of the Merger Transaction, the acquisition method of accounting and adoption of fair value for corporate loans eliminated the need for an allowance for loan losses. The reevaluation of assets required by the acquisition method of accounting resulted in all loans being reported at their estimated fair values as of the Effective Date. The estimated fair value took into account the contractual payments on loans that were not expected to be received and consequently, no allowance for loan losses was carried over for the Successor Company. As of the Effective Date, no allowance for loan losses will be recorded as all corporate loans are carried at estimated fair value. As such, the disclosure related to the allowance for loan losses pertains to the Predecessor Company. The Company’s corporate loan portfolio is comprised of a single portfolio segment which includes one class of financing receivables, that is, high yield loans that are typically purchased via assignment or participation in either the primary or secondary market. High yield loans are generally characterized as having below investment grade ratings or being unrated. Prior to the Effective Date, the Company’s allowance for loan losses represented its estimate of probable credit losses inherent in its corporate loan portfolio held for investment as of the balance sheet date. Estimating the Company’s allowance for loan losses involved a high degree of management judgment and was based upon a comprehensive review of the Company’s corporate loan portfolio that was performed on a quarterly basis. The Company’s allowance for loan losses consisted of two components, an allocated component and an unallocated component. The allocated component of the allowance for loan losses pertained to specific corporate loans that the Company had determined were impaired. The Company determined a corporate loan was impaired when management estimated that it was probable that the Company would be unable to collect all amounts due according to the contractual terms of the corporate loan agreement. On a quarterly basis the Company performed a comprehensive review of its entire corporate loan portfolio and identified certain corporate loans that it had determined were impaired. Once a corporate loan was identified as being impaired, the Company placed the corporate loan on non-accrual status, unless the corporate loan was already on non-accrual status, and recorded an allowance that reflected management’s best estimate of the loss that the Company expected to recognize from the corporate loan. The expected loss was estimated as being the difference between the Company’s current cost basis of the corporate loan, including accrued interest receivable, and the present value of expected future cash flows discounted at the corporate loan’s effective interest rate, except as a practical expedient, the corporate loan’s observable estimated fair value may have been used. The Company also estimated the probable credit losses inherent in its unfunded loan commitments as of the balance sheet date. Any credit loss reserve for unfunded loan commitments was recorded in accounts payable, accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets. The unallocated component of the Company’s allowance for loan losses represented its estimate of probable losses inherent in the corporate loan portfolio as of the balance sheet date where the specific loan that the loan loss relates to was indeterminable. The Company estimated the unallocated component of the allowance for loan losses through a comprehensive review of its corporate loan portfolio and identified certain corporate loans that demonstrated possible indicators of impairment, including internally assigned credit quality indicators. This assessment excluded all corporate loans that were determined to be impaired and as a result, an allocated reserve had been recorded as described in the preceding paragraph. Such indicators included the current and/or forecasted financial performance, liquidity profile of the issuer, specific industry or economic conditions that may have impacted the issuer, and the observable trading price of the corporate loan if available. All corporate loans were first categorized based on their assigned risk grade and further stratified based on the seniority of the corporate loan in the issuer’s capital structure. The seniority classifications assigned to corporate loans were senior secured, second lien and subordinate. Senior secured consisted of corporate loans that were the most senior debt in an issuer’s capital structure and therefore had a lower estimated loss severity than other debt that was subordinate to the senior secured loan. Senior secured corporate loans often had a first lien on some or all of the issuer’s assets. Second lien consisted of corporate loans that were secured by a second lien interest on some or all of the issuer’s assets; however, the corporate loan was subordinate to the first lien debt in the issuer’s capital structure. Subordinate consisted of corporate loans that were generally unsecured and subordinate to other debt in the issuer’s capital structure. There were three internally assigned risk grades that were applied to loans that have not been identified as being impaired: high, moderate and low. High risk meant that there was evidence of possible loss due to the current and/or forecasted financial performance, liquidity profile of the issuer, specific industry or economic conditions that may have impacted the issuer, observable trading price of the corporate loan if available, or other factors that indicated that the breach of a covenant contained in the related loan agreement was possible. Moderate risk meant that while there was not observable evidence of possible loss, there were issuer and/or industry specific trends that indicated a loss may have occurred. Low risk meant that while there was no identified evidence of loss, there was the risk of loss inherent in the loan that had not been identified. All loans held for investment, with the exception of loans that had been identified as impaired, were assigned a risk grade of high, moderate or low. The Company applied a range of default and loss severity estimates in order to estimate a range of loss outcomes upon which to base its estimate of probable losses that resulted in the determination of the unallocated component of the Company’s allowance for loan losses. |
Corporate Loans Held for Sale | Corporate Loans Held for Sale As described above, corporate loans held for sale related to the Predecessor Company. From time to time the Company made the determination to transfer certain of its corporate loans from held for investment to held for sale. The decision to transfer a loan to held for sale was generally as a result of the Company determining that the respective loan’s credit quality in relation to the loan’s expected risk-adjusted return no longer met the Company’s investment objective and/or the Company deciding to reduce or eliminate its exposure to a particular loan for risk management purposes. Corporate loans held for sale were stated at lower of cost or estimated fair value and were assessed on an individual basis. Prior to transferring a loan to held for sale, any difference between the carrying amount of the loan and its outstanding principal balance was recognized as an adjustment to the yield by the effective interest method. The loan was transferred from held for investment to held for sale at the lower of its cost or estimated fair value and was carried at the lower of its cost or estimated fair value thereafter. Subsequent to transfer and while the loan was held for sale, recognition as an adjustment to yield by the effective interest method was discontinued for any difference between the carrying amount of the loan and its outstanding principal balance. From time to time the Company also made the determination to transfer certain of its corporate loans from held for sale back to held for investment. The decision to transfer a loan back to held for investment was generally as a result of the circumstances that led to the initial transfer to held for sale no longer being present. Such circumstances may have included deteriorated market conditions often resulting in price depreciation or assets becoming illiquid, changes in restrictions on sales and certain loans amending their terms to extend the maturity, whereby the Company determined that selling the asset no longer met its investment objective and strategy. The loan was transferred from held for sale back to held for investment at the lower of its cost or estimated fair value, whereby a new cost basis was established based on this amount. Interest income on corporate loans held for sale was recognized through accrual of the stated coupon rate for the loans, unless the loans were placed on non-accrual status, at which point previously recognized accrued interest was reversed if it was determined that such amounts were not collectible and interest income was recognized using either the cost-recovery method or on a cash-basis. |
Corporate Loans, at Estimated Fair Value | Corporate Loans, at Estimated Fair Value The Predecessor and Successor Company both elected the fair value option of accounting for certain of their corporate loans for the purpose of enhancing the transparency of their financial condition as fair value is consistent with how the Companies manage the risks of these corporate loans. All corporate loans carried at estimated fair value are included within corporate loans, net on the condensed consolidated balance sheets. Estimated fair values are based on quoted prices for similar instruments in active markets and inputs other than observable quoted prices, or internal valuation models when external sources of fair value are not available. In accounting for the Merger Transaction, the difference between the estimated fair value, as of the Effective Date, and the par amount became the new premium or discount to be amortized or accreted over the remaining terms, adjusted for actual prepayments, of the corporate loans using the effective interest method. As described above under “Basis of Presentation,” as of the Effective Date, purchases and sales of corporate loans are recorded on the trade date. |
Oil And Gas Revenue Recognition | Oil and Gas Revenue Recognition Oil, natural gas and natural gas liquid (“NGL”) revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title has transferred and collectability of the revenue is reasonably assured. The Company follows the sales method of accounting for natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which the Company is entitled based on the Company’s working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under‑produced owners to recoup their entitled share through future production. Under the sales method, no receivables are recorded when the Company has taken less than its share of production and no payables are recorded when the Company has taken more than its share of production. |
Long-Lived Assets | Long‑Lived Assets Whenever events or changes in circumstances indicate that the carrying amounts of such properties may not be recoverable, the Company evaluates its proved oil and natural gas properties and related equipment and facilities for impairment on a field‑by‑field basis. The determination of recoverability is made based upon estimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash flow analysis, with the carrying value of the related asset. The factors used to determine fair value may include, but are not limited to, estimates of proved reserves, future commodity pricing, future production estimates, anticipated capital expenditures, future operating costs and a discount rate commensurate with the risk on the properties and cost of capital. Unproved oil and natural gas properties were assessed periodically and, at a minimum, annually on a property‑by‑property basis, and any impairment in value was recognized when incurred. As a result of certain transactions during the third quarter of 2014, the Company no longer has any unproved oil and natural gas properties, as further described in Note 6 to these condensed consolidated financial statements. |
Borrowings | Borrowings The Company finances the majority of its investments through the use of secured borrowings in the form of securitization transactions structured as non‑ recourse secured financings and other secured and unsecured borrowings. The Company recognizes interest expense on all borrowings on an accrual basis. In connection with the Company’s application of acquisition accounting related to the Merger Transaction and to align more closely with KKR & Co.’s method of accounting, the Company elected to carry its CLO secured notes at estimated fair value as of the Effective Date, with changes in estimated fair value recorded in net realized and unrealized gain (loss) on debt in the condensed consolidated statements of operations. Prior to the Effective Date, the Company's CLO secured notes were carried at amortized cost. As mentioned above, beginning January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable. Accordingly, these financial assets were measured at fair value and these financial liabilities were measured as (i) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs less, (ii) the sum of the fair value of any beneficial interests retained by the reporting entity (other than those that represent compensation for services) and the Company’s carrying value of any beneficial interests that represent compensation for services. The resulting amount was allocated to the individual financial liabilities (other than the beneficial interests retained by the Company) using a reasonable and consistent methodology. |
Trust Preferred Securities | Trust Preferred Securities Trusts formed by the Company for the sole purpose of issuing trust preferred securities are not consolidated by the Company as the Company has determined that it is not the primary beneficiary of such trusts. The Company’s investment in the common securities of such trusts is included within other assets on the condensed consolidated balance sheets. |
Preferred Shares | Preferred Shares Distributions on the Company’s Series A LLC Preferred Shares are cumulative and payable quarterly when and if declared by the Company’s board of directors at a 7.375% rate per annum. The Company accrues for the distribution upon declaration and is included within accounts payable, accrued expenses and other liabilities on the condensed consolidated balance sheets. |
Derivative Instruments | Derivative Instruments The Company recognizes all derivatives on the condensed consolidated balance sheet at estimated fair value. On the date the Company enters into a derivative contract, the Company designates and documents each derivative contract as one of the following at the time the contract is executed: (i) a hedge of a recognized asset or liability (“fair value” hedge); (ii) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge); (iii) a hedge of a net investment in a foreign operation; or (iv) a derivative instrument not designated as a hedging instrument (“free‑standing derivative”). For a fair value hedge, the Company records changes in the estimated fair value of the derivative instrument and, to the extent that it is effective, changes in the fair value of the hedged asset or liability in the current period earnings in the same financial statement category as the hedged item. For a cash flow hedge, the Company records changes in the estimated fair value of the derivative to the extent that it is effective in accumulated other comprehensive loss and subsequently reclassifies these changes in estimated fair value to net income in the same period(s) that the hedged transaction affects earnings. The effective portion of the cash flow hedges is recorded in the same financial statement category as the hedged item. For free‑standing derivatives, the Company reports changes in the fair values in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations. The Company formally documents at inception its hedge relationships, including identification of the hedging instruments and the hedged items, its risk management objectives, strategy for undertaking the hedge transaction and the Company’s evaluation of effectiveness of its hedged transactions. Periodically, the Company also formally assesses whether the derivative it designated in each hedging relationship is expected to be and has been highly effective in offsetting changes in estimated fair values or cash flows of the hedged item using either the dollar offset or the regression analysis method. If the Company determines that a derivative is not highly effective as a hedge, it discontinues hedge accounting. In connection with the Merger Transaction, the Company discontinued hedge accounting for its cash flow hedges and, as of the Effective Date, classifies all derivative instruments as free‑standing derivatives. As a result, the Company records changes in the estimated fair value of the derivative instruments in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations. |
Foreign Currency | Foreign Currency The Company makes investments in non‑United States dollar denominated assets including securities, loans, equity investments and interests in joint ventures and partnerships. As a result, the Company is subject to the risk of fluctuation in the exchange rate between the United States dollar and the foreign currency in which it makes an investment. In order to reduce the currency risk, the Company may hedge the applicable foreign currency. All investments denominated in a foreign currency are converted to the United States dollar using prevailing exchange rates on the balance sheet date. Income, expenses, gains and losses on investments denominated in a foreign currency are converted to the United States dollar using the prevailing exchange rates on the dates when they are recorded. Foreign exchange gains and losses are recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations. |
Noncontrolling Interests | Noncontrolling Interests Noncontrolling interests represent noncontrolling interests in condensed consolidated entities held by third party investors. Income (loss) is allocated to noncontrolling interests based on the relative ownership interests of third party investors and is presented as net income (loss) attributable to noncontrolling interests on the condensed consolidated statements of operations. Noncontrolling interests are also presented separately within equity in the condensed consolidated balance sheets. |
