Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 02, 2016 | |
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, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 100 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets | ||
Cash and cash equivalents | $ 677,184 | $ 320,122 |
Restricted cash and cash equivalents | 384,559 | 487,374 |
Securities, at estimated fair value | 213,191 | 417,519 |
Loans, at estimated fair value | 3,755,783 | 5,188,610 |
Equity investments, at estimated fair value | 213,068 | 262,946 |
Oil and gas properties, net | 111,631 | 114,868 |
Interests in joint ventures and partnerships, at estimated fair value | 779,027 | 888,408 |
Derivative assets | 32,899 | 40,852 |
Interest and principal receivable | 16,672 | 22,196 |
Receivable for investments sold | 135,346 | 19,930 |
Other assets | 11,231 | 25,570 |
Total assets | 6,330,591 | 7,788,395 |
Liabilities | ||
Collateralized loan obligation secured notes, at estimated fair value | 3,456,988 | 4,843,746 |
Collateralized loan obligation junior secured notes to affiliates, at estimated fair value | 60,919 | 0 |
Senior notes | 411,836 | 413,006 |
Junior subordinated notes | 249,730 | 248,498 |
Payable for investments purchased | 361,523 | 220,085 |
Accounts payable, accrued expenses and other liabilities | 33,625 | 43,667 |
Accrued interest payable | 18,715 | 20,619 |
Related party payable | 3,528 | 3,892 |
Derivative liabilities | 52,324 | 43,892 |
Total liabilities | 4,649,188 | 5,837,405 |
Equity | ||
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both September 30, 2016 and December 31, 2015 | 0 | 0 |
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both September 30, 2016 and December 31, 2015 | 0 | 0 |
Paid-in-capital | 2,764,061 | 2,764,061 |
Accumulated deficit | (1,148,413) | (895,950) |
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity | 1,615,648 | 1,868,111 |
Noncontrolling interests | 65,755 | 82,879 |
Total equity | 1,681,403 | 1,950,990 |
Total liabilities and equity | $ 6,330,591 | $ 7,788,395 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred shares, no par value (in dollars per share) | ||
Preferred shares, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Preferred shares, shares issued (in shares) | 14,950,000 | 14,950,000 |
Preferred shares, shares outstanding (in shares) | 14,950,000 | 14,950,000 |
Common shares, no par value (in dollars per share) | ||
Common shares, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common shares, shares issued (in shares) | 100 | 100 |
Common shares, shares outstanding (in shares) | 100 | 100 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues | ||||
Loan interest income | $ 51,000 | $ 62,743 | $ 175,434 | $ 210,203 |
Securities interest income | 3,795 | 15,297 | 15,751 | 47,146 |
Oil and gas revenue | 2,387 | 3,876 | 8,285 | 13,055 |
Other | 13,835 | 7,193 | 30,014 | 22,182 |
Total revenues | 71,017 | 89,109 | 229,484 | 292,586 |
Investment costs and expenses | ||||
Interest expense | 119,039 | 47,422 | 224,346 | 161,589 |
Interest expense to affiliates | 5,437 | 0 | 6,446 | 0 |
Oil and gas production costs | 247 | 248 | 702 | 498 |
Oil and gas depreciation, depletion and amortization | 914 | 1,404 | 3,238 | 4,409 |
Other | 4,956 | 1,278 | 6,912 | 3,959 |
Total investment costs and expenses | 130,593 | 50,352 | 241,644 | 170,455 |
Other income (loss) | ||||
Net realized and unrealized gain (loss) on investments | 74,436 | (232,549) | (33,085) | (219,058) |
Net realized and unrealized gain (loss) on derivatives and foreign exchange | (168) | (10,304) | (13,564) | (3,545) |
Net realized and unrealized gain (loss) on debt | 131,712 | 54,860 | 67,737 | (33,933) |
Net realized and unrealized gain (loss) on debt to affiliates | 2,706 | 0 | (278) | 0 |
Other income (loss) | 4,680 | 2,544 | 7,620 | 9,958 |
Total other income (loss) | 213,366 | (185,449) | 28,430 | (246,578) |
Other expenses | ||||
Related party management compensation | 8,100 | 9,449 | 22,143 | 29,486 |
General, administrative and directors' expenses | 8,047 | 1,779 | 25,238 | 9,265 |
Professional services | 994 | 319 | 3,016 | 2,233 |
Total other expenses | 17,141 | 11,547 | 50,397 | 40,984 |
Income (loss) before income taxes | 136,649 | (158,239) | (34,127) | (165,431) |
Income tax expense (benefit) | 340 | 94 | 213 | 1,170 |
Net income (loss) | 136,309 | (158,333) | (34,340) | (166,601) |
Net income (loss) attributable to noncontrolling interests | 1,492 | (6,676) | (15,324) | (15,452) |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 134,817 | (151,657) | (19,016) | (151,149) |
Preferred share distributions | 6,891 | 6,891 | 20,673 | 20,673 |
Net income (loss) available to common shares | $ 127,926 | $ (158,548) | $ (39,689) | $ (171,822) |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 136,309 | $ (158,333) | $ (34,340) | $ (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) | 136,309 | (158,333) | (34,340) | (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 | $ 136,309 | $ (158,333) | $ (34,340) | $ (166,601) |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Changes in Equity (Unaudited) - USD ($) $ in Thousands | Total | Preferred Shares | Preferred Shares Paid-In Capital | Common Shares | Common Shares Paid-In Capital | Accumulated Deficit | Noncontrolling interests |
Balance at Dec. 31, 2014 | $ 2,488,048 | $ 378,983 | $ 2,385,078 | $ (376,182) | $ 100,169 | ||
Balance (in shares) at Dec. 31, 2014 | 14,950,000 | 100 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Capital contributions | 1,236 | 1,236 | |||||
Net income (loss) | (166,601) | (151,149) | (15,452) | ||||
Distributions declared on preferred shares | (20,673) | (20,673) | |||||
Distributions to Parent | (141,566) | (141,566) | |||||
Balance at Sep. 30, 2015 | 2,158,567 | 378,983 | 2,385,078 | (691,447) | 85,953 | ||
Balance (in shares) at Sep. 30, 2015 | 14,950,000 | 100 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Cumulative effect adjustment from adoption of accounting guidance | (1,877) | (1,877) | |||||
Balance at Dec. 31, 2015 | 1,950,990 | 378,983 | 2,385,078 | (895,950) | 82,879 | ||
Balance (in shares) at Dec. 31, 2015 | 14,950,000 | 100 | |||||
Increase (Decrease) in Shareholders' Equity | |||||||
Capital contributions | 5,049 | 5,049 | |||||
Capital distributions | (6,849) | (6,849) | |||||
Net income (loss) | (34,340) | (19,016) | (15,324) | ||||
Distributions declared on preferred shares | (20,673) | (20,673) | |||||
Distributions to Parent | (212,774) | (212,774) | |||||
Balance at Sep. 30, 2016 | $ 1,681,403 | $ 378,983 | $ 2,385,078 | $ (1,148,413) | $ 65,755 | ||
Balance (in shares) at Sep. 30, 2016 | 14,950,000 | 100 |
Condensed Consolidated Stateme7
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities | ||
Net income (loss) | $ (34,340) | $ (166,601) |
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 | 13,564 | 3,545 |
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests | (15,324) | (15,452) |
Net realized and unrealized (gain) loss on investments | 48,409 | 234,510 |
Depreciation and net amortization | 40,799 | 22,915 |
Net realized and unrealized (gain) loss on debt | (67,737) | 33,933 |
Net realized and unrealized (gain) loss on debt to affiliates | 278 | 0 |
Changes in assets and liabilities: | ||
Interest receivable | 5,554 | 24,170 |
Other assets | (11,481) | (32,759) |
Related party payable | (364) | (612) |
Accounts payable, accrued expenses and other liabilities | (10,048) | 28,235 |
Accrued interest payable | (1,904) | 3,034 |
Net cash provided by (used in) operating activities | (32,594) | 134,918 |
Cash flows from investing activities | ||
Principal payments from corporate loans | 1,068,822 | 1,160,687 |
Principal payments from securities | 31,118 | 11,841 |
Proceeds from sales of corporate loans | 1,860,854 | 1,142,796 |
Proceeds from sales of securities | 116,259 | 152,707 |
Proceeds from equity and other investments | 122,800 | 48,915 |
Purchases of corporate loans | (1,418,194) | (1,391,722) |
Purchases of securities | (5,068) | (9,387) |
Purchases of equity and other investments | (61,852) | (56,171) |
Net change in proceeds, purchases and settlements of derivatives | 5,562 | 21,643 |
Net change in restricted cash and cash equivalents | 102,815 | 99,124 |
Net cash provided by (used in) investing activities | 1,823,116 | 1,180,433 |
Cash flows from financing activities | ||
Issuance of collateralized loan obligation secured notes | 745,156 | 595,056 |
Retirement of collateralized loan obligation secured notes | (2,075,332) | (1,445,941) |
Distributions on common shares | (80,811) | (141,566) |
Distributions on preferred shares | (20,673) | (20,673) |
Capital distributions to noncontrolling interests | (6,849) | (2,728) |
Capital contributions from noncontrolling interests | 5,049 | 3,964 |
Other capitalized costs | 0 | (3,652) |
Net cash provided by (used in) financing activities | (1,433,460) | (989,477) |
Net increase (decrease) in cash and cash equivalents | 357,062 | 325,874 |
Cash and cash equivalents at beginning of period | 320,122 | 163,405 |
Cash and cash equivalents at end of period | 677,184 | 489,279 |
Supplemental cash flow information | ||
Cash paid for interest | 195,441 | 123,224 |
Net cash paid (refunded) for income taxes | 56 | (1,988) |
Non-cash investing and financing activities | ||
Assets distributed to Parent | (131,963) | 0 |
Redemption of CLO 2007-A subordinated notes | (15,587) | 0 |
Preferred share distributions declared, not yet paid | 6,891 | 6,891 |
CLO Warehouse Facility | ||
Cash flows from financing activities | ||
Proceeds from credit facilities | 62,479 | 216,063 |
Repayment of collateralized loan obligation warehouse facility | $ (62,479) | $ (190,000) |
ORGANIZATION
ORGANIZATION | 9 Months Ended |
Sep. 30, 2016 | |
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 and interests in joint ventures and partnerships. 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 Company is a subsidiary of KKR & Co. L.P. (“KKR & Co.”). KKR Fund Holdings L.P. (“KKR Fund Holdings”), a subsidiary of KKR & Co., is the sole holder of all of the outstanding common shares of the Company and is the parent of the Company (the “Parent”). 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. The Company’s 7.375% Series A LLC Preferred Shares (“Series A LLC Preferred Shares”) and senior notes are traded on the New York Stock Exchange ("NYSE"). |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The majority of the Company's significant accounting policies have remained unchanged from the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2016 ("2015 Annual Report"). As such, in addition to the below, refer to the Company's 2015 Annual Report for further discussion. 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. 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 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”), KKR CLO 11, Ltd ("CLO 11"), KKR CLO 13, Ltd ("CLO 13"), KKR CLO 15, Ltd. ("CLO 15") and KKR 2016-1, Ltd. ("CLO 2016-1") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”) and KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”) and during 2015, the Company called KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and KKR Financial CLO 2006-1, Ltd ("CLO 2006-1"), whereby the Company 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, 2016 , the Company’s CLOs held $3.7 billion par amount, or $3.6 billion estimated fair value, of corporate debt investments. As of December 31, 2015, the Company's CLOs held $5.5 billion par amount, or $5.1 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, 2016 and December 31, 2015, the aggregate par amount of CLO debt to unaffiliated and affiliated parties totaled $3.6 billion and $4.9 billion , respectively. 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. 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 adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. In October 2016, the FASB issued guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements. Financial Instruments In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is currently evaluating the impact on its financial statements. Cash Flow Classification In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact on its financial statements. |
SECURITIES
SECURITIES | 9 Months Ended |
Sep. 30, 2016 | |
Investments, Debt and Equity Securities [Abstract] | |
SECURITIES | SECURITIES The Company accounts for all of its securities, including RMBS, at estimated fair value. The following table summarizes the Company’s securities as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Securities, at estimated fair value $ 370,923 $ 307,887 $ 213,191 $ 520,135 $ 474,201 $ 417,519 Total $ 370,923 $ 307,887 $ 213,191 $ 520,135 $ 474,201 $ 417,519 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, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Net realized gains (losses) $ 724 $ (3,227 ) $ 4,910 $ (9,127 ) Net (increase) decrease in unrealized losses (4,176 ) (15,523 ) (39,272 ) (20,598 ) Net realized and unrealized gains (losses) $ (3,452 ) $ (18,750 ) $ (34,362 ) $ (29,725 ) Defaulted Securities As of both September 30, 2016 and December 31, 2015, no corporate debt securities in the Company's portfolio was in default. Concentration Risk The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2016 , approximately 98% 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 LCI Helicopters Limited, Mizuho Bank, Ltd. and Preferred Proppants LLC which combined represented $114.4 million, or approximately 67% of the estimated fair value of the Company’s corporate debt securities. As of December 31, 2015, approximately 89% 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 LCI Helicopters Limited, Preferred Proppants LLC and JC Penney Corp. Inc, which combined represented $192.5 million , or approximately 52% of the estimated fair value of the Company’s corporate debt securities. Pledged Assets Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged assets for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 25,040 $ 170,365 Total $ 25,040 $ 170,365 |
LOANS
LOANS | 9 Months Ended |
Sep. 30, 2016 | |