Manager Compensation | Manager Compensation The Management Agreement provides for the payment of a base management fee to the Manager, as well as an incentive fee if the Company’s financial performance exceeds certain benchmarks. Additionally, the Management Agreement provides for the Manager to be reimbursed for certain expenses incurred on the Company’s behalf. The base management fee and the incentive fee are accrued and expensed during the period for which they are earned by the Manager. |
Income Taxes | Income Taxes The Company intends to continue to operate so as to qualify, for United States federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation. Therefore, the Company generally is not subject to United States federal income tax at the entity level, but is subject to limited state and foreign taxes. Holders of the Company’s Series A LLC Preferred Shares will be allocated a share of the Company’s gross ordinary income for the taxable year of the Company ending within or with their taxable year. Holders of the Company’s Series A LLC Preferred Shares will not be allocated any gains or losses from the sale of the Company’s assets. The Company owns equity interests in entities that have elected or intend to elect to be taxed as real estate investment trusts (“REITs”) under the Internal Revenue Code of 1986, as amended (the “Code”). A REIT generally is not subject to United States federal income tax to the extent that it currently distributes its income and satisfies certain asset, income and ownership tests, and recordkeeping requirements, but it may be subject to some amount of federal, state, local and foreign taxes based on its taxable income. The Company has wholly‑owned domestic and foreign subsidiaries that are taxable as corporations for United States federal income tax purposes and thus are not consolidated with the Company for United States federal income tax purposes. For financial reporting purposes, current and deferred taxes are provided for on the portion of earnings recognized by the Company with respect to its interest in the domestic taxable corporate subsidiaries, because each is taxed as a regular corporation under the Code. Deferred income tax assets and liabilities are computed based on temporary differences between the GAAP consolidated financial statements and the United States federal income tax basis of assets and liabilities as of each consolidated balance sheet date. The foreign corporate subsidiaries were formed to make certain foreign and domestic investments from time to time. The foreign corporate subsidiaries are organized as exempted companies incorporated with limited liability under the laws of the Cayman Islands, and are anticipated to be exempt from United States federal and state income tax at the corporate entity level because they restrict their activities in the United States to trading in stock and securities for their own account. However, the Company will be required to include their current taxable income in the Company’s calculation of its gross ordinary income allocable to holders of its Series A LLC Preferred Shares. The Company must recognize the tax impact from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax impact recognized in the financial statements from such a position is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Penalties and interest related to uncertain tax positions are recorded as tax expense. Significant judgment is required in the identification of uncertain tax positions and in the estimation of penalties and interest on uncertain tax positions. If it is determined that recognition for an uncertain tax provision is necessary, the Company would record a liability for an unrecognized tax expense from an uncertain tax position taken or expected to be taken. |
Share-Based Compensation | Share-Based Compensation In connection with the Merger Transaction, the Predecessor Company’s common shares were converted into 0.51 KKR & Co. common units. Prior to the Effective Date, the Company accounted for share-based compensation issued to its directors and to its Manager using the fair value based methodology in accordance with relevant accounting guidance. Compensation cost related to restricted common shares issued to the Company’s directors was measured at its estimated fair value at the grant date, and was amortized and expensed over the vesting period on a straight-line basis. Compensation cost related to restricted common shares and common share options issued to the Manager was initially measured at estimated fair value at the grant date, and was remeasured on subsequent dates to the extent the awards were unvested. The Company elected to use the graded vesting attribution method to amortize compensation expense for the restricted common shares and common share options granted to the Manager. |
Earnings Per Common Share | Earnings Per Common Share In connection with the Merger Transaction, as of the Effective Date, the Company is now a subsidiary of KKR Fund Holdings, a subsidiary of KKR & Co., which owns 100 common shares of the Company constituting all of the Company’s outstanding common shares. As KKR Fund Holdings is the Company’s sole shareholder, earnings per common share is not reported for the Successor Company. Prior to the Effective Date, the Company presented both basic and diluted earnings per common share (‘‘EPS’’) in its consolidated financial statements and footnotes thereto. Basic earnings per common share (‘‘Basic EPS’’) excluded dilution and was computed by dividing net income or loss available to common shareholders by the weighted average number of common shares, including vested restricted common shares, outstanding for the period. The Company calculated EPS using the more dilutive of the two-class method or the if-converted method. The two-class method was an earnings allocation formula that determined EPS for common shares and participating securities. Unvested share-based payment awards that contained non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) were participating securities and were included in the computation of EPS using the two-class method. Accordingly, all earnings (distributed and undistributed) were allocated to common shares, preferred shares and participating securities based on their respective rights to receive dividends. Diluted earnings per common share (‘‘Diluted EPS’’) reflected the potential dilution of common share options and unvested restricted common shares using the treasury method or if-converted method. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Consolidation In February 2015, the FASB issued guidance which eliminates the presumption that a general partner should consolidate a limited partnership and also eliminates the consolidation model specific to limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicle and whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. The guidance is effective for reporting periods starting after December 15, 2015 and for interim periods within the fiscal year. Early adoption is permitted, and a full retrospective or modified retrospective approach is required. The Company is evaluating the impact of this guidance on its financial statements. |
MERGER TRANSACTION (Tables)
MERGER TRANSACTION (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Summary of the estimated fair values assigned to the assets purchased and liabilities assumed | The following table summarizes the estimated fair values assigned to the assets purchased and liabilities assumed (amounts in thousands): Assets acquired: Cash and cash equivalents $ 210,413 Restricted cash and cash equivalents 649,967 Securities 541,149 Corporate loans 6,649,054 Equity investments 297,054 Oil and gas properties, net 505,238 Interests in joint ventures and partnerships 491,324 Derivative assets 26,383 Interest and principal receivable 35,992 Other assets 208,144 Total assets 9,614,718 Liabilities assumed: Collateralized loan obligation secured notes 5,663,666 Credit facilities 63,189 Senior notes 415,538 Junior subordinated notes 245,782 Accounts payable, accrued expenses and other liabilities 357,084 Accrued interest payable 17,647 Derivative liabilities 88,356 Total liabilities 6,851,262 Fair value of preferred shares 378,983 Fair value of net assets acquired 2,384,473 Less: Purchase price 2,369,559 Bargain purchase gain(1) $ 14,914 (1) Represents the excess of the fair value of the net assets acquired over the purchase price and value of the preferred shares, which constitute noncontrolling interests in the Company. This difference was recorded as an adjustment to the Company’s additional paid‑in‑capital as of the Effective Date. |
SECURITIES (Tables)
SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Investments, Debt and Equity Securities [Abstract] | |
Summary of the company's securities which are carried at estimated fair value | The following table summarizes the Company’s securities as of September 30, 2015 and December 31, 2014, which are carried at estimated fair value (amounts in thousands): September 30, 2015 December 31, 2014 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Securities, at estimated fair value $ 531,990 $ 485,932 $ 447,438 $ 721,094 $ 654,257 $ 638,605 Total $ 531,990 $ 485,932 $ 447,438 $ 721,094 $ 654,257 $ 638,605 |
Schedule of realized and unrealized gains from securities | The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands): Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Net realized gains (losses) $ (3,227 ) $ (9,127 ) $ (103 ) $ 632 Net (increase) decrease in unrealized losses (15,523 ) (20,598 ) (4,645 ) 6,178 Net (increase) decrease in unrealized losses $ (18,750 ) $ (29,725 ) $ (4,748 ) $ 6,810 |
Schedule of estimated fair value of securities pledged as collateral | The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Pledged as collateral for collateralized loan obligation secured debt $ 186,598 $ 262,085 Total $ 186,598 $ 262,085 |
CORPORATE LOANS AND ALLOWANCE29
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Successor Company | |
Summary of corporate loans | |
Schedule of corporate loans | The following table summarizes the Company’s corporate loans, at estimated fair value as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Corporate loans, at estimated fair value $ 5,864,706 $ 5,740,766 $ 5,444,004 $ 6,907,373 $ 6,710,570 $ 6,506,564 Total $ 5,864,706 $ 5,740,766 $ 5,444,004 $ 6,907,373 $ 6,710,570 $ 6,506,564 |
Schedule of realized and unrealized (losses) gains from corporate loans | The following tables present the Company’s realized and unrealized gains (losses) from corporate loans (amounts in thousands): Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Net realized gains (losses) $ (546 ) $ (22,807 ) $ 6,353 $ 1,637 Net (increase) decrease in unrealized losses (147,107 ) (92,283 ) (128,749 ) (102,888 ) Net realized and unrealized gains (losses) $ (147,653 ) $ (115,090 ) $ (122,396 ) $ (101,251 ) |
Schedule of corporate loans pledged as collateral | The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2015 and December 31, 2014 (amounts in thousands): September 30, 2015 December 31, 2014 Pledged as collateral for collateralized loan obligation secured debt $ 5,089,936 $ 6,205,292 Total $ 5,089,936 $ 6,205,292 |
Predecessor Company | |
Summary of corporate loans | |
Schedule of changes in the allowance for loan losses | The following table summarizes the changes in the allowance for loan losses for the Company’s corporate loan portfolio (amounts in thousands): For the four months ended April 30, 2014 Allowance for loan losses: Beginning balance 224,999 Provision for loan losses — Charge-offs (1,458 ) Ending balance $ 223,541 |
Schedule of loans by class modified as troubled debt restructurings | The following table presents the aggregate balance of loans whose terms had been modified in a TDR (dollar amounts in thousands): Four months ended April 30, 2014 Number of TDRs Pre-modification outstanding recorded investment(1) Post-modification outstanding recorded investment(1)(2) Troubled debt restructurings: Loans held for investment 1 $ 154,075 $ — Loans at estimated fair value 2 41,347 24,571 Total $ 195,422 $ 24,571 (1) Recorded investment is defined as amortized cost plus accrued interest. (2) Excludes equity securities received from the loans held for investment and/or loans at estimated fair value TDRs with an estimated fair value of $92.0 million and $12.3 million , from the two issuers, respectively. |
NATURAL RESOURCES ASSETS (Table
NATURAL RESOURCES ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |
Summary of the company's oil and gas properties | The following table summarizes the Company’s oil and gas properties as of September 30, 2015 and December 31, 2014 (amounts in thousands): As of September 30, 2015 As of December 31, 2014 Proved oil and natural gas properties (successful efforts method) $ 128,800 $ 128,800 Accumulated depreciation, depletion and amortization (12,935 ) (8,526 ) Oil and gas properties, net $ 115,865 $ 120,274 |
EQUITY METHOD INVESTMENTS (Tabl
EQUITY METHOD INVESTMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Summarized financial information of equity investments | The following table shows summarized financial information for the Company’s equity method investment(s), which were reported under the fair value option of accounting and were determined to be significant as defined by accounting guidance, assuming 100% ownership (amounts in thousands): Successor Company Predecessor Company Natural Resources Natural Resources Nine months ended September 30, 2015 Five months ended September 30, 2014 Four months ended April 30, 2014 Revenues(1) $ 227,322 $ — $ — Expenses(1) $ 233,005 $ — $ — Net income (loss) $ 33,236 $ — $ — (1) Revenues and expenses exclude realized and unrealized gains and losses. |
BORROWINGS (Tables)
BORROWINGS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [Abstract] | |
Schedule of Company's borrowings | Certain information with respect to the Company’s borrowings as of September 30, 2015 is summarized in the following table (dollar amounts in thousands): Par Carrying Value(1) Weighted Average Borrowing Rate Weighted Average Remaining Maturity (in days) Collateral(2) CLO 2005-2 secured notes $ 140,212 $ 143,019 2.07 % 788 $ 239,807 CLO 2007-1 secured notes 1,627,249 1,660,963 1.99 2054 1,915,755 CLO 2007-1 subordinated notes(3) 134,468 100,762 12.80 2054 158,308 CLO 2007-A subordinated notes(3) 15,096 19,522 17.54 746 56,511 CLO 2011-1 senior debt 252,398 252,398 1.65 1781 322,741 CLO 2012-1 secured notes 367,500 365,283 2.42 3364 368,655 CLO 2012-1 subordinated notes(3) 18,000 12,736 15.79 3364 18,057 CLO 2013-1 secured notes 458,500 455,227 2.02 3576 480,853 CLO 2013-2 secured notes 339,250 337,240 2.49 3768 354,497 CLO 9 secured notes 463,750 458,925 2.30 4033 464,768 CLO 9 subordinated notes(3) 15,000 11,157 13.75 4033 15,033 CLO 10 secured notes 368,000 368,152 2.59 3729 388,438 CLO 11 secured notes 507,750 499,576 2.33 4215 502,168 CLO 11 subordinated notes(3) 28,250 24,178 — 4215 27,939 Total collateralized loan obligation secured debt 4,735,423 4,709,138 5,313,530 CLO warehouse facility(4) 26,063 26,063 1.83 76 136,554 8.375% Senior notes 258,750 289,968 8.38 9543 — 7.500% Senior notes 115,043 123,426 7.50 9668 — Junior subordinated notes 283,517 248,160 5.42 7676 — Total borrowings $ 5,418,796 $ 5,396,755 $ 5,450,084 (1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings. (2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO. (3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any. (4) Represents a $350.0 million CLO warehouse facility. Certain information with respect to the Company’s borrowings as of December 31, 2014 is summarized in the following table (dollar amounts in thousands): Par Carrying Value(1) Weighted Average Borrowing Rate Weighted Average Remaining Maturity (in days) Collateral(2) CLO 2005-1 senior secured notes $ 192,384 $ 192,260 1.84 % 847 $ 224,716 CLO 2005-2 senior secured notes 242,928 242,365 0.68 1061 381,362 CLO 2006-1 senior secured notes 166,841 166,710 1.28 1333 400,165 CLO 2007-1 senior secured notes 1,906,409 1,891,228 0.80 2327 2,182,078 CLO 2007-1 mezzanine notes 489,723 486,575 3.84 2327 560,538 CLO 2007-1 subordinated notes(3) 134,468 119,112 13.75 2327 153,912 CLO 2007-A subordinated notes(3) 15,096 25,921 88.02 1019 66,044 CLO 2011-1 senior debt 402,515 402,515 1.58 1323 508,625 CLO 2012-1 senior secured notes 367,500 364,063 2.33 3637 365,662 CLO 2012-1 subordinated notes(3) 18,000 12,986 16.86 3637 17,910 CLO 2013-1 senior secured notes 458,500 441,153 1.96 3849 477,691 CLO 2013-2 senior secured notes 339,250 331,383 2.21 4041 357,722 CLO 9 senior secured notes 463,750 449,349 2.28 4306 474,072 CLO 9 subordinated notes(3) 15,000 13,531 — 4306 15,334 CLO 10 senior notes 368,000 361,948 2.50 4002 343,090 Total collateralized loan obligation secured debt 5,580,364 5,501,099 6,528,921 8.375% Senior notes 258,750 290,861 8.38 9816 — 7.500% Senior notes 115,043 123,663 7.50 9941 — Junior subordinated notes 283,517 246,907 5.39 7949 — Total borrowings $ 6,237,674 $ 6,162,530 $ 6,528,921 (1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings. (2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO senior, mezzanine and subordinated notes are calculated pro rata based on the par amount for each respective CLO. (3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the year ended December 31, 2014, if any. |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Derivative Instruments | |
Schedule of aggregate notional amount and estimated net fair value of the derivative instruments | The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of September 30, 2015 and December 31, 2014 (amounts in thousands): As of September 30, 2015 As of December 31, 2014 Notional Estimated Fair Value Notional Estimated Fair Value Free-Standing Derivatives: Interest rate swaps $ 311,667 $ (47,504 ) $ 426,000 $ (54,071 ) Foreign exchange forward contracts and options (363,836 ) 32,127 (442,181 ) 27,428 Total rate of return swaps — — — (130 ) Options — 481 — 5,212 Total $ (14,896 ) $ (21,561 ) |