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |
LOANS | LOANS The Company accounts for all of its loans at estimated fair value. The following table summarizes the Company’s loans as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Corporate loans, at estimated fair value $ 3,890,239 $ 3,872,205 $ 3,755,783 $ 5,722,646 $ 5,619,815 $ 5,188,610 Total $ 3,890,239 $ 3,872,205 $ 3,755,783 $ 5,722,646 $ 5,619,815 $ 5,188,610 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 loans (amounts in thousands): Three Months Ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Net realized gains (losses) $ (18,720 ) $ (546 ) $ (229,672 ) $ (22,807 ) Net (increase) decrease in unrealized losses 64,646 (147,107 ) 300,072 (92,283 ) Net realized and unrealized gains (losses) $ 45,926 $ (147,653 ) $ 70,400 $ (115,090 ) For the corporate loans measured at estimated fair value under the fair value option of accounting, $3.4 million and $122.4 million of net losses were attributable to changes in instrument specific credit risk for the three months ended September 30, 2016 and September 30, 2015, respectively. For the nine months ended September 30, 2016 and September 30, 2015, $54.9 million and $136.7 million of net losses were attributable to changes in instrument specific credit risk, respectively. 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, 2016 , the Company held a total par value and estimated fair value of $104.2 million and $35.5 million , respectively, of non-accrual loans carried at estimated fair value. As of December 31, 2015, the Company held a total par value and estimated fair value of $435.2 million and $127.5 million, respectively, of non-accrual loans. As of both September 30, 2016 and December 31, 2015, there were no corporate loans past due 90 or more days and still accruing. Defaulted Loans As of September 30, 2016 , the Company held no corporate loans that were in default. As of December 31, 2015, the Company held one corporate loan that was in default with a total estimated fair value of $113.6 million from one issuer. Concentration Risk The Company’s corporate loan portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2016 , approximately 21% 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 RedPrairie Corp, iPayment Investors L.P. and SRS Distribution Inc., which combined represented $152.2 million , or approximately 4% of the aggregate estimated fair value of the Company’s corporate loans. As of December 31, 2015, approximately 31% 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 and PQ Corp, which combined represented $434.6 million , or approximately 8% of the aggregate estimated fair value of the Company’s corporate loans. Pledged Assets Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged assets for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 3,573,587 $ 4,917,123 Total $ 3,573,587 $ 4,917,123 |
EQUITY METHOD INVESTMENTS AND I
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS | 9 Months Ended |
Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS | EQUITY INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS The Company holds interests in joint ventures and partnerships, certain of which (i) the Company participates alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to commercial real estate and specialty lending focused businesses or (ii) are held as interests in private or public funds managed by KKR and its affiliates. Refer to Note 10 to these condensed consolidated financial statements for further discussion. As of September 30, 2016 and December 31, 2015, the Company held $779.0 million and $888.4 million , respectively, of interests in joint ventures and partnerships carried at estimated fair value. In addition, as of September 30, 2016 and December 31, 2015, the Company held $213.1 million and $262.9 million , respectively, of equity investments, which were carried at estimated fair value and comprised primarily of common and preferred stock. Net Realized and Unrealized Gains (Losses) The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships (1) Equity Investments Interests in Joint Ventures and Partnerships (1) Net realized gains (losses) $ — $ (4,566 ) $ 1,549 $ 9,176 $ (3,771 ) $ 3,008 $ 2,915 $ 9,176 Net (increase) decrease in unrealized losses (5,402 ) 41,930 (14,245 ) (62,630 ) (21,851 ) (46,509 ) (6,872 ) (80,103 ) Net realized and unrealized gains (losses) $ (5,402 ) $ 37,364 $ (12,696 ) $ (53,454 ) $ (25,622 ) $ (43,501 ) $ (3,957 ) $ (70,927 ) (1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016 , respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 2015 , respectively. 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, 2016 and December 31, 2015, the Company had equity method investments, at estimated fair value, totaling $423.3 million and $506.5 million , respectively. The Company's equity method investments are comprised primarily of the following issuers with the respective ownership percentages: (i) Maritime Credit Corporation Ltd., which the Company holds approximately 31% through its ownership of KKR Nautilus Aggregator Limited, (ii) LCI Helicopters Limited, which the Company holds approximately 33% common equity interest in and (iii) 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): Nine months ended September 30, 2016 Nine months ended September 30, 2015 Credit Natural Resources Other Credit Natural Resources Other Revenues(1) $ 71,714 $ 86,942 $ 71,808 $ 65,250 $ 231,248 $ 36,099 Expenses(1) $ 46,060 $ 126,414 $ 23,725 $ 40,424 $ 237,275 $ 39,019 Net income (loss) $ (6,644 ) $ (52,786 ) $ 48,084 $ (25,056 ) $ 32,892 $ (2,921 ) (1) Revenues and expenses exclude realized and unrealized gains and losses. Pledged Assets Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged assets for borrowings. The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 42,210 $ 82,430 Total $ 42,210 $ 82,430 |
BORROWINGS
BORROWINGS | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
BORROWINGS | BORROWINGS The Company accounts 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, and all of its other borrowings 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, 2016 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 2007-1 subordinated notes(3)(4) $ 134,468 $ 21,155 62.74 % 1688 $ 75,945 CLO 2012-1 secured notes 367,500 376,667 2.90 2998 380,108 CLO 2012-1 subordinated notes(3) 18,000 10,226 14.71 2998 18,618 CLO 2013-1 secured notes 458,500 470,021 2.40 3210 488,310 CLO 2013-2 secured notes 339,250 343,686 2.72 3402 367,020 CLO 9 secured notes 463,749 470,905 2.69 3667 460,882 CLO 9 subordinated notes(3) 15,000 9,512 15.52 3667 14,907 CLO 9 subordinated notes to affiliates(3) 25,572 16,217 8.09 3667 25,414 CLO 10 secured notes 368,000 378,010 3.07 3363 362,465 CLO 10 subordinated notes to affiliates(3) 29,948 15,472 9.51 3363 29,498 CLO 11 secured notes 507,750 510,576 2.74 3849 504,497 CLO 11 subordinated notes(3) 28,250 21,709 17.74 3849 28,069 CLO 11 subordinated notes to affiliates(3) 19,362 14,879 9.45 3849 19,238 CLO 13 secured notes 375,000 385,329 3.03 4125 375,414 CLO 13 subordinated