Schedule of effect on income from free-standing derivatives by derivative instrument type | The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations (amounts in thousands): Successor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ — $ (8,489 ) $ (8,489 ) $ (5,297 ) $ 5,924 $ 627 Foreign exchange forward contracts and options(1) 12,872 (11,848 ) 1,024 27,107 (24,571 ) 2,536 Common stock warrants — (411 ) (411 ) — (2,412 ) (2,412 ) Total rate of return swaps — — — 304 130 434 Options — (2,428 ) (2,428 ) — (4,730 ) (4,730 ) Net realized and unrealized gains (losses) $ 12,872 $ (23,176 ) $ (10,304 ) $ 22,114 $ (25,659 ) $ (3,545 ) (1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. Successor Company Predecessor Company Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ — $ 2,892 $ 2,892 $ — $ 1,767 $ 1,767 $ — $ — $ — Commodity swaps 338 2,678 3,016 (1,194 ) (672 ) (1,866 ) (2,515 ) (5,856 ) (8,371 ) Credit default swaps(1) — — — — — — (2,167 ) 1,986 (181 ) Foreign exchange forward contracts and options(2) (11,489 ) 6,082 (5,407 ) (13,129 ) 5,124 (8,005 ) (2,068 ) 2,784 716 Common stock warrants 1,237 (1,077 ) 160 1,237 (1,082 ) 155 — 137 137 Total rate of return swaps (765 ) 392 (373 ) (596 ) 179 (417 ) (2,349 ) 284 (2,065 ) Options — (136 ) (136 ) — (646 ) (646 ) — (19 ) (19 ) Net realized and unrealized gains (losses) $ (10,679 ) $ 10,831 $ 152 $ (13,682 ) $ 4,670 $ (9,012 ) $ (9,099 ) $ (684 ) $ (9,783 ) (1) Includes related income and expense on the derivatives. (2) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. |
Predecessor Company | |
Derivative Instruments | |
Schedule of net (losses) gains recognized in accumulated other comprehensive loss related to derivatives in cash flow hedging relationships | The following table presents the net gains (losses) recognized in other comprehensive income (loss) related to derivatives in cash flow hedging relationships for the four months ended April 30, 2014 (amounts in thousands): For the four months ended April 30, 2014 Net gains (losses) recognized in accumulated other comprehensive income (loss) on cash flow hedges $ (5,442 ) |
FAIR VALUE OF FINANCIAL INSTR34
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Carrying value and the estimated fair value of the financial instruments | |
Schedule of fair value of financial assets and liabilities measured on a recurring basis | The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 , and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of Assets: Securities: Corporate debt securities $ — $ 189,183 $ 208,116 $ 397,299 Residential mortgage-backed securities — — 50,139 50,139 Total securities — 189,183 258,255 447,438 Corporate loans — 5,112,378 331,626 5,444,004 Equity investments, at estimated fair value 33,263 87,206 158,877 279,346 Interests in joint ventures and partnerships, at estimated fair value — — 655,655 655,655 Derivatives: Foreign exchange forward contracts and options — 34,285 — 34,285 Options — — 481 481 Total derivatives — 34,285 481 34,766 Total $ 33,263 $ 5,423,052 $ 1,404,894 $ 6,861,209 Liabilities: Collateralized loan obligation secured notes $ — $ 4,709,138 $ — $ 4,709,138 Derivatives: Interest rate swaps — 47,504 — 47,504 Foreign exchange forward contracts and options — 2,158 — 2,158 Total derivatives — 49,662 — 49,662 Total $ — $ 4,758,800 $ — $ 4,758,800 The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2014, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): Successor Company Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Balance as of December 31, 2014 Assets: Securities: Corporate debt securities $ — $ 266,387 $ 317,034 $ 583,421 Residential mortgage-backed securities — — 55,184 55,184 Total securities — 266,387 372,218 638,605 Corporate loans — 6,159,487 347,077 6,506,564 Equity investments, at estimated fair value 25,692 73,967 81,719 181,378 Interests in joint ventures and partnerships, at estimated fair value — — 718,772 718,772 Other assets — 4,645 — 4,645 Derivatives: Foreign exchange forward contracts and options — 28,354 — 28,354 Options — — 5,212 5,212 Total derivatives — 28,354 5,212 33,566 Total $ 25,692 $ 6,532,840 $ 1,524,998 $ 8,083,530 Liabilities: Collateralized loan obligation secured notes $ — $ — $ 5,501,099 $ 5,501,099 Derivatives: Interest rate swaps — 54,071 — 54,071 Foreign exchange forward contracts and options — 926 — 926 Total rate of return swaps — 130 — 130 Total derivatives — 55,127 — 55,127 Total $ — $ 55,127 $ 5,501,099 $ 5,556,226 |
Successor Company | |
Carrying value and the estimated fair value of the financial instruments | |
Schedule of carrying value and estimated fair value, as well as the respective hierarchy classifications, of the financial assets and liabilities that are not carried at estimated fair value | The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of September 30, 2015 (amounts in thousands): Successor Company As of September 30, 2015 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 837,662 $ 837,662 $ 837,662 $ — $ — Liabilities: Senior notes 413,394 400,036 400,036 — — Junior subordinated notes 248,160 214,190 — — 214,190 The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2014 (amounts in thousands): Successor Company As of December 31, 2014 Fair Value Hierarchy Carrying Amount Estimated Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Assets: Cash, restricted cash, and cash equivalents $ 610,912 $ 610,912 $ 610,912 $ — $ — Liabilities: Senior notes 414,524 413,215 413,215 — — Junior subordinated notes 246,907 228,087 — — 228,087 |
Schedule of additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis | The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended September 30, 2015 (amounts in thousands): Successor Company Assets Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Beginning balance as of July 1, 2015 $ 225,891 $ 52,389 $ 341,047 $ 166,879 $ 739,597 $ 411 $ 2,910 Total gains or losses (for the period): Included in earnings(1) (11,727 ) 2,454 (6,882 ) (8,453 ) (63,887 ) (411 ) (2,429 ) Transfers into Level 3 — — — — — — — Transfers out of Level 3 — — — — — — — Purchases — — — — 3,767 — — Sales (9,086 ) — — — — — — Settlements 3,038 (4,704 ) (2,539 ) 451 (23,822 ) — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (11,727 ) $ 581 $ (6,882 ) $ (8,453 ) $ (63,887 ) $ (411 ) $ (2,429 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the nine months ended September 30, 2015 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Warrants Options Collateralized Loan Obligation Secured Notes Beginning balance as of January 1, 2015 $ 317,034 $ 55,184 $ 347,077 $ 81,719 $ 718,772 $ — $ 5,212 $ 5,501,099 Total gains or losses (for the period): Included in earnings(1) (23,486 ) 5,469 (64,930 ) (29,567 ) (84,045 ) (2,412 ) (4,731 ) — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — — — — — (5,501,099 ) Purchases — — 12,307 — 53,133 — — — Sales (89,665 ) — (25,511 ) — — — — — Settlements 4,233 (10,514 ) 62,683 106,725 (32,205 ) 2,412 — — Ending balance as of September 30, 2015 $ 208,116 $ 50,139 $ 331,626 $ 158,877 $ 655,655 $ — $ 481 $ — Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (26,145 ) $ 758 $ (64,043 ) $ (28,871 ) $ (84,045 ) $ (2,412 ) $ (4,731 ) $ — (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of September 30, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statement for further discussion. The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three and five months ended September 30, 2014 (amounts in thousands): Successor Company Assets Liabilities Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Collateralized Loan Obligations Secured Notes Beginning balance as of May 1, 2014 $ 156,500 $ 59,623 $ 294,218 $ 157,765 $ 472,467 $ 8,854 $ 6,684 $ 5,663,665 Total gains or losses (for the period): Included in earnings(1) 2,185 1,359 2,951 2,160 21,690 (1,798 ) (509 ) 28,669 Transfers into Level 3 — — — — — — — — Transfers out of Level 3(2) — — — (1,230 ) — — — — Purchases 20,000 — 1,261 — 27,466 — — 52,594 Sales (3,966 ) — (2,912 ) — — — — — Settlements (5,127 ) (1,740 ) 4,764 (17,535 ) (6,067 ) — — (197,014 ) Ending balance as of June 30, 2014 $ 169,592 $ 59,242 $ 300,282 $ 141,160 $ 515,556 $ 7,056 $ 6,175 $ 5,547,914 Total gains or losses (for the period): Included in earnings(1) (7,751 ) 1,421 (10,084 ) (3,265 ) 8,639 (7,056 ) (137 ) 5,468 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases 29,780 — 1,327 — 15,381 — — 471,441 Sales (6,870 ) — — — (13,795 ) — — — Settlements 29,792 (3,517 ) (3,758 ) (96,125 ) 211,540 — — (581,237 ) Ending balance as of September 30, 2014 $ 214,543 $ 57,146 $ 287,767 $ 41,770 $ 737,321 $ — $ 6,038 $ 5,443,586 Change in unrealized gains or losses for the three months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (7,751 ) $ (185 ) $ (10,084 ) $ (3,265 ) $ 8,639 $ — $ (137 ) $ 5,324 Change in unrealized gains or losses for the five months ended September 30, 2014 included in earnings for assets held at the end of the reporting period(1) $ (5,566 ) $ 438 $ (7,092 ) $ 109 $ 26,272 $ — $ (646 ) $ 33,993 (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized gain (loss) on debt in the condensed consolidated statements of operations. (2) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available. |
Summary of valuation techniques used for assets and liabilities, measured at fair value and categorized within level 3 | The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2014 (dollar amounts in thousands): Successor Company Balance as of December 31, 2014 Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 317,034 Yield analysis Yield 17% 3% - 19% Decrease Net leverage 6x 5x - 12x Decrease EBITDA multiple 7x 4x - 11x Increase Discount margin 905bps 625bps - 1100bps Decrease Broker quotes Offered quotes 101 101 Increase Residential mortgage-backed securities $ 55,184 Discounted cash flows Probability of defaults 8% 0% - 21% Decrease Loss severity 26% 12% - 45% Decrease Constant prepayment rate 12% 4% - 19% (5 ) Corporate loans, at estimated fair value $ 347,077 Yield Analysis Yield 12% 3% - 21% Decrease Net leverage 6x 1x - 13x Decrease EBITDA multiple 9x 5x - 12x Increase Equity investments, at estimated fair value(6) $ 81,719 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 97% 0% - 100% (7 ) Weight ascribed to discounted cash flows 83% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 4x 1x - 12x Increase Forward EBITDA multiple 7x 4x - 11x Increase Discounted cash flows Weighted average cost of capital 13% 9% - 16% Decrease LTM EBITDA exit multiple 8x 5x - 10x Increase Interests in joint ventures and partnerships(9) $ 718,772 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 54% 0% - 100% (7 ) Weight ascribed to discounted cash flows 79% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 4% - 15% Decrease LTM EBITDA multiple 11x 10x - 13x Increase Control Premium 15% 15% Increase Discounted cash flows Weighted average cost of capital 12% 7% - 20% Decrease Average Price per BOE(10) $30.16 $21.46 - $35.67 Increase Options(11) $ 5,212 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) Market comparables LTM EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 11x 11x Increase Liabilities: Collateralized loan obligation secured notes $ 5,501,099 Yield analysis Discount margin 255bps 95bps - 1000bps Decrease Discounted cash flows Probability of default 3% 2% - 3% Decrease Loss Severity 32% 30% - 37% Decrease (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value , $9.5 million was valued solely using a discounted cash flow technique, while $67.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interests in joint ventures and partnerships, $207.6 million was valued solely using a discounted cash flow technique, while $20.4 million was valued solely using a market comparables technique. (10) Natural resources assets with an estimated fair value of $176.4 million as of December 31, 2014 were valued using commodity prices.Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 23% liquids and 77% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of September 30, 2015 (dollar amounts in thousands): Successor Company Balance as of Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 208,116 Yield analysis Yield 19% 6% - 23% Decrease Net leverage 7x 6x-12x Decrease EBITDA multiple 6x 5x - 10x Increase Discount margin 845 750bps – 1425bps Decrease Discounted cash flows Weighted average cost of capital 17% 17% Decrease Residential mortgage – backed securities $ 50,139 Discounted cash flows Probability of default 1% 0% - 3% Decrease Loss severity 35% 30% - 50% Decrease Constant prepayment rate 16% 12% - 18% (5 ) Corporate loans $ 331,626 Yield Analysis Yield 12% 3% - 20% Decrease Net leverage 6x 1x - 22x Decrease EBITDA multiple 8x 4x - 17x Increase Equity investments, at estimated fair value(6) $ 158,877 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 0% - 15% Decrease Weight ascribed to market comparables 62% 0% - 100% (7 ) Weight ascribed to discounted cash flows 38% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 5x 1x - 12x Increase Forward EBITDA multiple 8x 4x - 10x Increase Discounted cash flows Weighted average cost of capital 9% 7% - 14% Decrease LTM EBITDA exit multiple 9x 3x - 10x Increase Interests in joint ventures and partnerships(9) $ 655,655 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 34% 0% - 100% (7 ) Weight ascribed to discounted cash flows 66% 0% - 100% (8 ) Market comparables Current capitalization rate 7% 6% - 11% Decrease LTM EBITDA multiple 8x 8x Increase Discounted cash flows Weighted average cost of capital 10% 7% - 20% Decrease Average price per BOE(10) $21.92 $16.85 - $24.81 Increase Yield analysis Yield 16% 16% Decrease Net leverage 5x 1x - 13x Decrease EBITDA multiple 10x 8x - 13x Increase Options(11) $ 481 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 10% Decrease Weight ascribed to market comparables 50% 50% (7 ) Weight ascribed to discounted cash flows 50% 50% (8 ) , Market comparables LTM EBITDA multiple 10x 10x Increase Forward EBITDA multiple 9x 9x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 6x 6x Increase (1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0 - 100% . When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques. (2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities. (3) Weighted average amounts are based on the estimated fair values. (4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements. (5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips. (6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $7.0 million was valued solely using a discounted cash flow technique, while $46.4 million was valued solely using a market comparables technique. (7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach. (8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach. (9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $168.2 million was valued solely using a discounted cash flow technique, while $33.0 million was valued solely using a market comparables technique and $18.4 million was valued solely using a yield analysis. (10) Natural resources assets with an estimated fair value of $134.4 million as of September 30, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas. (11) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. |
Predecessor Company | |
Carrying value and the estimated fair value of the financial instruments | |
Schedule of additional information of assets measured on level 3 basis | The following table presents additional information about assets, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the four months ended April 30, 2014 (amounts in thousands): Predecessor Company Securities Available- For-Sale Other Securities, at Estimated Fair Value Residential Mortgage- Backed Securities Corporate Loans, at Estimated Fair Value Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Options Beginning balance as of January 1, 2014 $ 23,401 $ 107,530 $ 76,004 $ 152,800 $ 138,059 $ 415,247 $ 8,941 $ 6,794 Total gains or losses (for the period): Included in earnings(1) 22 3,059 3,088 (5,123 ) 9,076 22,377 (813 ) (302 ) Included in other comprehensive income 121 — — — — — — — Transfers into Level 3 — — — — — — — — Transfers out of Level 3(3) — — — — (8,751 ) — — — Purchases — 25,000 — 8,822 — 42,683 — — Sales — — (17,810 ) — — — — — Settlements (16 ) (10,078 ) (2,529 ) (3,104 ) 120,593 14,113 — — Ending balance as of March 31, 2014 23,528 125,511 58,753 153,395 258,977 494,420 8,128 6,492 Total gains or losses (for the period): Included in earnings(1) 44 479 1,416 1,240 12,126 (24,158 ) 726 192 Included in other comprehensive income 33 — — — — — — — Transfers into Level 3(2) 6,937 — — — — — — — Transfers out of Level 3(3) — — — — (119,033 ) — — — Purchases — — — — — 1,615 — — Sales — — — — — — — — Settlements (32 ) — (546 ) 2,272 — (1,184 ) — — Ending balance as of April 30, 2014 $ 30,510 $ 125,990 $ 59,623 $ 156,907 $ 152,070 $ 470,693 $ 8,854 $ 6,684 Change in unrealized gains or losses for the period included in earnings for the four months ended April 30, 2014 for assets held at the end of the reporting period(1) $ 66 $ 2,683 $ 5,242 $ 4,445 $ 20,499 $ (1,781 ) $ (87 ) $ (110 ) (1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. (2) Securities available-for-sale were transferred into Level 3 because observable market data was no longer available as a result of an asset-restructure. (3) Equity investments, at estimated fair value were transferred out of Level 3 because observable market data became available as a result of asset-restructures. |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Schedule of restricted common share transactions | The following table summarizes the restricted common share transactions that occurred prior to the Merger Transaction: Predecessor Company Manager Directors Total Unvested shares as January 1, 2014 584,634 85,194 669,828 Issued — — — Vested (243,648 ) — (243,648 ) Forfeited — — — Unvested shares as of April 30, 2014 340,986 85,194 426,180 |
Schedule of common share option transactions | The following table summarizes common share option transactions: Predecessor Company Number of Options Weighted Average Exercise Price Outstanding as of January 1, 2014 1,932,279 $ 20.00 Granted — — Exercised — — Forfeited — — Outstanding as of April 30, 2014 1,932,279 $ 20.00 |
Schedule of share-based compensation expense | The components of share-based compensation expense were as follows (amounts in thousands): Predecessor Company For the four months ended April 30, 2014 Restricted common shares granted to Manager $ 690 Restricted common shares granted to certain directors 328 Total share-based compensation expense $ 1,018 |
MANAGEMENT AGREEMENT AND RELA36
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Management Agreement and Related Party Transactions | |
Summary of components of related party management compensation | The following table summarizes the components of related party management compensation on the Company’s condensed consolidated statements of operations, which are described in further detail below (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Base management fees, net $ 2,633 $ 8,096 $ 4,986 $ 10,927 $ 5,253 CLO management fees 6,816 21,390 7,558 12,023 11,016 Incentive fees — — — — 12,882 Manager share-based compensation — — — — 690 Total related party management compensation $ 9,449 $ 29,486 $ 12,544 $ 22,950 $ 29,841 |
Schedule of estimate fair value of contributions and distributions | The table below summarizes the estimated fair value of contributions and distributions at the time of transfer, certain of which were different from the carrying value of assets transferred (amounts in thousands): Three months ended September 30, 2014 Cash $ 235,759 Securities 22,873 Loans 13,464 Interests in joint ventures and partnerships 19,433 Total contributions from Parent $ 291,529 Cash $ 14,370 Equity investments, at estimated fair value 101,042 Oil and gas properties, net 179,203 Total distributions to Parent $ 294,615 |
Base Management Fees | |
Management Agreement and Related Party Transactions | |
Summary of components of related party management compensation | The table below summarizes the aggregate base management fees (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Base management fees, gross $ 7,702 $ 24,029 $ 9,846 $ 16,534 $ 13,364 CLO management fees credit(1) (5,069 ) (15,933 ) (4,860 ) (5,607 ) (8,111 ) Other related party fees credit — — — — — Total base management fees, net $ 2,633 $ 8,096 $ 4,986 $ 10,927 $ 5,253 (1) See “CLO Management Fees” for further discussion. |
CLO Management Fees | |
Management Agreement and Related Party Transactions | |
Summary of components of related party management compensation | The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands): Successor Company Predecessor Company Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2014 Five months ended September 30, 2014 Four months ended April 30, 2014 Charged and retained CLO management fees(1) $ 1,747 $ 5,457 $ 12,418 $ 17,630 $ 2,905 CLO management fees credit 5,069 15,933 (4,860 ) (5,607 ) 8,111 Total CLO management fees $ 6,816 $ 21,390 $ 7,558 $ 12,023 $ 11,016 (1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO. |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Segment reporting | |
Schedule showing net income (loss) components and total assets of reportable segments reconciled to amounts reflected in the condensed consolidated financial statements | The following table shows total assets of our reportable segments reconciled to amounts reflected in the condensed consolidated balance sheets as of September 30, 2015 and December 31, 2014 (amounts in thousands): Successor Company Credit Natural Resources Other Reconciling Items Total Consolidated(1) As of September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 September 30, 2015 December 31, 2014 Total assets $ 7,412,244 $ 8,438,227 $ 252,618 $ 300,281 $ 234,581 $ 213,006 $ — $ 111 $ 7,899,443 $ 8,951,625 (1) Total consolidated assets as of September 30, 2015 included $86.0 million of noncontrolling interests, of which $53.1 million was related to the Credit segment and $32.9 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2014 included $100.2 million of noncontrolling interests, of which $62.7 million was related to the Credit segment and $37.4 million was related to the Natural Resources segment. |
Successor Company | |
Segment reporting | |
Schedule showing net income (loss) components and total assets of reportable segments reconciled to amounts reflected in the condensed consolidated financial statements | The following tables present the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations (amounts in thousands): Successor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Three months ended September 30, 2015 Nine months ended September 30, 2015 Total revenues $ 79,698 $ 265,176 $ 3,876 $ 13,055 $ 5,535 $ 14,355 $ — $ — $ 89,109 $ 292,586 Total investment costs and expenses 47,948 163,246 2,016 6,062 388 1,147 — — 50,352 170,455 Total other income (loss) (149,952 ) (216,786 ) (36,236 ) (50,337 ) 739 20,545 — — (185,449 ) (246,578 ) Total other expenses 11,285 39,702 114 800 99 333 49 149 11,547 40,984 Income tax expense (benefit) 64 126 — — 30 1,044 — — 94 1,170 Net income (loss) $ (129,551 ) $ (154,684 ) $ (34,490 ) $ (44,144 ) $ 5,757 $ 32,376 $ (49 ) $ (149 ) $ (158,333 ) $ (166,601 ) Net income (loss) attributable to noncontrolling interests (2,727 ) (8,403 ) (3,949 ) (7,049 ) — — — — (6,676 ) (15,452 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (126,824 ) $ (146,281 ) $ (30,541 ) $ (37,095 ) $ 5,757 $ 32,376 $ (49 ) $ (149 ) $ (151,657 ) $ (151,149 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. Successor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Three months ended September 30, 2014 Five months ended September 30, 2014 Total revenues $ 98,413 $ 160,724 $ 17,929 $ 49,859 $ 8,414 $ 8,486 $ — $ — $ 124,756 $ 219,069 Total investment costs and expenses 46,412 81,822 14,617 34,674 311 508 — — 61,340 117,004 Total other income (loss) (132,098 ) (114,985 ) (1,514 ) (6,394 ) 7,927 16,581 — — (125,685 ) (104,798 ) Total other expenses 14,136 26,889 617 2,010 145 328 — 35 14,898 29,262 Income tax expense (benefit) 34 58 — — — 4 — — 34 62 Net income (loss) $ (94,267 ) $ (63,030 ) $ 1,181 $ 6,781 $ 15,885 $ 24,227 $ — $ (35 ) $ (77,201 ) $ (32,057 ) Net income (loss) attributable to noncontrolling interests 816 816 — — — — — — 816 816 Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (95,083 ) $ (63,846 ) $ 1,181 $ 6,781 $ 15,885 $ 24,227 $ — $ (35 ) $ (78,017 ) $ (32,873 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. |
Predecessor Company | |
Segment reporting | |
Schedule showing net income (loss) components and total assets of reportable segments reconciled to amounts reflected in the condensed consolidated financial statements | Predecessor Company Credit Natural Resources Other Reconciling Items(1) Total Consolidated Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Four months ended April 30, 2014 Total revenues $ 134,255 $ 61,782 $ 21,205 $ — $ 217,242 Total investment costs and expenses 62,485 38,915 425 — 101,825 Total other income (loss) 76,046 (8,123 ) (11,589 ) — 56,334 Total other expenses 23,121 1,633 230 40,625 65,609 Income tax expense (benefit) 146 — 16 — 162 Net income (loss) $ 124,549 $ 13,111 $ 8,945 $ (40,625 ) $ 105,980 (1) Consists of certain expenses not allocated to individual segments including other expenses comprised of incentive fees of $12.9 million and merger related transaction costs of $22.7 million . The remaining reconciling items include insurance expenses, directors’ expenses and share-based compensation expense which are not allocated to individual segments. |
EARNINGS PER COMMON SHARE (Tabl
EARNINGS PER COMMON SHARE (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Earnings Per Share, Basic and Diluted [Abstract] | |
Schedule of reconciliation of basic and diluted net (loss) income per common share | The following table presents a reconciliation of basic and diluted net income (loss) per common share for the Predecessor Company (amounts in thousands, except per share information): Predecessor Company Four months ended April 30, 2014 Net income (loss) $ 105,980 Less: Preferred share distributions 6,891 Net income (loss) available to common shares $ 99,089 Less: Dividends and undistributed earnings allocated to participating securities 292 Net income (loss) allocated to common shares $ 98,797 Basic: Basic weighted average common shares outstanding 204,276 Net income (loss) per common share $ 0.48 Diluted: Diluted weighted average common shares outstanding(1) 204,276 Net income (loss) per common share $ 0.48 Distributions declared per common share $ 0.22 (1) Potential anti-dilutive common shares excluded from diluted earnings per share related to common share options were 1,932,279 . |
ACCUMULATED OTHER COMPREHENSI39
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Stockholders' Equity Note [Abstract] | |
Schedule of components of changes in accumulated other comprehensive loss | The components of changes in accumulated other comprehensive loss for the Predecessor Company were as follows (amounts in thousands): Predecessor Company Four months ended April 30, 2014 (1) Net unrealized gains on available-for-sale securities Net unrealized losses on cash flow hedges Total Beginning balance $ 23,567 $ (39,219 ) $ (15,652 ) Other comprehensive loss before reclassifications (2,614 ) (5,442 ) (8,056 ) Amounts reclassified from accumulated other comprehensive loss(2) (2,639 ) — (2,639 ) Net current-period other comprehensive loss (5,253 ) (5,442 ) (10,695 ) Ending balance $ 18,314 $ (44,661 ) $ (26,347 ) (1) The Company’s gross and net of tax amounts are the same. (2) Includes an impairment charge of $4.4 million for investments which were determined to be other-than-temporary for the four months ended April 30, 2014. Reclassified amounts were included in net realized and unrealized gain (loss) on investments on the condensed consolidated statements of operations. |
ORGANIZATION (Details)
ORGANIZATION (Details) | Apr. 30, 2014 | Sep. 30, 2015 |
Series A LLC Preferred Shares | ||
Definitive merger agreement | ||
Preferred shares, dividend rate (as a percent) | 7.375% | |
Predecessor Company | Series A LLC Preferred Shares | ||
Definitive merger agreement | ||
Preferred shares, dividend rate (as a percent) | 7.375% | |
Predecessor Company | KFN | KKR & Co. | ||
Definitive merger agreement | ||
Stock exchange ratio to be applied in the merger transaction | 0.51 |
SUMMARY OF SIGNIFICANT ACCOUN41
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Successor Company - USD ($) $ in Thousands | 1 Months Ended | ||
Jul. 31, 2015 | Sep. 30, 2015 | Dec. 31, 2014 | |
Collateralized Debt Obligation disclosures | |||
Collateralized loan obligation secured notes | $ 5,418,796 | $ 6,237,674 | |
Collateralized Debt Obligation (CLOs) VIEs | |||
Collateralized Debt Obligation disclosures | |||
Corporate debt investment, par amount | 5,700,000 | 6,900,000 | |
Estimated fair value of corporate debt investments | 5,300,000 | 6,500,000 | |
Collateralized Debt Obligation (CLOs) VIEs | Nonaffiliates | |||
Collateralized Debt Obligation disclosures | |||
Collateralized loan obligation secured notes | 4,700,000 | $ 5,600,000 | |
Accounting Standards Update 2014-13 | |||
Collateralized Debt Obligation disclosures | |||
Cumulative effect adjustment from adoption of accounting guidance | $ 1,900 | ||
CLO 2005-1 secured notes | |||
Collateralized Debt Obligation disclosures | |||
Extinguishment of debt, amount | $ 142,400 |
SUMMARY OF SIGNIFICANT ACCOUN42
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) | 4 Months Ended | 9 Months Ended |
Apr. 30, 2014gradecomponentcategory | Sep. 30, 2015approachmethodclass | |
Consolidation | ||
Minimum percentage of voting interest required to consolidate non-VIEs | 50.00% | |
Fair Value of Financial Instruments | ||
Number of approaches used to determine fair value of investments | approach | 2 | |
Corporate Loans | ||
Period for determination of non-accrual status | 90 days | |
Number of methods interest income recognized | method | 2 | |
Sustained period of repayment performance | 6 months | |
Allowance for Loan Losses | ||
Number of classes of financing receivables | class | 1 | |
Predecessor Company | ||
Summary of corporate loans | ||
Number of loan categories | category | 3 | |
Allowance for Loan Losses | ||
Number of components in the loans receivable allowance for loan losses (in components) | component | 2 | |
Number of internally assigned risk grades | 3 |
SUMMARY OF SIGNIFICANT ACCOUN43
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) | 9 Months Ended |
Sep. 30, 2015 | |
Series A LLC Preferred Shares | |
Preferred Shares | |
Preferred shares, dividend rate (as a percent) | 7.375% |
SUMMARY OF SIGNIFICANT ACCOUN44
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 4) | Apr. 30, 2014 | Dec. 16, 2013 |
Predecessor Company | KFN | KKR & Co. | ||
Merger transaction | ||
Exchange ratio of share based awards under merger transaction | 0.51 | 0.51 |
SUMMARY OF SIGNIFICANT ACCOUN45
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 5) | Sep. 30, 2015shares |
KKR Fund Holdings | |
Earnings per common share | |
Number of common shares held | 100 |
MERGER TRANSACTION (Details)
MERGER TRANSACTION (Details) $ in Thousands | Apr. 30, 2014USD ($) | Dec. 16, 2013 |
KFN | KKR & Co. | ||
Merger transaction | ||
Transaction costs | $ 24,200 | |
KFN | KKR & Co. | General, administrative and directors expenses | ||
Merger transaction | ||
Transaction costs | $ 22,700 | |
Predecessor Company | Phantom share | ||
Merger transaction | ||
Exchange ratio of share based awards under merger transaction | 0.51 | |
Predecessor Company | KFN | KKR & Co. | ||
Merger transaction | ||
Exchange ratio of share based awards under merger transaction | 0.51 | 0.51 |
Assets acquired: | ||
Cash and cash equivalents | $ 210,413 | |
Restricted cash and cash equivalents | 649,967 | |
Securities | 541,149 | |
Corporate loans | 6,649,054 | |
Equity investments | 297,054 | |
Oil and gas properties, net | 505,238 | |
Interests in joint ventures and partnerships | 491,324 | |
Derivative assets | 26,383 | |
Interest and principal receivable | 35,992 | |
Other assets | 208,144 | |
Total assets | 9,614,718 | |
Liabilities assumed: | ||
Collateralized loan obligation secured notes | 5,663,666 | |
Credit facilities | 63,189 | |
Senior notes | 415,538 | |
Junior subordinated notes | 245,782 | |
Accounts payable, accrued expenses and other liabilities | 357,084 | |
Accrued interest payable | 17,647 | |
Derivative liabilities | 88,356 | |
Total liabilities | 6,851,262 | |
Fair value of preferred shares | 378,983 | |
Fair value of net assets acquired | 2,384,473 | |
Less: Purchase price | 2,369,559 | |
Bargain purchase gain | $ 14,914 | |
Predecessor Company | KFN | KKR & Co. | Restricted common shares | ||
Merger transaction | ||
Exchange ratio of share based awards under merger transaction | 0.51 |
SECURITIES (Details)
SECURITIES (Details) - Successor Company - USD ($) $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | |
Securities Available-for-Sale | |||||
Par | $ 531,990 | $ 531,990 | $ 721,094 | ||
Amortized Cost | 485,932 | 485,932 | 654,257 | ||
Estimated Fair Value | 447,438 | 447,438 | 638,605 | ||
Net realized and unrealized gains | |||||
Net realized gains (losses) | (3,227) | $ (103) | $ 632 | (9,127) | |
Net (increase) decrease in unrealized losses | (15,523) | (4,645) | 6,178 | (20,598) | |
Net (increase) decrease in unrealized losses | (18,750) | $ (4,748) | $ 6,810 | (29,725) | |
Securities, at estimated fair value | |||||
Securities Available-for-Sale | |||||
Par | 531,990 | 531,990 | 721,094 | ||
Amortized Cost | 485,932 | 485,932 | 654,257 | ||
Estimated Fair Value | $ 447,438 | $ 447,438 | $ 638,605 |
SECURITIES (Details 2)
SECURITIES (Details 2) - Successor Company - Corporate Debt Securities $ in Millions | Sep. 30, 2015security | Dec. 31, 2014USD ($)issuer |
Gross unrealized losses and estimated fair value of available-for-sale securities | ||
Number of corporate debt securities in default | security | 0 | |
Number of issuers with corporate debt securities in default | 1 | |
Estimated fair value of corporate debt security in default | $ | $ 8.7 |
SECURITIES (Details 3)
SECURITIES (Details 3) - Successor Company $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015USD ($)issuer | Dec. 31, 2014USD ($)issuer | |
Concentration risk | ||
Number of issuers with whom a specified percentage of estimated fair value of corporate debt securities is concentrated (in issuers) | issuer | 10 | 10 |
Number of largest issuers with whom a specified percentage of estimated fair value of debt securities is concentrated (in issuers) | issuer | 3 | 3 |
Securities | $ 447,438 | $ 638,605 |
Estimated fair value of securities pledged as collateral | ||
Pledged as collateral for collateralized loan obligation secured debt | 186,598 | 262,085 |
Total | $ 186,598 | $ 262,085 |
Corporate Debt Securities | Percent to total investment in corporate loans, debt securities and other investments | Top three largest | ||
Concentration risk | ||
Concentration risk of total fair value (as a percent) | 50.00% | 37.00% |
Securities | $ 199,300 | $ 213,600 |
Corporate Debt Securities | Percent to total investment in corporate loans, debt securities and other investments | Ten issuers | ||
Concentration risk | ||
Concentration risk of total fair value (as a percent) | 85.00% | 70.00% |
SECURITIES (Details 4)
SECURITIES (Details 4) | 4 Months Ended | ||
Apr. 30, 2014USD ($)security | Sep. 30, 2015USD ($) | Dec. 31, 2014USD ($) | |
Troubled Debt Restructurings | |||
Estimated fair value of new securities received from the security TDR exchange | $ 279,346,000 | $ 181,378,000 | |
Predecessor Company | |||
Troubled Debt Restructurings | |||
Available-for-sale securities, gross realized gain | $ 2,500,000 | ||
Available-for-sale securities, gross realized losses | 0 | ||
Predecessor Company | Equity Investments, at Estimated Fair Value | |||
Troubled Debt Restructurings | |||
Estimated fair value of new securities received from the security TDR exchange | $ 16,100,000 | ||
Number of securities modified as TDRs in default within a twelve month period subsequent to their original restructuring | security | 0 | ||
Predecessor Company | Securities Available- For-Sale | |||
Troubled Debt Restructurings | |||
Modified amortized cost of security | $ 24,100,000 | ||
Securities Available- For-Sale | Predecessor Company | |||
Troubled Debt Restructurings | |||
Other-than-temporarily impaired loss | $ 4,400,000 |
CORPORATE LOANS AND ALLOWANCE51
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) - Successor Company - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Summary of corporate loans | ||
Par | $ 5,864,706 | $ 6,907,373 |
Amortized Cost | 5,740,766 | 6,710,570 |
Estimated Fair Value | 5,444,004 | 6,506,564 |
Corporate loans, at estimated fair value | ||
Summary of corporate loans | ||
Par | 5,864,706 | 6,907,373 |
Amortized Cost | 5,740,766 | 6,710,570 |
Estimated Fair Value | $ 5,444,004 | $ 6,506,564 |
CORPORATE LOANS AND ALLOWANCE52
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 2) - Successor Company - USD ($) $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Corporate loans | ||||
Net realized and unrealized (losses) gains | ||||
Credit risk, gain (loss) | $ 122,400 | $ 61,000 | $ 42,100 | $ 136,700 |
Corporate loans, at estimated fair value | ||||
Net realized and unrealized (losses) gains | ||||
Net realized gains (losses) | (546) | 6,353 | 1,637 | (22,807) |
Net (increase) decrease in unrealized losses | (147,107) | (128,749) | (102,888) | (92,283) |
Net realized and unrealized gains (losses) | $ (147,653) | $ (122,396) | $ (101,251) | $ (115,090) |
CORPORATE LOANS AND ALLOWANCE53
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 3) - Successor Company $ in Millions | Sep. 30, 2015USD ($)issuerloan | Dec. 31, 2014USD ($)issuerloan |
Recorded investment in impaired loans and related allowances for credit losses | ||
Number of loans in default | loan | 1 | 4 |