notes(3) 4,000 2,653 24.01 4125 4,004 CLO 13 subordinated notes to affiliates(3) 21,636 14,351 18.01 4125 21,660 CLO 2016-1 secured notes 66,665 64,808 2.29 615 69,304 CLO 2016-1 subordinated notes(3) 9,971 10,097 — 615 10,366 CLO 15 secured notes 370,500 370,803 3.06 4401 372,942 CLO 15 subordinated notes(3) 12,100 10,831 — 4401 12,180 Total collateralized loan obligation secured debt 3,635,221 3,517,907 3,640,841 8.375% Senior notes(5) 258,750 288,728 8.38 9177 — 7.500% Senior notes 115,043 123,108 7.50 9302 — Junior subordinated notes 283,517 249,730 4.01 7310 — Total borrowings $ 4,292,531 $ 4,179,473 $ 3,640,841 (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 to unaffiliated and affiliated parties 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) As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full. (5) On October 25, 2016, the Company announced its intention to redeem all of its outstanding 8.375% Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion. Certain information with respect to the Company’s borrowings as of December 31, 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 2007-1 secured notes $ 1,544,032 $ 1,630,293 2.10 % 1962 $ 1,732,855 CLO 2007-1 subordinated notes(3) 134,468 74,954 11.66 1962 150,912 CLO 2007-A subordinated notes(3) 15,096 17,060 14.49 654 48,856 CLO 2011-1 senior debt 249,301 249,301 1.67 1689 310,498 CLO 2012-1 secured notes 367,500 365,383 2.59 3272 361,684 CLO 2012-1 subordinated notes(3) 18,000 10,845 15.82 3272 17,715 CLO 2013-1 secured notes 458,500 450,280 2.05 3484 479,391 CLO 2013-2 secured notes 339,250 334,187 2.52 3676 347,989 CLO 9 secured notes 463,750 454,103 2.33 3941 463,574 CLO 9 subordinated notes(3) 15,000 9,972 15.92 3941 14,994 CLO 10 secured notes 368,000 363,977 2.75 3637 384,991 CLO 11 secured notes 507,750 491,699 2.38 4123 501,286 CLO 11 subordinated notes(3) 28,250 23,306 5.28 4123 27,890 CLO 13 secured notes 370,000 364,986 2.84 4399 323,781 CLO 13 subordinated notes(3) 4,000 3,400 — 4399 3,500 Total collateralized loan obligation secured debt 4,882,897 4,843,746 5,169,916 8.375% Senior notes 258,750 289,660 8.38 9451 — 7.500% Senior notes 115,043 123,346 7.50 9576 — Junior subordinated notes 283,517 248,498 5.43 7584 — Total borrowings $ 5,540,207 $ 5,505,250 $ 5,169,916 (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. 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, there were no gains (losses) attributable to changes in instrument specific credit risk for the three and nine months ended September 30, 2016 and 2015. 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 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11, CLO 13 and CLO 15 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019, January 2020 and October 2020, 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 August 2016, the Company called CLO 2007-1 and repaid all senior and mezzanine notes totaling $945.6 million par amount. During November 2015, the Company called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. In addition, during July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. Furthermore, 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 7 to these condensed consolidated financial statements, the Company used pay-fixed, receive-variable interest rate swaps to hedge interest rate risk associated with its CLOs. In connection with the repayment of CLO 2007-1 notes and CLO 2006-1 notes, the related interest rate swaps, with contractual notional amounts of $142.3 million and $84.0 million , respectively, were terminated. During the three and nine months ended September 30, 2016 , $947.6 million and $1.5 billion par amount, respectively, of original CLO 2007-1 and CLO 13 secured notes were repaid, which included the repayment in full related to the calling of CLO 2007-1. Comparatively, during the three and nine months ended September 30, 2015, $583.6 million and $1.1 billion par amount, respectively, of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 secured notes were repaid, which included the repayment in full related to the calling of CLO 2005-1. CLO 2011-1 and CLO 2016-1 do not have reinvestment periods and all principal proceeds from holdings in the respective CLOs are used to amortize the transaction. During both the three and nine months ended September 30, 2016, $280.0 million par amount of original CLO 2016-1 secured and subordinated notes were repaid. During March 2016, the Company called CLO 2011-1 and repaid all senior debt totaling $249.3 million par amount. During the three and nine months ended September 30, 2015, $119.3 million and $150.1 million par amount, respectively, of original CLO 2011-1 senior debt was repaid. During the three and nine months ended September 30, 2016, the Company issued $7.0 million par amount of CLO 13 class F notes for proceeds of $5.9 million . On September 14, 2016, the Company closed CLO 15, a $410.8 million secured financing transaction maturing on October 18, 2028. The Company issued $370.5 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 2.05% . The Company also issued $12.1 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 15 collateralize the CLO 15 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. On June 7, 2016, the Company closed CLO 2016-1, a $426.4 million secured financing transaction maturing on June 7, 2018, which was funded during the third quarter of 2016. The Company issued $330.9 million par amount of senior secured notes to unaffiliated investors at a rate of three-month LIBOR plus 1.70% and $25.7 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 2016-1 collateralize the CLO 2016-1 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. During May 2016, the Company distributed an aggregate $96.5 million par amount of CLO 9, CLO 10, CLO 11 and CLO 13 subordinated notes to its Parent. These notes were previously owned by the Company and eliminated in consolidation. Following the distribution, the subordinated notes were held by an affiliate of KKR and reflected as collateralized loan obligation junior secured notes to affiliates, at estimated fair value, on the Company's condensed consolidated balance sheets. During April 2016, the remaining $15.1 million par amount of CLO 2007-A subordinated notes owned by third parties were deemed repaid in full, whereby the Company distributed assets held as collateral in CLO 2007-A to the subordinated note holders. On December 16, 2015, the Company closed CLO 13, a $412.0 million secured financing transaction maturing on January 16, 2028. The Company issued $370.0 million par amount of senior secured notes to unaffiliated investors, $350.0 million of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.19% and $20.0 million of which was fixed rate with a weighted-average coupon of 3.83% . The Company also issued $4.0 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 13 collateralize the CLO 13 debt, and as a result, those investments are not available to the Company, its creditors or shareholders. 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 par amount 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. 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, CLO 13 entered into a $350.0 million CLO warehouse facility ("CLO 13 Warehouse"), which matured upon the closing of CLO 13 on December 16, 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 on December 16, 2015, the aggregate amount outstanding under the CLO 13 Warehouse was repaid. |
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
DERIVATIVE INSTRUMENTS | DERIVATIVE INSTRUMENTS The Company enters into derivative transactions in order to hedge its interest rate and foreign currency exposure to the effects of interest rate and foreign currency 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 are major financial institutions 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, 2016 and December 31, 2015 (amounts in thousands): As of September 30, 2016 As of December 31, 2015 Notional Estimated Fair Value Notional Estimated Fair Value Free-Standing Derivatives: Interest rate swaps $ 125,000 $ (47,907 ) $ 297,667 $ (41,743 ) Foreign exchange forward contracts and options (297,947 ) 24,642 (375,524 ) 38,608 Common stock warrants — 1,613 — — Options — 2,227 — 95 Total $ (19,425 ) $ (3,040 ) 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 interest rate swaps, commodity derivatives, credit default swaps 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. Interest Rate Swaps The Company uses interest rate swaps to hedge a portion of the interest rate risk associated with certain of its floating rate junior subordinated notes. The Company had also previously used interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs. In conjunction with the calling of CLO 2007-1 in August 2016, the Company terminated the related interest rate swap. As of September 30, 2016 and December 31, 2015, the Company had interest rate swaps with a notional amount of $125.0 million and $297.7 million, respectively. 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, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $297.9 million and $375.5 million , respectively, the majority of which related to certain of our foreign currency denominated assets. Free-Standing Derivatives Gain (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): Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ (9,316 ) $ 10,340 $ 1,024 $ — $ (8,489 ) $ (8,489 ) Foreign exchange forward contracts and options(1) (1,523 ) 723 (800 ) 12,872 (11,848 ) 1,024 Common stock warrants — (507 ) (507 ) — (411 ) (411 ) Options — 115 115 — (2,428 ) (2,428 ) Net realized and unrealized gains (losses) $ (10,839 ) $ 10,671 $ (168 ) $ 12,872 $ (23,176 ) $ (10,304 ) (1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ (9,316 ) $ (7,325 ) $ (16,641 ) $ (5,297 ) $ 5,924 $ 627 Foreign exchange forward contracts and options(1) 16,089 (14,614 ) 1,475 27,107 (24,571 ) 2,536 Common stock warrants 142 (672 ) (530 ) — (2,412 ) (2,412 ) Total rate of return swaps — — — 304 130 434 Options — 2,132 2,132 — (4,730 ) (4,730 ) Net realized and unrealized gains (losses) $ 6,915 $ (20,479 ) $ (13,564 ) $ 22,114 $ (25,659 ) $ (3,545 ) (1) 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, 2016 , 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) $0.1 million net asset, net of $2.6 million collateral posted, (ii) $1.6 million net asset, net of $3.0 million collateral posted and (iii) $8.2 million net asset, including $38.8 million collateral held. Comparatively, as of December 31, 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) $2.4 million net asset, net of $20.7 million collateral posted, (ii) $1.6 million net asset, including $0.1 million collateral held and (iii) $9.1 million net asset, including $23.6 million collateral held. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Financial Instruments Not Carried at Estimated Fair Value The Company accounts for its investments, as well as its collateralized loan obligation secured notes 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, 2016 (amounts in thousands): As of September 30, 2016 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 $ 1,061,743 $ 1,061,743 $ 1,061,743 $ — $ — Liabilities: Senior notes 411,836 382,579 382,579 — — Junior subordinated notes 249,730 188,933 — — 188,933 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, 2015 (amounts in thousands): As of December 31, 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 $ 807,496 $ 807,496 $ 807,496 $ — $ — Liabilities: Senior notes 413,006 394,390 394,390 — — Junior subordinated notes 248,498 216,757 — — 216,757 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, 2016 , and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): 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 $ — $ 25,040 $ 144,837 $ 169,877 Residential mortgage-backed securities — — 43,314 43,314 Total securities — 25,040 188,151 213,191 Loans — 3,562,107 193,676 3,755,783 Equity investments, at estimated fair value 40,455 49,065 123,548 213,068 Interests in joint ventures and partnerships, at estimated fair value — — 779,027 779,027 Derivatives: Foreign exchange forward contracts and options — 27,552 1,507 29,059 Warrants — — 1,613 1,613 Options — — 2,227 2,227 Total derivatives — 27,552 5,347 32,899 Total $ 40,455 $ 3,663,764 $ 1,289,749 $ 4,993,968 Liabilities: Collateralized loan obligation secured notes $ — $ 3,456,988 $ — $ 3,456,988 Collateralized loan obligation secured notes to affiliates — 60,919 — 60,919 Derivatives: Interest rate swaps — 47,907 — 47,907 Foreign exchange forward contracts and options — 3,887 530 4,417 Total derivatives — 51,794 530 52,324 Total $ — $ 3,569,701 $ 530 $ 3,570,231 The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): 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, 2015 Assets: Securities: Corporate debt securities $ — $ 172,912 $ 194,986 $ 367,898 Residential mortgage-backed securities — — 49,621 49,621 Total securities — 172,912 244,607 417,519 Loans — 4,889,876 298,734 5,188,610 Equity investments, at estimated fair value 40,765 75,533 146,648 262,946 Interests in joint ventures and partnerships, at estimated fair value — — 888,408 888,408 Derivatives: 0 Foreign exchange forward contracts and options — 37,120 3,637 40,757 Options — — 95 95 Total derivatives — 37,120 3,732 40,852 Total $ 40,765 $ 5,175,441 $ 1,582,129 $ 6,798,335 Liabilities: Collateralized loan obligation secured notes $ — $ 4,843,746 $ — $ 4,843,746 Derivatives: Interest rate swaps — 41,743 — 41,743 Foreign exchange forward contracts and options — 1,399 750 2,149 Total derivatives — 43,142 750 43,892 Total $ — $ 4,886,888 $ 750 $ 4,887,638 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, 2016 (amounts in thousands): Assets Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Warrants Options Beginning balance as of July 1, 2016 $ 149,372 $ 45,800 $ 200,841 $ 123,374 $ 758,321 $ 1,652 $ 2,120 $ 2,112 Total gains or losses (for the period): Included in earnings(1) (4,505 ) 919 1,884 174 36,668 (675 ) (507 ) 115 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases — — 3,979 — 1,574 — — — Sales — — (13,264 ) — — — — — Settlements (30 ) (3,405 ) 236 — (17,536 ) — — — Ending balance as of September 30, 2016 $ 144,837 $ 43,314 $ 193,676 $ 123,548 $ 779,027 $ 977 $ 1,613 $ 2,227 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (4,505 ) $ 919 $ 1,883 $ 174 $ 36,669 $ (675 ) $ (507 ) $ 115 (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, 2016 (amounts in thousands): Assets Corporate Debt Securities Residential Mortgage-Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Warrants Options Beginning balance as of January 1, 2016 $ 194,986 $ 49,621 $ 298,734 $ 146,648 $ 888,408 $ 2,887 $ — $ 95 Total gains or losses (for the period): Included in earnings(1) (50,054 ) 1,999 (49,886 ) (25,287 ) (43,080 ) (1,910 ) (672 ) 2,132 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases — — 7,282 — 61,397 — — — Sales — — (39,949 ) (5,130 ) — — — — Settlements (95 ) (8,306 ) (22,505 ) 7,317 (127,698 ) — 2,285 — Ending balance as of September 30, 2016 $ 144,837 $ 43,314 $ 193,676 $ 123,548 $ 779,027 $ 977 $ 1,613 $ 2,227 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (50,054 ) $ 1,999 $ (49,886 ) $ (25,287 ) $ (43,080 ) $ (1,910 ) $ (672 ) $ 2,132 (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 three months ended September 30, 2015 (amounts in thousands): 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): 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 statements for further discussion. 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, 2016 and 2015. 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, 2016 (dollar amounts in thousands): Balance as of September 30, 2016 Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 144,837 Yield analysis Yield 13% 5% - 15% Decrease Net leverage 10x 9x-10x Decrease EBITDA multiple 8x 7x - 9x Increase Discount margin 1500 1500bps Decrease Market comparables LTM EBITDA multiple 9x 9x Increase Residential mortgage – backed securities $ 43,314 Discounted cash flows Probability of default 2% 0% - 3% Decrease Loss severity 43% 35% - 50% Decrease Constant prepayment rate 18% 12% - 23% (5 ) Corporate loans(6) $ 193,676 Yield Analysis Yield 15% 3% -28% Decrease Net leverage 10x 3x - 36x Decrease EBITDA multiple 9x 7x - 13x Increase Equity investments, at estimated fair value(7) $ 123,548 Inputs to both market comparables and discounted cash flow Illiquidity discount 11% 0% - 15% Decrease Weight ascribed to market comparables 27% 0% - 100% (8 ) Weight ascribed to discounted cash flows 73% 0% - 100% (9 ) Market comparables LTM EBITDA multiple 9x 0x - 15x Increase Forward EBITDA multiple 7x 3x - 13x Increase Discounted cash flows Weighted average cost of capital 9% 6% - 14% Decrease LTM EBITDA exit multiple 8x 1x - 9x Increase Interests in joint ventures and partnerships(11) $ 779,027 Inputs to market comparables, discounted cash flow and yield analysis Weight ascribed to market comparables 21% 0% - 100% (8 ) Weight ascribed to discounted cash flows 72% 0% - 100% (9 ) Weight ascribed to yield analysis 7% 0% - 100% (10 ) Market comparables LTM EBITDA multiple 5x 1x- 9x Increase Forward EBITDA multiple 8x 8x Increase Capitalization Rate 7% 6% - 12% Decrease Discounted cash flows Weighted average cost of capital 10% 6% - 24% Decrease Average price per BOE(12) $20.45 $17.44-$23.46 Increase Yield analysis Yield 14% 14% Decrease Net leverage 1x 1x Decrease EBITDA multiple 7x 7x Increase Foreign exchange options, net $ 977 Option pricing model Forward and spot rates 11,635 6 - 13,500 (13 ) Options(14) $ 2,227 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 10% Decrease Weight ascribed to market comparables 50% 50% (8 ) Weight ascribed to discounted cash flows 50% 50% (9 ) , Market comparables LTM EBITDA multiple 8x 8x Increase Forward EBITDA multiple 7x 7x Increase Discounted cash flows Weighted average cost of capital 15% 15% 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) Inputs exclude a single loan totaling $2.0 million , which had a yield, net leverage and EBITDA multiple of 513% , 35.6 x and 11.2 x, respectively. (7) 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, $6.1 million was valued solely using a market comparables technique and $44.2 million was valued solely using a discounted cash flow technique. (8) 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 or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach. (9) 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 or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach. (10) The directional change from an increase in the weight ascribed to the yield analysis approach would increase the fair value of the Level 3 investments if the yield analysis approach results in a higher valuation than the market comparables or discounted cash flow approach. The opposite would be true if the yield analysis approach results in a lower valuation than the market comparables or discounted cash flow approach. (11) Inputs exclude $346.3 million of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships, $165.3 million was valued solely using a discounted cash flow technique, while $7.8 million was valued solely using a market comparables technique and $24.1 million was valued solely using a yield analysis. (12) Natural resources assets with an estimated fair value of $120.4 million as of September 30, 2016 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. (13) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees. (14) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. The table above excludes warrants of $1.6 million , comprised of equity-like securities in a company that were valued using an independent third party valuation firm primarily based on the contractual agreement and public disclosures of the expected sale value. 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, 2015 (dollar amounts in thousands): 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 $ 194,986 Yield analysis Yield 23% 6% - 31% Decrease Net leverage 10x 10x-12x Decrease EBITDA multiple 7x 7x - 10x Increase Discount margin 750 750bps Decrease Residential mortgage – backed securities $ 49,621 Discounted cash flows Probability of default 1% 0% - 3% Decrease Loss severity 40% 35% - 45% Decrease Constant prepayment rate 15% 12% - 18% (5 ) Corporate loans $ 298,734 Yield Analysis Yield 11% 3% - 18% Decrease Net leverage 7x 1x - 19x Decrease EBITDA multiple 9x 6x - 15x Increase Equity investments, at estimated fair value(6) $ 146,648 Inputs to market comparables, discounted cash flow and broker quotes Illiquidity discount 11% 0% - 15% Decrease Weight ascribed to market comparables 52% 0% - 100% (7 ) Weight ascribed to discounted cash flows 42% 0% - 100% (8 ) Weight ascribed to broker quotes 6% 0% - 100% (9 ) Market comparables LTM EBITDA multiple 8x 4x - 13x Increase Forward EBITDA multiple 8x 3x - 11x Increase Discounted cash flows Weighted average cost of capital 9% 7% - 14% Decrease LTM EBITDA exit multiple 8x 0x - 9x Increase Broker quotes Offered quotes 4 0 - 5 Increase Interests in joint ventures and partnerships(10) $ 888,408 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 