Estimated fair value of corporate loans in default | $ 139.6 | $ 266.9 |
Number of issuers in default | issuer | 1 | 2 |
Corporate loans, at estimated fair value | ||
Recorded investment in impaired loans and related allowances for credit losses | ||
Par amount of non-accrual loans | $ 432.6 | $ 580.1 |
Estimated fair value of non-accrual loans | 153.9 | 342.1 |
Par amount of non-accrual and past due loans | 362.2 | 410.2 |
Estimated fair value of past due loans | $ 139.6 | $ 266.9 |
CORPORATE LOANS AND ALLOWANCE54
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 4) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015USD ($)issuer | Dec. 31, 2014USD ($)issuer | |
Concentration risk | ||
Estimated fair value of corporate loans | $ | $ 5,444,004 | $ 6,506,564 |
Successor Company | Corporate Loans | ||
Concentration risk | ||
Number of issuers with whom a specified percentage of estimated fair value or amortized cost of corporate loans is concentrated | 20 | 20 |
Number of issuers with the largest concentration of corporate loans | 3 | 3 |
Successor Company | Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top Twenty Issuers | ||
Concentration risk | ||
Concentration risk (as a percent) | 33.00% | 38.00% |
Successor Company | Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top three largest | ||
Concentration risk | ||
Concentration risk (as a percent) | 9.00% | 11.00% |
Estimated fair value of corporate loans | $ | $ 506,900 | $ 700,400 |
CORPORATE LOANS AND ALLOWANCE55
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 5) - Successor Company - Estimated Fair Value - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Pledged assets | ||
Pledged as collateral for collateralized loan obligation secured debt | $ 5,089,936 | $ 6,205,292 |
Total loans pledged as collateral | $ 5,089,936 | $ 6,205,292 |
CORPORATE LOANS AND ALLOWANCE56
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 6) - Predecessor Company $ in Thousands | 4 Months Ended |
Apr. 30, 2014USD ($) | |
Allowance for loan losses: | |
Charge-offs | $ (1,500) |
Corporate Loans | |
Allowance for loan losses: | |
Beginning balance | 224,999 |
Provision for loan losses | 0 |
Charge-offs | (1,458) |
Ending balance | $ 223,541 |
CORPORATE LOANS AND ALLOWANCE57
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 7) - Predecessor Company | 4 Months Ended |
Apr. 30, 2014USD ($)classcomponent | |
Summary of corporate loans | |
Number of components in the loans receivable allowance for loan losses (in components) | component | 2 |
Interest income recognized using accrual method | $ 4,500,000 |
Number of classifications of non-accrual loans | class | 3 |
Interest income recognized using cash basis method | $ 5,300,000 |
Corporate loans transferred from held for investment to held for sale | 348,808,000 |
Corporate loans transferred from held for sale to held for investment | 0 |
Net charge for lower of cost or estimated fair value adjustment | (5,038,000) |
Corporate Loans | |
Summary of corporate loans | |
Interest income recognized using cash basis method | 4,500,000 |
Corporate loans transferred from held for investment to held for sale | 348,800,000 |
Corporate Loans Held for Sale | |
Summary of corporate loans | |
Interest income recognized using cash basis method | 700,000 |
Net charge for lower of cost or estimated fair value adjustment | 5,000,000 |
Corporate loans held for sale | 546,100,000 |
Corporate loans, at estimated fair value | |
Summary of corporate loans | |
Interest income recognized using cash basis method | 100,000 |
Corporate loans | |
Summary of corporate loans | |
Credit risk, gain (loss) | $ 2,800,000 |
CORPORATE LOANS AND ALLOWANCE58
CORPORATE LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 8) - Predecessor Company | 4 Months Ended |
Apr. 30, 2014USD ($)contractclassissuerloan | |
Troubled debt restructurings: | |
Sustained period of repayment performance for determining the reclassification of restructured loans from non-accrual to accrual status (in months) | 6 months |
Pre-modification outstanding recorded investment | $ 195,422,000 |
Post-modification outstanding recorded investment | $ 24,571,000 |
Number of issuers troubled debt restructurings | issuer | 2 |
Higher coupon rate for extended period (as a percent) | 4.00% |
Charge-offs recorded related to TDR's | $ 1,100,000 |
Charge-offs related to TDR's as a percentage of charge-offs related to loans and losses (in percentage) | 76.00% |
Charge-offs recorded | $ 1,500,000 |
Lending commitment to borrower whose loans had been modified in the troubled debt restructuring | $ 0 |
Number of loans modified as TDRs in default | loan | 0 |
Modified amortized cost of corporate loans that did not qualify as TDRs | $ 1,100,000,000 |
Minimum | |
Troubled debt restructurings: | |
Financing receivable modifications extension period of maturity date (in years) | 3 years |
Maximum | |
Troubled debt restructurings: | |
Financing receivable modifications extension period of maturity date (in years) | 5 years |
Corporate Loans | |
Troubled debt restructurings: | |
Number of TDRs (loans) | contract | 1 |
Pre-modification outstanding recorded investment | $ 154,075,000 |
Post-modification outstanding recorded investment | 0 |
Estimated fair value of equity received from the TDRs excluded from post-modification outstanding recorded investment | $ 92,000,000 |
Number of TDRs identified as impaired (in issuers) | class | 1 |
Charge-offs recorded | $ 1,458,000 |
Corporate loans, at estimated fair value | |
Troubled debt restructurings: | |
Number of TDRs (loans) | contract | 2 |
Pre-modification outstanding recorded investment | $ 41,347,000 |
Post-modification outstanding recorded investment | 24,571,000 |
Estimated fair value of equity received from the TDRs excluded from post-modification outstanding recorded investment | $ 12,300,000 |
Number of loans carried at estimated fair value | loan | 2 |
NATURAL RESOURCES ASSETS (Detai
NATURAL RESOURCES ASSETS (Details) - USD ($) | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | |
Oil and natural gas properties | |||||
Oil and gas properties, net | $ 115,865,000 | $ 120,274,000 | |||
Successor Company | |||||
Oil and natural gas properties | |||||
Proved oil and natural gas properties (successful efforts method) | 128,800,000 | 128,800,000 | |||
Accumulated depreciation, depletion and amortization | (12,935,000) | (8,526,000) | |||
Oil and gas properties, net | 115,865,000 | $ 120,274,000 | |||
Interests in joint ventures and partnerships | 19,200,000 | ||||
Aggregate value of private equity, natural resources assets distributed to Parent | $ 179,200,000 | ||||
Amount capitalized from purchases of natural resource assets | $ 30,900,000 | $ 0 | |||
Predecessor Company | |||||
Oil and natural gas properties | |||||
Amount capitalized from purchases of natural resource assets | $ 54,100,000 |
EQUITY METHOD INVESTMENTS (Deta
EQUITY METHOD INVESTMENTS (Details) - USD ($) $ in Millions | Sep. 30, 2015 | Dec. 31, 2014 |
Schedule of Equity Method Investments [Line Items] | ||
Estimate fair value of equity method investments | $ 470.2 | $ 534.7 |
Maritime Finance Company | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 31.00% | |
Mineral Acquisition Company | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 70.00% |
EQUITY METHOD INVESTMENTS (De61
EQUITY METHOD INVESTMENTS (Details 2) - Natural Resources - USD ($) $ in Thousands | 4 Months Ended | 5 Months Ended | 9 Months Ended |
Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||
Schedule of Equity Method Investments [Line Items] | |||
Revenues | $ 0 | $ 227,322 | |
Expenses | 0 | 233,005 | |
Net income (loss) | $ 0 | $ 33,236 | |
Predecessor Company | |||
Schedule of Equity Method Investments [Line Items] | |||
Revenues | $ 0 | ||
Expenses | 0 | ||
Net income (loss) | $ 0 |
BORROWINGS (Details)
BORROWINGS (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2015 | Dec. 31, 2014 | Jul. 22, 2015 | Dec. 18, 2014 | Sep. 16, 2014 | |
Details of Company's borrowings | |||||
Carrying value | $ 4,709,138,000 | $ 5,501,099,000 | |||
Successor Company | |||||
Details of Company's borrowings | |||||
Total borrowings | 5,418,796,000 | 6,237,674,000 | |||
Total borrowings, carrying value | 5,396,755,000 | 6,162,530,000 | |||
Collateral amount | 5,450,084,000 | 6,528,921,000 | |||
Successor Company | CLO 2005-1 secured notes | |||||
Details of Company's borrowings | |||||
Par | 192,384,000 | ||||
Carrying value | $ 192,260,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 1.84% | ||||
Weighted Average Remaining Maturity (in days) | 847 days | ||||
Collateral amount | $ 224,716,000 | ||||
Successor Company | CLO 2005-2 secured notes | |||||
Details of Company's borrowings | |||||
Par | 140,212,000 | 242,928,000 | |||
Carrying value | $ 143,019,000 | $ 242,365,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.07% | 0.68% | |||
Weighted Average Remaining Maturity (in days) | 788 days | 1061 days | |||
Collateral amount | $ 239,807,000 | $ 381,362,000 | |||
Successor Company | CLO 2006-1 senior secured notes | |||||
Details of Company's borrowings | |||||
Par | 166,841,000 | ||||
Carrying value | $ 166,710,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 1.28% | ||||
Weighted Average Remaining Maturity (in days) | 1333 days | ||||
Collateral amount | $ 400,165,000 | ||||
Successor Company | CLO 2007-1 secured notes | |||||
Details of Company's borrowings | |||||
Par | 1,627,249,000 | 1,906,409,000 | |||
Carrying value | $ 1,660,963,000 | $ 1,891,228,000 | |||
Weighted Average Borrowing Rate (as a percent) | 1.99% | 0.80% | |||
Weighted Average Remaining Maturity (in days) | 2054 days | 2327 days | |||
Collateral amount | $ 1,915,755,000 | $ 2,182,078,000 | |||
Successor Company | CLO 2007-1 subordinated notes | |||||
Details of Company's borrowings | |||||
Par | 134,468,000 | 134,468,000 | |||
Carrying value | $ 100,762,000 | $ 119,112,000 | |||
Weighted Average Borrowing Rate (as a percent) | 12.80% | 13.75% | |||
Weighted Average Remaining Maturity (in days) | 2054 days | 2327 days | |||
Collateral amount | $ 158,308,000 | $ 153,912,000 | |||
Successor Company | CLO 2007-1 mezzanine notes | |||||
Details of Company's borrowings | |||||
Par | 489,723,000 | ||||
Carrying value | $ 486,575,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 3.84% | ||||
Weighted Average Remaining Maturity (in days) | 2327 days | ||||
Collateral amount | $ 560,538,000 | ||||
Successor Company | CLO 2007-A subordinated notes | |||||
Details of Company's borrowings | |||||
Par | 15,096,000 | 15,096,000 | |||
Carrying value | $ 19,522,000 | $ 25,921,000 | |||
Weighted Average Borrowing Rate (as a percent) | 17.54% | 88.02% | |||
Weighted Average Remaining Maturity (in days) | 746 days | 1019 days | |||
Collateral amount | $ 56,511,000 | $ 66,044,000 | |||
Successor Company | CLO 2011-1 senior debt | |||||
Details of Company's borrowings | |||||
Par | 252,398,000 | 402,515,000 | |||
Carrying value | $ 252,398,000 | $ 402,515,000 | |||
Weighted Average Borrowing Rate (as a percent) | 1.65% | 1.58% | |||
Weighted Average Remaining Maturity (in days) | 1781 days | 1323 days | |||
Collateral amount | $ 322,741,000 | $ 508,625,000 | |||
Successor Company | CLO 2012-1 secured notes | |||||
Details of Company's borrowings | |||||
Par | 367,500,000 | 367,500,000 | |||
Carrying value | $ 365,283,000 | $ 364,063,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.42% | 2.33% | |||
Weighted Average Remaining Maturity (in days) | 3364 days | 3637 days | |||
Collateral amount | $ 368,655,000 | $ 365,662,000 | |||
Successor Company | CLO 2012-1 subordinated notes | |||||
Details of Company's borrowings | |||||
Par | 18,000,000 | 18,000,000 | |||
Carrying value | $ 12,736,000 | $ 12,986,000 | |||
Weighted Average Borrowing Rate (as a percent) | 15.79% | 16.86% | |||
Weighted Average Remaining Maturity (in days) | 3364 days | 3637 days | |||
Collateral amount | $ 18,057,000 | $ 17,910,000 | |||
Successor Company | CLO 2013-1 secured notes | |||||
Details of Company's borrowings | |||||
Par | 458,500,000 | 458,500,000 | |||
Carrying value | $ 455,227,000 | $ 441,153,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.02% | 1.96% | |||
Weighted Average Remaining Maturity (in days) | 3576 days | 3849 days | |||
Collateral amount | $ 480,853,000 | $ 477,691,000 | |||
Successor Company | CLO 2013-2 secured notes | |||||
Details of Company's borrowings | |||||
Par | 339,250,000 | 339,250,000 | |||
Carrying value | $ 337,240,000 | $ 331,383,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.49% | 2.21% | |||
Weighted Average Remaining Maturity (in days) | 3768 days | 4041 days | |||
Collateral amount | $ 354,497,000 | $ 357,722,000 | |||
Successor Company | CLO 9 secured notes | |||||
Details of Company's borrowings | |||||
Par | 463,750,000 | 463,750,000 | $ 463,800,000 | ||
Carrying value | $ 458,925,000 | $ 449,349,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.30% | 2.28% | |||
Weighted Average Remaining Maturity (in days) | 4033 days | 4306 days | |||
Collateral amount | $ 464,768,000 | $ 474,072,000 | |||
Successor Company | CLO 9 subordinated notes | |||||
Details of Company's borrowings | |||||
Par | 15,000,000 | 15,000,000 | $ 15,000,000 | ||
Carrying value | $ 11,157,000 | $ 13,531,000 | |||
Weighted Average Borrowing Rate (as a percent) | 13.75% | 0.00% | |||
Weighted Average Remaining Maturity (in days) | 4033 days | 4306 days | |||
Collateral amount | $ 15,033,000 | $ 15,334,000 | |||
Successor Company | CLO 10 senior notes | |||||
Details of Company's borrowings | |||||
Par | 368,000,000 | 368,000,000 | $ 368,000,000 | ||
Carrying value | $ 368,152,000 | $ 361,948,000 | |||
Weighted Average Borrowing Rate (as a percent) | 2.59% | 2.50% | |||
Weighted Average Remaining Maturity (in days) | 3729 days | 4002 days | |||
Collateral amount | $ 388,438,000 | $ 343,090,000 | |||
Successor Company | CLO 11 senior secured notes | |||||
Details of Company's borrowings | |||||
Par | 507,750,000 | ||||
Carrying value | $ 499,576,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 2.33% | ||||
Weighted Average Remaining Maturity (in days) | 4215 days | ||||
Collateral amount | $ 502,168,000 | ||||
Successor Company | CLO 11 subordinated notes | |||||
Details of Company's borrowings | |||||
Par | 28,250,000 | ||||
Carrying value | $ 24,178,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 0.00% | ||||
Weighted Average Remaining Maturity (in days) | 4215 days | ||||
Collateral amount | $ 27,939,000 | ||||
Successor Company | Collaterized loan obligation secured notes | |||||
Details of Company's borrowings | |||||
Par | 4,735,423,000 | 5,580,364,000 | |||
Carrying value | 4,709,138,000 | 5,501,099,000 | |||
Collateral amount | 5,313,530,000 | 6,528,921,000 | |||
Successor Company | CLO Warehouse Facility | |||||
Details of Company's borrowings | |||||
Par | 26,063,000 | ||||
Carrying value | $ 26,063,000 | ||||
Weighted Average Borrowing Rate (as a percent) | 1.83% | ||||
Weighted Average Remaining Maturity (in days) | 76 days | ||||
Collateral amount | $ 136,554,000 | ||||
Successor Company | CLO 13 Warehouse Facility | |||||
Details of Company's borrowings | |||||
Maximum borrowing capacity | $ 350,000,000 | ||||
Successor Company | 8.375% Senior notes | |||||
Details of Company's borrowings | |||||
Par | 258,750,000 | 258,750,000 | |||
Carrying value | $ 289,968,000 | $ 290,861,000 | |||
Weighted Average Borrowing Rate (as a percent) | 8.38% | 8.38% | |||
Weighted Average Remaining Maturity (in days) | 9543 days | 9816 days | |||
Successor Company | 7.500% Senior notes | |||||
Details of Company's borrowings | |||||
Par | $ 115,043,000 | $ 115,043,000 | |||
Carrying value | $ 123,426,000 | $ 123,663,000 | |||
Weighted Average Borrowing Rate (as a percent) | 7.50% | 7.50% | |||
Weighted Average Remaining Maturity (in days) | 9668 days | 9941 days | |||
Successor Company | Junior subordinated notes | |||||
Details of Company's borrowings | |||||
Par | $ 283,517,000 | $ 283,517,000 | |||
Carrying value | $ 248,160,000 | $ 246,907,000 | |||
Weighted Average Borrowing Rate (as a percent) | 5.42% | 5.39% | |||
Weighted Average Remaining Maturity (in days) | 7676 days | 7949 days |
BORROWINGS (Details 2)
BORROWINGS (Details 2) - USD ($) | May. 07, 2015 | Dec. 18, 2014 | Sep. 16, 2014 | Jan. 23, 2014 | Jul. 31, 2015 | Feb. 28, 2015 | Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 |
Successor Company | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | $ 778,866,000 | $ 1,445,941,000 | ||||||||||
Successor Company | Collateralized Loan Obligation Secured Notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Fair value, option, credit risk, gains (losses) on liabilities | $ 0 | 0 | ||||||||||
Fair value, option, credit risk, unrealized gain (loss) on liabilities | $ 1,500,000 | 1,800,000 | ||||||||||
Successor Company | CLO 2005-1 secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | $ 142,400,000 | |||||||||||
Par amount of notes issued | $ 192,384,000 | |||||||||||
Successor Company | CLO 2005-2 Class E Secured Notes - 1 | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 15,000,000 | 15,000,000 | ||||||||||
Proceeds from senior notes | 15,100,000 | |||||||||||
Successor Company | CLO 2005-2 Class E Secured Notes - 2 | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 30,000,000 | 30,000,000 | ||||||||||
Proceeds from senior notes | 30,200,000 | |||||||||||
Successor Company | CLO 2006-1 senior secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Derivative, Notional Amount, Terminated | $ 84,000,000 | |||||||||||
Collateralized loan obligation secured debt repaid | $ 181,800,000 | |||||||||||
Par amount of notes issued | 166,841,000 | |||||||||||
Successor Company | CLO 2006-1 Class E Secured Notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 15,000,000 | 15,000,000 | ||||||||||
Proceeds from senior notes | 15,000,000 | |||||||||||
Successor Company | CLO 2007-A senior secured an junior secured mezzanine notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | 494,900,000 | |||||||||||
Successor Company | Senior Notes Legacy CLO | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | 583,600,000 | 104,400,000 | $ 182,600,000 | 301,300,000 | 1,100,000,000 | |||||||
Successor Company | CLO 2011-1 senior debt | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | 119,300,000 | 46,600,000 | 46,600,000 | 150,100,000 | ||||||||
Par amount of notes issued | 252,398,000 | 252,398,000 | 402,515,000 | |||||||||
Successor Company | CLO 2007-1 Class D and E secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 35,000,000 | 35,000,000 | ||||||||||
Proceeds from senior notes | 35,100,000 | |||||||||||
Successor Company | CLO 2007-1 Class E secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 37,500,000 | 37,500,000 | ||||||||||
Proceeds from senior notes | $ 37,600,000 | |||||||||||
Successor Company | CLO 2013-2 secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 339,250,000 | 339,250,000 | 339,250,000 | |||||||||
Successor Company | CLO 9 notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 518,000,000 | |||||||||||
Successor Company | CLO 9 secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 463,800,000 | 463,750,000 | 463,750,000 | 463,750,000 | ||||||||
Successor Company | CLO 9 secured notes | LIBOR | ||||||||||||
Details of Company's borrowings | ||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.01% | |||||||||||
Successor Company | CLO 9 subordinated notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 15,000,000 | 15,000,000 | 15,000,000 | 15,000,000 | ||||||||
Successor Company | CLO 10 notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 415,600,000 | |||||||||||
Successor Company | CLO 10 senior notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 368,000,000 | 368,000,000 | 368,000,000 | $ 368,000,000 | ||||||||
Fixed rate (as a percent) | 4.90% | |||||||||||
Successor Company | CLO 10 senior notes | Nonaffiliates | ||||||||||||
Details of Company's borrowings | ||||||||||||
Floating rate senior secured note | $ 343,000,000 | |||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.09% | |||||||||||
Fixed rate senior secured note | $ 25,000,000 | |||||||||||
Successor Company | CLO 11 Notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 564,500,000 | |||||||||||
Successor Company | CLO 11 senior secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 507,750,000 | 507,750,000 | ||||||||||
Successor Company | CLO 11 senior secured notes | Nonaffiliates | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 507,800,000 | |||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.06% | |||||||||||
Successor Company | CLO 11 subordinated notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 28,250,000 | $ 28,250,000 | ||||||||||
Successor Company | CLO 11 subordinated notes | Nonaffiliates | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 28,300,000 | |||||||||||
Predecessor Company | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | 221,914,000 | |||||||||||
Predecessor Company | CLO 2005-1 Class D - F secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 72,000,000 | |||||||||||
Proceeds from senior notes | 71,500,000 | |||||||||||
Predecessor Company | CLO 2007-A Class D and E secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 61,100,000 | |||||||||||
Proceeds from senior notes | 61,300,000 | |||||||||||
Predecessor Company | CLO 2011-1 senior debt | ||||||||||||
Details of Company's borrowings | ||||||||||||
Collateralized loan obligation secured debt repaid | 39,400,000 | |||||||||||
Predecessor Company | CLO 2007-1 Class E secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 21,900,000 | |||||||||||
Proceeds from senior notes | 21,900,000 | |||||||||||
Predecessor Company | CLO 2007-A Class G secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 29,800,000 | |||||||||||
Proceeds from senior notes | 30,200,000 | |||||||||||
Predecessor Company | CLO 2007-A Class H secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 29,800,000 | |||||||||||
Proceeds from senior notes | $ 30,100,000 | |||||||||||
Predecessor Company | CLO 2013-2 secured notes | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | $ 384,000,000 | |||||||||||
Predecessor Company | CLO 2013-2 secured notes | Nonaffiliates | ||||||||||||
Details of Company's borrowings | ||||||||||||
Par amount of notes issued | 339,300,000 | |||||||||||
Floating rate senior secured note | $ 319,300,000 | |||||||||||
Debt, variable interest rate basis | three-month LIBOR | |||||||||||
Fixed rate senior secured note | $ 20,000,000 | |||||||||||
Fixed rate (as a percent) | 3.74% | |||||||||||
Predecessor Company | CLO 2013-2 secured notes | Nonaffiliates | LIBOR | ||||||||||||
Details of Company's borrowings | ||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.16% |
BORROWINGS (Details 3)
BORROWINGS (Details 3) - Successor Company - USD ($) | Jul. 22, 2015 | Mar. 02, 2015 |
CLO 11 Warehouse Facility | ||
Details of Company's borrowings | ||
Maximum borrowing capacity | $ 570,000,000 | |
CLO 11 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Debt, variable interest rate basis | LIBOR | |
CLO 13 Warehouse Facility | ||
Details of Company's borrowings | ||
Maximum borrowing capacity | $ 350,000,000 | |
CLO 13 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Debt, variable interest rate basis | LIBOR | |
Minimum | CLO 11 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 1.25% | |
Minimum | CLO 13 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 1.50% | |
Maximum | CLO 11 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 1.75% | |
Maximum | CLO 13 Warehouse Facility | LIBOR | ||
Details of Company's borrowings | ||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.25% |
DERIVATIVE INSTRUMENTS (Details
DERIVATIVE INSTRUMENTS (Details) - Successor Company - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | $ (14,896) | $ (21,561) |
Foreign exchange forward contracts and options | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Derivative liability, notional amount | (363,800) | (442,200) |
Free-Standing Derivatives: | Interest rate swaps | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Derivative asset, notional amount | 311,667 | 426,000 |
Estimated Fair Value | (47,504) | (54,071) |
Free-Standing Derivatives: | Foreign exchange forward contracts and options | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Derivative liability, notional amount | (363,836) | (442,181) |
Estimated Fair Value | 32,127 | 27,428 |
Free-Standing Derivatives: | Total rate of return swaps | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | 0 | (130) |
Free-Standing Derivatives: | Options | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | $ 481 | $ 5,212 |
DERIVATIVE INSTRUMENTS (Detai66
DERIVATIVE INSTRUMENTS (Details 2) $ in Thousands | 4 Months Ended |
Apr. 30, 2014USD ($) | |
Predecessor Company | |
Net (losses) gains recognized in accumulated other comprehensive loss on cash flow hedges | |
Net gains (losses) recognized in accumulated other comprehensive income (loss) on cash flow hedges | $ (5,442) |
DERIVATIVE INSTRUMENTS (Detai67
DERIVATIVE INSTRUMENTS (Details 3) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Successor Company | Foreign exchange forward contracts and options | ||
Notional amount | ||
Notional amount of liability | $ 363,800 | $ 442,200 |
Counterparty One | ||
Notional amount | ||
Net asset | 1,300 | |
Derivative, Collateral, Obligation to Return Cash | 18,700 | |
Counterparty Two | ||
Notional amount | ||
Net asset | 1,200 | |
Derivative, Collateral, Right to Reclaim Cash | 800 | |
Counterparty Three | ||
Notional amount | ||
Net asset | 6,400 | |
Derivative, Collateral, Right to Reclaim Cash | 25,700 | |
Free-Standing Derivatives: | Successor Company | Interest rate swaps | ||
Notional amount | ||
Notional | 311,700 | 426,000 |
Free-Standing Derivatives: | Successor Company | Foreign exchange forward contracts and options | ||
Notional amount | ||
Notional amount of liability | $ 363,836 | $ 442,181 |
DERIVATIVE INSTRUMENTS (Detai68
DERIVATIVE INSTRUMENTS (Details 4) - Free-Standing Derivatives: - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Predecessor Company | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | $ (9,099) | ||||
Unrealized gains (losses) | (684) | ||||
Total | (9,783) | ||||
Predecessor Company | Interest rate swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | ||||
Unrealized gains (losses) | 0 | ||||
Total | 0 | ||||
Predecessor Company | Commodity swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | (2,515) | ||||
Unrealized gains (losses) | (5,856) | ||||
Total | (8,371) | ||||
Predecessor Company | Credit default swap | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | (2,167) | ||||
Unrealized gains (losses) | 1,986 | ||||
Total | (181) | ||||
Predecessor Company | Foreign exchange forward contracts and options | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | (2,068) | ||||
Unrealized gains (losses) | 2,784 | ||||
Total | 716 | ||||
Predecessor Company | Common stock warrants | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | ||||
Unrealized gains (losses) | 137 | ||||
Total | 137 | ||||
Predecessor Company | Total rate of return swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | (2,349) | ||||
Unrealized gains (losses) | 284 | ||||
Total | (2,065) | ||||
Predecessor Company | Options | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | ||||
Unrealized gains (losses) | (19) | ||||
Total | $ (19) | ||||
Successor Company | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | $ 12,872 | $ (10,679) | $ (13,682) | $ 22,114 | |
Unrealized gains (losses) | (23,176) | 10,831 | 4,670 | (25,659) | |
Total | (10,304) | 152 | (9,012) | (3,545) | |
Successor Company | Interest rate swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | 0 | 0 | (5,297) | |
Unrealized gains (losses) | (8,489) | 2,892 | 1,767 | 5,924 | |
Total | (8,489) | 2,892 | 1,767 | 627 | |
Successor Company | Commodity swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 338 | (1,194) | |||
Unrealized gains (losses) | 2,678 | (672) | |||
Total | 3,016 | (1,866) | |||
Successor Company | Credit default swap | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | 0 | |||
Unrealized gains (losses) | 0 | 0 | |||
Total | 0 | 0 | |||
Successor Company | Foreign exchange forward contracts and options | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 12,872 | (11,489) | (13,129) | 27,107 | |
Unrealized gains (losses) | (11,848) | 6,082 | 5,124 | (24,571) | |
Total | 1,024 | (5,407) | (8,005) | 2,536 | |
Successor Company | Common stock warrants | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | 1,237 | 1,237 | 0 | |
Unrealized gains (losses) | (411) | (1,077) | (1,082) | (2,412) | |
Total | (411) | 160 | 155 | (2,412) | |
Successor Company | Total rate of return swaps | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | (765) | (596) | 304 | |
Unrealized gains (losses) | 0 | 392 | 179 | 130 | |
Total | 0 | (373) | (417) | 434 | |
Successor Company | Options | |||||
Effect on income from free-standing derivatives | |||||
Realized gains (losses) | 0 | 0 | 0 | 0 | |
Unrealized gains (losses) | (2,428) | (136) | (646) | (4,730) | |
Total | $ (2,428) | $ (136) | $ (646) | $ (4,730) |
FAIR VALUE OF FINANCIAL INSTR69
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Liabilities: | ||
Senior notes | $ 413,394 | $ 414,524 |
Junior subordinated notes | 248,160 | 246,907 |
Successor Company | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 837,662 | 610,912 |
Liabilities: | ||
Senior notes | 400,036 | 413,215 |
Successor Company | Significant Unobservable Inputs (Level 3) | ||
Liabilities: | ||
Junior subordinated notes | 214,190 | 228,087 |
Successor Company | Carrying Amount | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 837,662 | 610,912 |
Liabilities: | ||
Senior notes | 413,394 | 414,524 |
Junior subordinated notes | 248,160 | 246,907 |
Successor Company | Estimated Fair Value | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 837,662 | 610,912 |
Liabilities: | ||
Senior notes | 400,036 | 413,215 |
Junior subordinated notes | $ 214,190 | $ 228,087 |
FAIR VALUE OF FINANCIAL INSTR70
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands | Sep. 30, 2015 | Dec. 31, 2014 |
Assets: | ||
Total securities | $ 447,438 | $ 638,605 |
Corporate loans | 5,444,004 | 6,506,564 |
Equity investments, at estimated fair value | 279,346 | 181,378 |
Interests in joint ventures and partnerships, at estimated fair value | 655,655 | 718,772 |
Derivatives: | ||
Total derivative assets | 34,766 | 33,566 |
Derivatives: | ||
Total derivative liabilities | 49,662 | 55,127 |
Successor Company | ||
Assets: | ||
Corporate debt securities | 447,438 | 638,605 |
Liabilities: | ||
Collateralized loan obligation secured notes | 5,418,796 | 6,237,674 |
Successor Company | Recurring basis | Estimated Fair Value | ||
Assets: | ||
Total securities | 447,438 | 638,605 |
Corporate loans | 5,444,004 | 6,506,564 |
Equity investments, at estimated fair value | 279,346 | 181,378 |
Interests in joint ventures and partnerships, at estimated fair value | 655,655 | 718,772 |
Other assets | 4,645 | |
Derivatives: | ||
Total derivative assets | 34,766 | 33,566 |
Total | 6,861,209 | 8,083,530 |
Liabilities: | ||
Collateralized loan obligation secured notes | 4,709,138 | 5,501,099 |
Derivatives: | ||
Total derivative liabilities | 49,662 | 55,127 |
Total | 4,758,800 | 5,556,226 |
Successor Company | Recurring basis | Estimated Fair Value | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 50,139 | 55,184 |
Successor Company | Recurring basis | Estimated Fair Value | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 397,299 | 583,421 |
Successor Company | Recurring basis | Estimated Fair Value | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | 47,504 | 54,071 |
Successor Company | Recurring basis | Estimated Fair Value | Total rate of return swaps | ||
Derivatives: | ||
Derivative liabilities | 130 | |
Successor Company | Recurring basis | Estimated Fair Value | Foreign exchange forward contracts | ||
Derivatives: | ||
Derivative assets | 34,285 | 28,354 |
Derivatives: | ||
Derivative liabilities | 2,158 | 926 |
Successor Company | Recurring basis | Estimated Fair Value | Options | ||
Derivatives: | ||
Derivative assets | 481 | 5,212 |
Successor Company | Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Equity investments, at estimated fair value | 33,263 | 25,692 |
Derivatives: | ||
Total | 33,263 | 25,692 |
Successor Company | Recurring basis | Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Total securities | 189,183 | 266,387 |
Corporate loans | 5,112,378 | 6,159,487 |
Equity investments, at estimated fair value | 87,206 | 73,967 |
Other assets | 4,645 | |
Derivatives: | ||
Total derivative assets | 34,285 | 28,354 |
Total | 5,423,052 | 6,532,840 |
Liabilities: | ||
Collateralized loan obligation secured notes | 4,709,138 | 0 |
Derivatives: | ||
Total derivative liabilities | 49,662 | 55,127 |
Total | 4,758,800 | 55,127 |
Successor Company | Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 189,183 | 266,387 |
Successor Company | Recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | 47,504 | 54,071 |
Successor Company | Recurring basis | Significant Other Observable Inputs (Level 2) | Total rate of return swaps | ||
Derivatives: | ||
Derivative liabilities | 130 | |
Successor Company | Recurring basis | Significant Other Observable Inputs (Level 2) | Foreign exchange forward contracts | ||
Derivatives: | ||
Derivative assets | 34,285 | 28,354 |
Derivatives: | ||
Derivative liabilities | 2,158 | 926 |
Successor Company | Recurring basis | Significant Unobservable Inputs (Level 3) | ||
Assets: | ||
Total securities | 258,255 | 372,218 |
Corporate loans | 331,626 | 347,077 |
Equity investments, at estimated fair value | 158,877 | 81,719 |
Interests in joint ventures and partnerships, at estimated fair value | 655,655 | 718,772 |
Derivatives: | ||
Total derivative assets | 481 | 5,212 |
Total | 1,404,894 | 1,524,998 |
Liabilities: | ||
Collateralized loan obligation secured notes | 0 | 5,501,099 |
Derivatives: | ||
Total | 0 | 5,501,099 |
Successor Company | Recurring basis | Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 50,139 | 55,184 |
Successor Company | Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 208,116 | 317,034 |
Successor Company | Recurring basis | Significant Unobservable Inputs (Level 3) | Options | ||
Derivatives: | ||
Derivative assets | $ 481 | $ 5,212 |
FAIR VALUE OF FINANCIAL INSTR71
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands | 1 Months Ended | 2 Months Ended | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | ||
Apr. 30, 2014 | Jun. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Mar. 31, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | ||||||||
Reconciliation of liabilities measured on Level 3 basis | ||||||||
Transfers from Level 1 into Level 2 | $ 0 | $ 0 | $ 0 | $ 0 | ||||
Transfers from Level 2 into Level 1 | 0 | 0 | 0 | 0 | ||||
Successor Company | Collateralized Loan Obligation Secured Notes | ||||||||
Reconciliation of liabilities measured on Level 3 basis | ||||||||
Balance at the beginning of the period | $ 5,663,665 | 5,547,914 | 5,663,665 | 5,501,099 | ||||
Included in earnings | 28,669 | 5,468 | ||||||
Transfers into Level 3 | 0 | |||||||
Transfers out of level 3 | 0 | 0 | (5,501,099) | |||||
Purchases | 52,594 | 471,441 | ||||||
Settlements | (197,014) | (581,237) | ||||||
Balance at the end of the period | $ 5,663,665 | 5,547,914 | 0 | 5,443,586 | $ 5,663,665 | 5,443,586 | 0 | |
Change in unrealized gains or losses for the period included in earnings for liabilities held at the end of the reporting period | 5,324 | 33,993 | 0 | |||||
Successor Company | Corporate Debt Securities | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 156,500 | 225,891 | 169,592 | 156,500 | 317,034 | |||
Included in earnings | 2,185 | (11,727) | (7,751) | (23,486) | ||||
Purchases | 20,000 | 0 | 29,780 | 0 | ||||
Sales | (3,966) | (9,086) | (6,870) | (89,665) | ||||
Settlements | (5,127) | 3,038 | 29,792 | 4,233 | ||||
Balance at the end of the period | 156,500 | 169,592 | 208,116 | 214,543 | 156,500 | 214,543 | 208,116 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (11,727) | (7,751) | (5,566) | (26,145) | ||||
Successor Company | Residential Mortgage- Backed Securities | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 59,623 | 52,389 | 59,242 | 59,623 | 55,184 | |||
Included in earnings | 1,359 | 2,454 | 1,421 | 5,469 | ||||
Sales | 0 | 0 | ||||||
Settlements | (1,740) | (4,704) | (3,517) | (10,514) | ||||
Balance at the end of the period | 59,623 | 59,242 | 50,139 | 57,146 | 59,623 | 57,146 | 50,139 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 581 | (185) | 438 | 758 | ||||
Successor Company | Corporate loans, at estimated fair value | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 294,218 | 341,047 | 300,282 | 294,218 | 347,077 | |||
Included in earnings | 2,951 | (6,882) | (10,084) | (64,930) | ||||
Purchases | 1,261 | 0 | 1,327 | 12,307 | ||||
Sales | (2,912) | 0 | 0 | (25,511) | ||||
Settlements | 4,764 | (2,539) | (3,758) | 62,683 | ||||
Balance at the end of the period | 294,218 | 300,282 | 331,626 | 287,767 | 294,218 | 287,767 | 331,626 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (6,882) | (10,084) | (7,092) | (64,043) | ||||