43% 0% - 100% (7 ) Weight ascribed to discounted cash flows 57% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 5x 1x - 9x Decrease Discounted cash flows Weighted average cost of capital 8% 6% - 20% Decrease Average price per BOE(11) $20.61 $14.33 - $23.22 Increase Yield analysis Yield 16% 16% Decrease Net leverage 2x 2x Decrease EBITDA multiple 8x 8x Increase Foreign exchange options, net $ 2,887 Option pricing model Forward and spot rates 11,500 6 -14,000 (12 ) Options(13) $ 95 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 9x 9x Increase Forward EBITDA multiple 8x 8x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 8x 8x 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, $6.4 million was valued solely using broker quotes, while $11.3 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 and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable. (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 and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable. (9) The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable. (10) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $164.4 million was valued solely using a discounted cash flow technique, while $98.9 million was valued solely using a market comparables technique and $17.5 million was valued solely using a yield analysis. (11) Natural resources assets with an estimated fair value of $114.1 million as of December 31, 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. (12) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees. (13) 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, 2016 | |
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 September 30, 2016 and December 31, 2015, the Company had unfunded financing commitments for corporate loans totaling $4.3 million and $8.6 million , respectively. The Company did not have any significant losses as of September 30, 2016 , 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 $94.0 million as of September 30, 2016 and $163.0 million as of December 31, 2015. Guarantees The Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.3 billion as of September 30, 2016 and $1.6 billion as of December 31, 2015. 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 and environmental losses. In connection with certain of these investments, joint and several non-recourse carve-out guarantees and environmental indemnities were provided, pursuant to which KFN guarantees losses or the full amount of the applicable loan in the event of specified bad acts or environmental matters. In addition, completion guarantees were provided for certain properties to complete all or portions of development projects, and partial payment guarantees were provided for certain investments. 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 consolidated financial statements. |
MANAGEMENT AGREEMENT AND RELATE
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2016 | |
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): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Base management fees, net $ 2,005 $ 2,633 $ 3,593 $ 8,096 CLO management fees 6,095 6,816 18,550 21,390 Incentive fees — — — — Total related party management compensation $ 8,100 $ 9,449 $ 22,143 $ 29,486 Base Management Fees The Company pays its Manager a base management fee quarterly in arrears. During 2016 and 2015, 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. The table below summarizes the aggregate base management fees (amounts in thousands): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Base management fees, gross $ 5,527 $ 7,702 $ 16,312 $ 24,029 CLO management fees credit(1) (3,522 ) (5,069 ) (12,719 ) (15,933 ) Total base management fees, net $ 2,005 $ 2,633 $ 3,593 $ 8,096 (1) See “CLO Management Fees” for further discussion. 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. The Company called CLO 2005-2 in November 2015. Fees Charged and Fee Credits The Company recorded management fees expense for the majority of its CLOs during the three and nine months ended September 30, 2016 and 2015. The Manager credited the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLOs including CLO 2007-1, CLO 2012-1, CLO 9, CLO 10, CLO 11 and CLO 13 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 affiliated and unaffiliated 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 CLOs including CLO 2013-1 and CLO 2013-2 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): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Charged and retained CLO management fees(1) $ 2,573 $ 1,747 $ 5,831 $ 5,457 CLO management fees credit 3,522 5,069 12,719 15,933 Total CLO management fees $ 6,095 $ 6,816 $ 18,550 $ 21,390 (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 receives quarterly incentive compensation from the Company based on its achievement of specified levels of net income pursuant to the Management Agreement. The Manager waived incentive fees of $16.1 million for the three and nine months ended September 30, 2016, which was attributable to a non-cash item. Comparatively, the Manager earned incentive fees totaling zero for the three and nine months ended September 30, 2015. 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 $1.1 million and $3.0 million for the three and nine months ended September 30, 2016 , respectively. 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. 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 cash distributions to its Parent, as the sole holder of its common shares. The Company distributed $17.9 million and $80.8 million during the three and nine months ended September 30, 2016 , respectively. The Company distributed $52.1 million and $141.6 million for the three and nine months ended September 30, 2015 , respectively. During the nine months ended September 30, 2016, certain assets were distributed to the Parent, including CLO subordinated notes, which were previously held by the Company. As the CLO subordinated notes are held by an affiliate of our Parent, refer to Note 6 in these condensed consolidated financial statements for additional details around these notes to affiliates. The table below summarizes the estimated fair value of distributions at the time of transfer (amounts in thousands): Nine months ended September 30, 2016 Loans $ 45,225 Equity investments, at estimated fair value 26,098 CLO subordinated notes 60,640 Total distributions to Parent $ 131,963 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, 2016 , the aggregate par amount of these affiliated investments totaled $20.4 million , or less than 1% of the total investment portfolio, and consisted of 2 issuers. The total affiliated investments was comprised of $20.1 million of equity investments and $0.3 million of corporate debt securities. As of December 31, 2015, the aggregate par amount of these affiliated investments totaled $734.3 million , or approximately 11% of the total investment portfolio, and consisted of 8 issuers. The total $734.3 million in affiliated investments was comprised of $723.3 million of corporate loans and $11.0 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, 2016 and December 31, 2015, the estimated fair value of these interests in joint ventures and partnerships totaled $670.9 million and $805.5 million , respectively. |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2016 | |