Successor Company | Equity Investments, at Estimated Fair Value | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 157,765 | 166,879 | 141,160 | 157,765 | 81,719 | |||
Included in earnings | 2,160 | (8,453) | (3,265) | (29,567) | ||||
Transfers out of Level 3 | (1,230) | 0 | ||||||
Settlements | (17,535) | 451 | (96,125) | 106,725 | ||||
Balance at the end of the period | 157,765 | 141,160 | 158,877 | 41,770 | 157,765 | 41,770 | 158,877 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (8,453) | (3,265) | 109 | (28,871) | ||||
Successor Company | Interests in Joint Ventures and Partnerships | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 472,467 | 739,597 | 515,556 | 472,467 | 718,772 | |||
Included in earnings | 21,690 | (63,887) | 8,639 | (84,045) | ||||
Purchases | 27,466 | 3,767 | 15,381 | 53,133 | ||||
Sales | (13,795) | |||||||
Settlements | (6,067) | (23,822) | 211,540 | (32,205) | ||||
Balance at the end of the period | 472,467 | 515,556 | 655,655 | 737,321 | 472,467 | 737,321 | 655,655 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (63,887) | 8,639 | 26,272 | (84,045) | ||||
Successor Company | Foreign Exchange Options, Net | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 8,854 | 7,056 | 8,854 | |||||
Included in earnings | (1,798) | (7,056) | ||||||
Balance at the end of the period | 8,854 | 7,056 | 0 | 8,854 | 0 | |||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 0 | 0 | ||||||
Successor Company | Common stock warrants | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 411 | 0 | ||||||
Included in earnings | (411) | (2,412) | ||||||
Settlements | 0 | 2,412 | ||||||
Balance at the end of the period | 0 | 0 | ||||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (411) | (2,412) | ||||||
Successor Company | Options | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 6,684 | 2,910 | 6,175 | 6,684 | 5,212 | |||
Included in earnings | (509) | (2,429) | (137) | (4,731) | ||||
Balance at the end of the period | 6,684 | 6,175 | 481 | 6,038 | 6,684 | 6,038 | 481 | |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $ (2,429) | (137) | (646) | $ (4,731) | ||||
Predecessor Company | ||||||||
Reconciliation of liabilities measured on Level 3 basis | ||||||||
Transfers from Level 1 into Level 2 | 0 | 0 | ||||||
Transfers from Level 2 into Level 1 | $ 0 | 0 | ||||||
Predecessor Company | Securities Available- For-Sale | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 23,528 | 30,510 | $ 23,401 | 23,401 | 30,510 | |||
Included in earnings | 44 | 22 | ||||||
Included in other comprehensive income | 33 | 121 | ||||||
Transfers into Level 3 | 6,937 | 0 | ||||||
Settlements | (32) | (16) | ||||||
Balance at the end of the period | 30,510 | 23,528 | 30,510 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 66 | |||||||
Predecessor Company | Other Securities, at Estimated Fair Value | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 125,511 | 125,990 | 107,530 | 107,530 | 125,990 | |||
Included in earnings | 479 | 3,059 | ||||||
Purchases | 0 | 25,000 | ||||||
Settlements | 0 | (10,078) | ||||||
Balance at the end of the period | 125,990 | 125,511 | 125,990 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 2,683 | |||||||
Predecessor Company | Residential Mortgage- Backed Securities | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 58,753 | 59,623 | 76,004 | 76,004 | 59,623 | |||
Included in earnings | 1,416 | 3,088 | ||||||
Sales | (17,810) | |||||||
Settlements | (546) | (2,529) | ||||||
Balance at the end of the period | 59,623 | 58,753 | 59,623 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 5,242 | |||||||
Predecessor Company | Corporate loans, at estimated fair value | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 153,395 | 156,907 | 152,800 | 152,800 | 156,907 | |||
Included in earnings | 1,240 | (5,123) | ||||||
Purchases | 0 | 8,822 | ||||||
Settlements | 2,272 | (3,104) | ||||||
Balance at the end of the period | 156,907 | 153,395 | 156,907 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 4,445 | |||||||
Predecessor Company | Equity Investments, at Estimated Fair Value | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 258,977 | 152,070 | 138,059 | 138,059 | 152,070 | |||
Included in earnings | 12,126 | 9,076 | ||||||
Transfers out of Level 3 | (119,033) | (8,751) | ||||||
Settlements | 0 | 120,593 | ||||||
Balance at the end of the period | 152,070 | 258,977 | 152,070 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 20,499 | |||||||
Predecessor Company | Interests in Joint Ventures and Partnerships | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 494,420 | 470,693 | 415,247 | 415,247 | 470,693 | |||
Included in earnings | (24,158) | 22,377 | ||||||
Purchases | 1,615 | 42,683 | ||||||
Settlements | (1,184) | 14,113 | ||||||
Balance at the end of the period | 470,693 | 494,420 | 470,693 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (1,781) | |||||||
Predecessor Company | Foreign Exchange Options, Net | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 8,128 | 8,854 | 8,941 | 8,941 | 8,854 | |||
Included in earnings | 726 | (813) | ||||||
Balance at the end of the period | 8,854 | 8,128 | 8,854 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (87) | |||||||
Predecessor Company | Options | ||||||||
Reconciliation of assets measured on Level 3 basis | ||||||||
Balance at the beginning of the period | 6,492 | $ 6,684 | 6,794 | 6,794 | $ 6,684 | |||
Included in earnings | 192 | (302) | ||||||
Balance at the end of the period | $ 6,684 | $ 6,492 | 6,684 | |||||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $ (110) |
FAIR VALUE OF FINANCIAL INSTR72
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015USD ($)$ / barrel | Dec. 31, 2014USD ($)$ / shares$ / barrel | |
Successor Company | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to each valuation technique | 0.00% | 0.00% |
Successor Company | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to each valuation technique | 100.00% | 100.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Liabilities, fair value (in dollars) | $ 5,501,099 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 208,116 | 317,034 |
Successor Company | Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | 50,139 | 55,184 |
Successor Company | Significant Unobservable Inputs (Level 3) | Corporate loans, at estimated fair value | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | 331,626 | 347,077 |
Successor Company | Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 158,877 | $ 81,719 |
Successor Company | Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 5.00% | 5.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 655,655 | $ 718,772 |
Successor Company | Significant Unobservable Inputs (Level 3) | Options | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 481 | $ 5,212 |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Weighted Average | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Discount margin | 2.55% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Minimum | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Discount margin | 0.95% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Maximum | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Discount margin | 10.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 19.00% | 17.00% |
Net leverage | 7 | 6 |
EBITDA multiple | 6 | 7 |
Discount margin | 8.45% | 9.05% |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 6.00% | 3.00% |
Net leverage | 6 | 5 |
EBITDA multiple | 5 | 4 |
Discount margin | 7.50% | 6.25% |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 23.00% | 19.00% |
Net leverage | 12 | 12 |
EBITDA multiple | 10 | 11 |
Discount margin | 14.25% | 11.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 12.00% | 12.00% |
Net leverage | 6 | 6 |
EBITDA multiple | 8 | 9 |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 3.00% | 3.00% |
Net leverage | 1 | 1 |
EBITDA multiple | 4 | 5 |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 20.00% | 21.00% |
Net leverage | 22 | 13 |
EBITDA multiple | 17 | 12 |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 18,400 | |
Yield | 16.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 16.00% | |
Net leverage | 5 | |
EBITDA multiple | 10 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Net leverage | 1 | |
EBITDA multiple | 8 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Net leverage | 13 | |
EBITDA multiple | 13 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Broker quotes | Corporate Debt Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Offered quotes (in dollars per share) | $ / shares | $ 101 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Broker quotes | Corporate Debt Securities | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Offered quotes (in dollars per share) | $ / shares | $ 101 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Weighted Average | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 3.00% | |
Loss severity | 32.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Minimum | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 2.00% | |
Loss severity | 30.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Maximum | Collateralized loan obligation secured notes | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 3.00% | |
Loss severity | 37.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Corporate Debt Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 17.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Corporate Debt Securities | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 17.00% | |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 1.00% | 8.00% |
Loss severity | 35.00% | 26.00% |
Constant prepayment rate | 16.00% | 12.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 0.00% | 0.00% |
Loss severity | 30.00% | 12.00% |
Constant prepayment rate | 12.00% | 4.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 3.00% | 21.00% |
Loss severity | 50.00% | 45.00% |
Constant prepayment rate | 18.00% | 19.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 7,000 | $ 9,500 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 9.00% | 13.00% |
LTM EBITDA exit multiple | 9 | 8 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 7.00% | 9.00% |
LTM EBITDA exit multiple | 3 | 5 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 14.00% | 16.00% |
LTM EBITDA exit multiple | 10 | 10 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 168,200 | $ 207,600 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 10.00% | 12.00% |
Average Price Per B O E | $ / barrel | 21.92 | 30.16 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 7.00% | 7.00% |
Average Price Per B O E | $ / barrel | 16.85 | 21.46 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 20.00% | 20.00% |
Average Price Per B O E | $ / barrel | 24.81 | 35.67 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Options | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 14.00% | 14.00% |
LTM EBITDA exit multiple | 6 | 11 |
Successor Company | Significant Unobservable Inputs (Level 3) | Discounted cash flows | Options | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 14.00% | 14.00% |
LTM EBITDA exit multiple | 6 | 11 |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 46,400 | $ 67,400 |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 5 | 4 |
Forward EBITDA multiple | 8 | 7 |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 1 | 1 |
Forward EBITDA multiple | 4 | 4 |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 12 | 12 |
Forward EBITDA multiple | 10 | 11 |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 33,000 | $ 20,400 |
LTM EBITDA multiple | 8 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 8 | 11 |
Control Premium | 15.00% | |
Current capitalization rate | 7.00% | 7.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 10 | |
Control Premium | 15.00% | |
Current capitalization rate | 6.00% | 4.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 13 | |
Current capitalization rate | 11.00% | 15.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Options | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 10 | 9 |
Forward EBITDA multiple | 9 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Market comparables | Options | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 10 | 9 |
Forward EBITDA multiple | 9 | |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | |
Weight ascribed to market comparables | 62.00% | 97.00% |
Weight ascribed to discounted cash flows | 38.00% | 83.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 0.00% | |
Weight ascribed to market comparables | 0.00% | 0.00% |
Weight ascribed to discounted cash flows | 0.00% | 0.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 15.00% | |
Weight ascribed to market comparables | 100.00% | 100.00% |
Weight ascribed to discounted cash flows | 100.00% | 100.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to market comparables | 34.00% | 54.00% |
Weight ascribed to discounted cash flows | 66.00% | 79.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to market comparables | 0.00% | 0.00% |
Weight ascribed to discounted cash flows | 0.00% | 0.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to market comparables | 100.00% | 100.00% |
Weight ascribed to discounted cash flows | 100.00% | 100.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | |
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Successor Company | Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | |
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Crude Oil | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 23.00% | |
Crude Oil | Successor Company | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 25.00% | |
Natural Gas | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 77.00% | |
Natural Gas | Successor Company | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 75.00% | |
Natural Resources | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 176,400 | |
Natural Resources | Successor Company | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value (in dollars) | $ 134,400 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Millions | May. 06, 2014claim | Sep. 30, 2015USD ($) | Dec. 31, 2014USD ($) |
Contingencies | |||
Number of Delaware actions voluntarily dismissed | claim | 2 | ||
Successor Company | |||
Debt Instrument | |||
Estimated future contributions for interests in joint ventures and partnerships | $ 177.3 | $ 162 | |
Guarantees | |||
Non-recourse debt | 1,500 | 457.3 | |
Successor Company | Corporate loans, at estimated fair value | |||
Debt Instrument | |||
Unfunded financing commitments for corporate loans | $ 9.5 | $ 9.5 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) $ / shares in Units, $ in Millions | Apr. 30, 2014USD ($)$ / sharesshares | Dec. 16, 2013 | Apr. 30, 2014USD ($)$ / sharesshares | Sep. 30, 2015shares | Dec. 31, 2014shares | Jun. 27, 2014shares |
Stock-based compensation | ||||||
Preferred shares, shares issued | 14,950,000 | 14,950,000 | ||||
Preferred shares, shares outstanding | 14,950,000 | 14,950,000 | ||||
Number of common shares issued | 100 | 100 | ||||
Number of common shares outstanding | 100 | 100 | ||||
KKR & Co. | ||||||
Stock-based compensation | ||||||
Number of common shares issued | 100 | |||||
Number of common shares outstanding | 100 | |||||
Series A LLC Preferred Shares | ||||||
Stock-based compensation | ||||||
Preferred shares, dividend rate (as a percent) | 7.375% | |||||
Successor Company | Series A LLC Preferred Shares | ||||||
Stock-based compensation | ||||||
Preferred shares, shares issued | 14,950,000 | |||||
Successor Company | Common share options | ||||||
Stock-based compensation | ||||||
Exercise price of share options granted, minimum (as a percent) | 100.00% | |||||
Successor Company | Common share options | Maximum | ||||||
Stock-based compensation | ||||||
Termination period from date of grant (in years) | 10 years | |||||
Predecessor Company | Series A LLC Preferred Shares | ||||||
Stock-based compensation | ||||||
Preferred shares, shares outstanding | 14,950,000 | |||||
Preferred shares, dividend rate (as a percent) | 7.375% | |||||
Predecessor Company | Restricted common shares | ||||||
Restricted common share transactions | ||||||
Unvested shares as January 1, 2014 | 669,828 | |||||
Issued (in shares) | 0 | |||||
Vested (in shares) | (243,648) | |||||
Forfeited (in shares) | 0 | |||||
Unvested shares as of April 30, 2014 | 426,180 | 426,180 | ||||
Unrecognized compensation cost (in dollars) | $ | $ 2.2 | $ 2.2 | ||||
Predecessor Company | Restricted common shares | Manager | ||||||
Restricted common share transactions | ||||||
Unvested shares as January 1, 2014 | 584,634 | |||||
Issued (in shares) | 0 | |||||
Vested (in shares) | (243,648) | |||||
Forfeited (in shares) | 0 | |||||
Unvested shares as of April 30, 2014 | 340,986 | 340,986 | ||||
Value of unvested restricted common shares granted (in dollars per share) | $ / shares | $ 11.54 | $ 11.54 | ||||
Predecessor Company | Restricted common shares | Directors | ||||||
Restricted common share transactions | ||||||
Unvested shares as January 1, 2014 | 85,194 | |||||
Issued (in shares) | 0 | |||||
Vested (in shares) | 0 | |||||
Forfeited (in shares) | 0 | |||||
Unvested shares as of April 30, 2014 | 85,194 | 85,194 | ||||
Predecessor Company | Common share options | ||||||
Stock-based compensation | ||||||
Authorized shares available to satisfy awards as of the balance sheet date | 8,964,625 | 8,964,625 | ||||
Predecessor Company | Phantom share | ||||||
Stock-based compensation | ||||||
Exchange ratio of share based awards under merger transaction | 0.51 | |||||
KFN | Predecessor Company | KKR & Co. | ||||||
Stock-based compensation | ||||||
Exchange ratio of share based awards under merger transaction | 0.51 | 0.51 | ||||
KFN | Predecessor Company | Restricted common shares | KKR & Co. | ||||||
Stock-based compensation | ||||||
Exchange ratio of share based awards under merger transaction | 0.51 |
SHAREHOLDERS' EQUITY (Details 2
SHAREHOLDERS' EQUITY (Details 2) - Predecessor Company - Common share options | 4 Months Ended |
Apr. 30, 2014$ / sharesshares | |
Number of Options | |
Outstanding at the beginning of the period (in shares) | 1,932,279 |
Granted (in shares) | 0 |
Exercised (in shares) | 0 |
Forfeited (in shares) | 0 |
Outstanding at the end of the period (in shares) | 1,932,279 |
Exercisable at the end of the period (in shares) | 1,932,279 |
Weighted Average Exercise Price | |
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 20 |
Granted (in dollars per share) | $ / shares | 0 |
Exercised (in dollars per share) | $ / shares | 0 |
Forfeited (in dollars per share) | $ / shares | 0 |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 20 |
SHAREHOLDERS' EQUITY (Details 3
SHAREHOLDERS' EQUITY (Details 3) - Predecessor Company - Restricted common shares $ in Thousands | 4 Months Ended |
Apr. 30, 2014USD ($) | |
Stock-based compensation | |
Total share-based compensation expense | $ 1,018 |
Manager | |
Stock-based compensation | |
Total share-based compensation expense | 690 |
Directors | |
Stock-based compensation | |
Total share-based compensation expense | $ 328 |
MANAGEMENT AGREEMENT AND RELA77
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | 12 Months Ended | |||
May. 31, 2014USD ($) | Sep. 30, 2015USD ($)issuer$ / shares | Sep. 30, 2014USD ($) | Sep. 30, 2007USD ($) | Apr. 30, 2014USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2015USD ($)issuerperiod$ / shares | Dec. 31, 2014USD ($)issuer | May. 23, 2014$ / shares | |
Management Agreement and Related Party Transactions | |||||||||
Distribution to parent | $ 52,100 | $ 141,600 | |||||||
Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | $ 9,449 | $ 12,544 | $ 22,950 | 29,486 | |||||
Distribution to parent | $ 44,900 | 392,923 | $ 141,566 | ||||||
Distributions to parent per unit (in dollars per share) | $ / shares | $ 0.43 | ||||||||
Successor Company | CLO Management Fees | Maximum | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Entity's percentage in subordinated notes | 100.00% | ||||||||
Successor Company | CLO Management Fees | CLO 2013-1 and CLO 2013-2 | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Entity's percentage in subordinated notes | 100.00% | ||||||||
Successor Company | Manager | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Renewal period (in years) | 1 year | ||||||||
Votes for termination, minimum (as a percent) | 66.70% | 66.70% | |||||||
Notice period for termination (in days) | 180 days | ||||||||
Multiplier used to determine termination fee | 4 | ||||||||
Number of 12 month periods considered for calculation of termination fee (in periods) | period | 2 | ||||||||
Specified period for which average annual incentive fee to be considered (in months) | 12 months | ||||||||
Successor Company | Manager | Base Management Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Common share closing price, minimum (in dollars per share) | $ / shares | $ 20 | $ 20 | |||||||
Number of consecutive trading days | 5 days | ||||||||
Related party transaction expense | $ 2,633 | 4,986 | 10,927 | $ 8,096 | |||||
Successor Company | Manager | Incentive Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 0 | 0 | 0 | 0 | |||||
Successor Company | Manager | Manager Share-Based Compensation | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 0 | 0 | 0 | 0 | |||||
Successor Company | Manager | Reimbursable General And Administrative Expenses | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 700 | 800 | 1,800 | 4,200 | |||||
Successor Company | Collateral manager | CLO Management Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Fees, waived | 400 | 1,400 | 3,000 | 1,500 | |||||
Related party transaction expense | 6,816 | $ 7,558 | $ 12,023 | 21,390 | |||||
Predecessor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | $ 29,841 | ||||||||
Predecessor Company | Manager | Base Management Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Common shares offering | $ 230,400 | ||||||||
Common share right offering | $ 270,000 | ||||||||
Fees, waived | 2,900 | ||||||||
Related party transaction expense | 5,253 | ||||||||
Predecessor Company | Manager | Incentive Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 12,882 | ||||||||
Predecessor Company | Manager | Manager Share-Based Compensation | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 690 | ||||||||
Predecessor Company | Manager | Reimbursable General And Administrative Expenses | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Related party transaction expense | 2,800 | ||||||||
Predecessor Company | Collateral manager | CLO Management Fees | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Fees, waived | 1,600 | ||||||||
Related party transaction expense | 11,016 | ||||||||
Restricted common shares | Predecessor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Share-based compensation | 1,018 | ||||||||
Restricted common shares | Predecessor Company | Manager | Manager Share-Based Compensation | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Share-based compensation | $ 700 | ||||||||
Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | $ 1,100,000 | $ 1,100,000 | $ 1,700,000 | ||||||
Investment in affiliates, number of issuers | issuer | 13 | 13 | 19 | ||||||
Percent to total investment in corporate loans, debt securities and other investments | Affiliated Investments | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Concentration risk (as a percent) | 16.00% | 20.00% | |||||||
Corporate loans, at estimated fair value | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | $ 1,100,000 | $ 1,100,000 | |||||||
Equity Investments, at Estimated Fair Value | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | 11,000 | 11,000 | $ 13,600 | ||||||
Corporate loans | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | 1,600,000 | ||||||||
Corporate Debt Securities | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | 9,500 | ||||||||
Joint Ventures And Partnerships | Affiliated Entity | Successor Company | |||||||||
Management Agreement and Related Party Transactions | |||||||||
Estimated fair value | $ 569,700 | $ 569,700 | $ 618,600 |
MANAGEMENT AGREEMENT AND RELA78
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 9,449 | $ 12,544 | $ 22,950 | $ 29,486 | |
Successor Company | Manager | Base Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 2,633 | 4,986 | 10,927 | 8,096 | |
Successor Company | Manager | Incentive Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 0 | 0 | 0 | 0 | |
Successor Company | Manager | Manager Share-Based Compensation | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 0 | 0 | 0 | 0 | |
Successor Company | Collateral manager | CLO Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 6,816 | $ 7,558 | $ 12,023 | $ 21,390 | |
Predecessor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 29,841 | ||||
Predecessor Company | Manager | Base Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 5,253 | ||||
Predecessor Company | Manager | Incentive Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 12,882 | ||||
Predecessor Company | Manager | Manager Share-Based Compensation | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | 690 | ||||
Predecessor Company | Collateral manager | CLO Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 11,016 |
MANAGEMENT AGREEMENT AND RELA79
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 9,449 | $ 12,544 | $ 22,950 | $ 29,486 | |
Successor Company | Manager | Base Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Base management fees, gross | 7,702 | 9,846 | 16,534 | 24,029 | |
CLO management fees credit | (5,069) | (4,860) | (5,607) | (15,933) | |
Other related party fees credit | 0 | 0 | 0 | 0 | |
Total CLO management fees | $ 2,633 | $ 4,986 | $ 10,927 | $ 8,096 | |
Predecessor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 29,841 | ||||
Predecessor Company | Manager | Base Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Base management fees, gross | 13,364 | ||||
CLO management fees credit | (8,111) | ||||
Other related party fees credit | 0 | ||||
Total CLO management fees | $ 5,253 |
MANAGEMENT AGREEMENT AND RELA80
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 4) - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Successor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 9,449 | $ 12,544 | $ 22,950 | $ 29,486 | |
Successor Company | Collateral manager | CLO Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Base management fees, gross | 1,747 | 12,418 | 17,630 | 5,457 | |
CLO management fees credit | 5,069 | (4,860) | (5,607) | 15,933 | |
Total CLO management fees | $ 6,816 | $ 7,558 | $ 12,023 | $ 21,390 | |
Predecessor Company | |||||
Management Agreement and Related Party Transactions | |||||
Total CLO management fees | $ 29,841 | ||||
Predecessor Company | Collateral manager | CLO Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Base management fees, gross | 2,905 | ||||
CLO management fees credit | 8,111 | ||||
Total CLO management fees | $ 11,016 |
MANAGEMENT AGREEMENT AND RELA81
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 5) - Successor Company - USD ($) $ in Thousands | 3 Months Ended | 5 Months Ended | 9 Months Ended |
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | |
Contributions and Distribution | |||
Cash | $ 235,759 | $ 235,759 | $ 0 |
Securities | 22,873 | ||
Loans | 13,464 | ||
Interests in joint ventures and partnerships | 19,433 | ||
Total contributions from Parent | 291,529 | ||
Cash | 14,370 | ||
Equity investments, at estimated fair value | 101,042 | ||
Oil and gas properties, net | 179,203 | $ 114,546 | $ 0 |
Total distributions to Parent | $ 294,615 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 3 Months Ended | 4 Months Ended | 5 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Apr. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2014 | |
Segment Reporting Information | ||||||
Total assets | $ 7,899,443 | $ 7,899,443 | $ 8,951,625 | |||
Predecessor Company | ||||||
Segment Reporting Information | ||||||
Total revenues | $ 217,242 | |||||
Total investment costs and expenses | 101,825 | |||||
Total other income (loss) | 56,334 | |||||
Total other expenses | 65,609 | |||||
Income tax expense (benefit) | 162 | |||||
Net income (loss) | 105,980 | |||||
Net income (loss) attributable to noncontrolling interests | 0 | |||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 105,980 | |||||
Total CLO management fees | 29,841 | |||||
Predecessor Company | Reportable Segments | Credit | ||||||
Segment Reporting Information | ||||||
Total revenues | 134,255 | |||||
Total investment costs and expenses | 62,485 | |||||
Total other income (loss) | 76,046 | |||||
Total other expenses | 23,121 | |||||
Income tax expense (benefit) | 146 | |||||
Net income (loss) | 124,549 | |||||
Predecessor Company | Reportable Segments | Natural Resources | ||||||
Segment Reporting Information | ||||||
Total revenues | 61,782 | |||||
Total investment costs and expenses | 38,915 | |||||
Total other income (loss) | (8,123) | |||||
Total other expenses | 1,633 | |||||
Income tax expense (benefit) | 0 | |||||
Net income (loss) | 13,111 | |||||
Predecessor Company | Reportable Segments | Other | ||||||
Segment Reporting Information | ||||||
Total revenues | 21,205 | |||||
Total investment costs and expenses | 425 | |||||
Total other income (loss) | (11,589) | |||||
Total other expenses | 230 | |||||
Income tax expense (benefit) | 16 | |||||
Net income (loss) | 8,945 | |||||
Predecessor Company | Reconciling Items | ||||||
Segment Reporting Information | ||||||
Total revenues | 0 | |||||
Total investment costs and expenses | 0 | |||||
Total other income (loss) | 0 | |||||
Total other expenses | 40,625 | |||||
Income tax expense (benefit) | 0 | |||||
Net income (loss) | (40,625) | |||||
Total CLO management fees | 12,900 | |||||
Successor Company | ||||||
Segment Reporting Information | ||||||
Total revenues | 89,109 | $ 124,756 | $ 219,069 | 292,586 | ||
Total investment costs and expenses | 50,352 | 61,340 | 117,004 | 170,455 | ||
Total other income (loss) | (185,449) | (125,685) | (104,798) | (246,578) | ||
Total other expenses | 11,547 | 14,898 | 29,262 | 40,984 | ||
Income tax expense (benefit) | 94 | 34 | 62 | 1,170 | ||
Net income (loss) | (158,333) | (77,201) | (32,057) | (166,601) | ||
Net income (loss) attributable to noncontrolling interests | (6,676) | 816 | 816 | (15,452) | ||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | (151,657) | (78,017) | (32,873) | (151,149) | ||
Total CLO management fees | 9,449 | 12,544 | 22,950 | 29,486 | ||
Successor Company | Reportable Segments | Credit | ||||||
Segment Reporting Information | ||||||
Total revenues | 79,698 | 98,413 | 160,724 | 265,176 | ||
Total investment costs and expenses | 47,948 | 46,412 | 81,822 | 163,246 | ||
Total other income (loss) | (149,952) | (132,098) | (114,985) | (216,786) | ||
Total other expenses | 11,285 | 14,136 | 26,889 | 39,702 | ||
Income tax expense (benefit) | 64 | 34 | 58 | 126 | ||
Net income (loss) | (129,551) | (94,267) | (63,030) | (154,684) | ||
Net income (loss) attributable to noncontrolling interests | (2,727) | 816 | 816 | (8,403) | ||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | (126,824) | (95,083) | (63,846) | (146,281) | ||
Total assets | 7,412,244 | 7,412,244 | 8,438,227 | |||
Successor Company | Reportable Segments | Natural Resources | ||||||
Segment Reporting Information | ||||||
Total revenues | 3,876 | 17,929 | 49,859 | 13,055 | ||
Total investment costs and expenses | 2,016 | 14,617 | 34,674 | 6,062 | ||
Total other income (loss) | (36,236) | (1,514) | (6,394) | (50,337) | ||
Total other expenses | 114 | 617 | 2,010 | 800 | ||
Income tax expense (benefit) | 0 | 0 | 0 | 0 | ||
Net income (loss) | (34,490) | 1,181 | 6,781 | (44,144) | ||
Net income (loss) attributable to noncontrolling interests | (3,949) | 0 | 0 | (7,049) | ||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | (30,541) | 1,181 | 6,781 | (37,095) | ||
Total assets | 252,618 | 252,618 | 300,281 | |||
Successor Company | Reportable Segments | Other | ||||||
Segment Reporting Information | ||||||
Total revenues | 5,535 | 8,414 | 8,486 | 14,355 | ||
Total investment costs and expenses | 388 | 311 | 508 | 1,147 | ||
Total other income (loss) | 739 | 7,927 | 16,581 | 20,545 | ||
Total other expenses | 99 | 145 | 328 | 333 | ||
Income tax expense (benefit) | 30 | 0 | 4 | 1,044 | ||
Net income (loss) | 5,757 | 15,885 | 24,227 | 32,376 | ||
Net income (loss) attributable to noncontrolling interests | 0 | 0 | 0 | 0 | ||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 5,757 | 15,885 | 24,227 | 32,376 | ||
Total assets | 234,581 | 234,581 | 213,006 | |||
Successor Company | Reconciling Items | ||||||
Segment Reporting Information | ||||||
Total revenues | 0 | 0 | 0 | 0 | ||
Total investment costs and expenses | 0 | 0 | 0 | 0 | ||
Total other income (loss) | 0 | 0 | 0 | 0 | ||
Total other expenses | 49 | 0 | 35 | 149 | ||
Income tax expense (benefit) | 0 | 0 | 0 | 0 | ||
Net income (loss) | (49) | 0 | (35) | (149) | ||
Net income (loss) attributable to noncontrolling interests | 0 | 0 | 0 | 0 | ||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | (49) | $ 0 | (35) | (149) | ||
Total assets | 0 | 0 | 111 | |||
Noncontrolling interests | Successor Company | ||||||
Segment Reporting Information | ||||||
Net income (loss) | $ 816 | (15,452) | ||||
Total assets | 86,000 | 86,000 | 100,200 | |||
Noncontrolling interests | Successor Company | Reportable Segments | Credit | ||||||
Segment Reporting Information | ||||||
Total assets | 53,100 | 53,100 | 62,700 | |||
Noncontrolling interests | Successor Company | Reportable Segments | Natural Resources | ||||||
Segment Reporting Information | ||||||
Total assets | $ 32,900 | $ 32,900 | $ 37,400 | |||
Merger Transaction Costs | Predecessor Company | Reconciling Items | ||||||
Segment Reporting Information | ||||||
Total CLO management fees | $ 22,700 |
EARNINGS PER COMMON SHARE (Deta
EARNINGS PER COMMON SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 4 Months Ended | |
Apr. 30, 2014 | Sep. 30, 2015 | |
KKR Fund Holdings | ||
Earnings per common share | ||
Number of common shares held | 100 | |
Predecessor Company | ||
Reconciliation of basic and diluted net income and distributions per common share | ||
Net income (loss) | $ 105,980 | |
Less: Preferred share distributions | 6,891 | |
Net income (loss) available to common shares | 99,089 | |
Less: Dividends and undistributed earnings allocated to participating securities | 292 | |
Net income (loss) allocated to common shares | $ 98,797 | |
Basic: | ||
Basic weighted average common shares outstanding | 204,276,000 | |
Net income (loss) per common share (in dollars per share) | $ 0.48 | |
Diluted: | ||
Diluted weighted average common shares outstanding | 204,276,000 | |
Net income (loss) per common share (in dollars per share) | $ 0.48 | |
Distribution declared (in dollars per share) | $ 0.22 | |
Anti-dilutive securities | ||
Anti-dilutive securities excluded from diluted earnings per share calculations (in shares) | 1,932,279 |
ACCUMULATED OTHER COMPREHENSI84
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) - Predecessor Company $ in Thousands | 4 Months Ended |
Apr. 30, 2014USD ($) | |
Reclassification From Accumulated Other Comprehensive Income Current Period Net Of Tax Abstract | |
Beginning balance | $ (15,652) |
Other comprehensive income (loss): | |
Other comprehensive loss before reclassifications | (8,056) |
Amounts reclassified from accumulated other comprehensive loss | (2,639) |
Total other comprehensive income (loss) | (10,695) |
Ending balance | (26,347) |
Impairment charge for investments which were determined to be other-than-temporary | 4,400 |
Net unrealized gains on available-for-sale securities | |
Reclassification From Accumulated Other Comprehensive Income Current Period Net Of Tax Abstract | |
Beginning balance | 23,567 |
Other comprehensive income (loss): | |
Other comprehensive loss before reclassifications | (2,614) |
Amounts reclassified from accumulated other comprehensive loss | (2,639) |
Total other comprehensive income (loss) | (5,253) |
Ending balance | 18,314 |
Net unrealized losses on cash flow hedges | |
Reclassification From Accumulated Other Comprehensive Income Current Period Net Of Tax Abstract | |
Beginning balance | (39,219) |
Other comprehensive income (loss): | |
Other comprehensive loss before reclassifications | (5,442) |
Amounts reclassified from accumulated other comprehensive loss | 0 |
Total other comprehensive income (loss) | (5,442) |
Ending balance | $ (44,661) |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands | Nov. 05, 2015 | Oct. 26, 2015 | Sep. 24, 2015 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2015 |
Successor Company | ||||||
Subsequent events | ||||||
Interests in joint ventures and partnerships | $ 19,433 | |||||
Cash | $ 14,370 | |||||
Dividends, preferred stock | $ 13,782 | $ 20,673 | ||||
Successor Company | Series A LLC Preferred Shares | ||||||
Subsequent events | ||||||
Cash distribution declared (in dollars per share) | $ 0.460938 | |||||
Dividends, preferred stock | $ 6,900 | |||||
Subsequent Event | ||||||
Subsequent events | ||||||
Interests in joint ventures and partnerships | $ 251,700 | |||||
Cash | $ 251,700 | |||||
Subsequent Event | Successor Company | Common Shares | ||||||
Subsequent events | ||||||
Dividends, common stock | $ 37,500 | |||||
Cash distribution declared (in dollars per share) | $ 375,155 |