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 and directors’ expenses, if any, 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 for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands): Three months ended September 30, Credit Natural Resources Other Reconciling Items(1) Total Consolidated 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Total revenues $ 65,416 $ 79,698 $ 2,387 $ 3,876 $ 3,214 $ 5,535 $ — $ — $ 71,017 $ 89,109 Total investment costs and expenses 128,549 47,948 1,594 2,016 450 388 — — 130,593 50,352 Total other income (loss) 192,435 (149,952 ) 21,974 (36,236 ) (1,043 ) 739 — — 213,366 (185,449 ) Total other expenses 16,815 11,285 192 114 134 99 — 49 17,141 11,547 Income tax expense (benefit) 126 64 — — 214 30 — — 340 94 Net income (loss) $ 112,361 $ (129,551 ) $ 22,575 $ (34,490 ) $ 1,373 $ 5,757 $ — $ (49 ) $ 136,309 $ (158,333 ) Net income (loss) attributable to noncontrolling interests 1,492 (2,727 ) — (3,949 ) — — — — 1,492 (6,676 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ 110,869 $ (126,824 ) $ 22,575 $ (30,541 ) $ 1,373 $ 5,757 $ — $ (49 ) $ 134,817 $ (151,657 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. Nine months ended September 30, Credit Natural Resources Other Reconciling Items(1) Total Consolidated 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Total revenues $ 208,716 $ 265,176 $ 8,285 $ 13,055 $ 12,483 $ 14,355 $ — $ — $ 229,484 $ 292,586 Total investment costs and expenses 235,198 163,246 5,102 6,062 1,344 1,147 — — 241,644 170,455 Total other income (loss) 37,245 (216,786 ) 3,366 (50,337 ) (12,181 ) 20,545 — — 28,430 (246,578 ) Total other expenses 49,665 39,702 449 800 283 333 — 149 50,397 40,984 Income tax expense (benefit) 122 126 — — 91 1,044 — — 213 1,170 Net income (loss) $ (39,024 ) $ (154,684 ) $ 6,100 $ (44,144 ) $ (1,416 ) $ 32,376 $ — $ (149 ) $ (34,340 ) $ (166,601 ) Net income (loss) attributable to noncontrolling interests (10,167 ) (8,403 ) (5,157 ) (7,049 ) — — — — (15,324 ) (15,452 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (28,857 ) $ (146,281 ) $ 11,257 $ (37,095 ) $ (1,416 ) $ 32,376 $ — $ (149 ) $ (19,016 ) $ (151,149 ) (1) Consists of insurance and directors’ expenses 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, 2016 and December 31, 2015 (amounts in thousands): Credit Natural Resources Other Reconciling Items Total Consolidated(1) As of September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 Total assets $ 5,874,168 $ 7,303,305 $ 233,925 $ 230,815 $ 222,498 $ 254,275 $ — $ — $ 6,330,591 $ 7,788,395 (1) Total consolidated assets as of September 30, 2016 included $65.8 million of noncontrolling interests, of which $37.5 million was related to the Credit segment and $28.3 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included $82.9 million of noncontrolling interests, of which $50.3 million was related to the Credit segment and $32.6 million was related to the Natural Resources segment. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On September 22, 2016, 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 17, 2016 to preferred shareholders of record as of the close of business on October 10, 2016. On October 25, 2016, the Company announced its intention to redeem all of its outstanding Notes due 2041 on November 15, 2016 in accordance with the optional redemption provisions provided in the documents governing the Notes due 2041. As of October 25, 2016, there was $258.8 million aggregate principal amount of the Notes due 2041 outstanding. The redemption price will equal 100% of the principal amount of the Notes due 2041 plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the Notes due 2041. The Company intends to use cash on hand to fund the redemption. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
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. |
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 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”), KKR CLO 11, Ltd ("CLO 11"), KKR CLO 13, Ltd ("CLO 13"), KKR CLO 15, Ltd. ("CLO 15") and KKR 2016-1, Ltd. ("CLO 2016-1") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”) and KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”) and during 2015, the Company called KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and KKR Financial CLO 2006-1, Ltd ("CLO 2006-1"), whereby the Company 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, 2016 , the Company’s CLOs held $3.7 billion par amount, or $3.6 billion estimated fair value, of corporate debt investments. As of December 31, 2015, the Company's CLOs held $5.5 billion par amount, or $5.1 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, 2016 and December 31, 2015, the aggregate par amount of CLO debt to unaffiliated and affiliated parties totaled $3.6 billion and $4.9 billion , respectively. 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. |
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 adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements. In October 2016, the FASB issued guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its financial statements. Financial Instruments In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is currently evaluating the impact on its financial statements. Cash Flow Classification In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact on its financial statements. |
SECURITIES (Tables)
SECURITIES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
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, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Securities, at estimated fair value $ 370,923 $ 307,887 $ 213,191 $ 520,135 $ 474,201 $ 417,519 Total $ 370,923 $ 307,887 $ 213,191 $ 520,135 $ 474,201 $ 417,519 |
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, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Net realized gains (losses) $ 724 $ (3,227 ) $ 4,910 $ (9,127 ) Net (increase) decrease in unrealized losses (4,176 ) (15,523 ) (39,272 ) (20,598 ) Net realized and unrealized gains (losses) $ (3,452 ) $ (18,750 ) $ (34,362 ) $ (29,725 ) The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships (1) Equity Investments Interests in Joint Ventures and Partnerships (1) Net realized gains (losses) $ — $ (4,566 ) $ 1,549 $ 9,176 $ (3,771 ) $ 3,008 $ 2,915 $ 9,176 Net (increase) decrease in unrealized losses (5,402 ) 41,930 (14,245 ) (62,630 ) (21,851 ) (46,509 ) (6,872 ) (80,103 ) Net realized and unrealized gains (losses) $ (5,402 ) $ 37,364 $ (12,696 ) $ (53,454 ) $ (25,622 ) $ (43,501 ) $ (3,957 ) $ (70,927 ) (1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016 , respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 2015 , respectively. |
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, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 25,040 $ 170,365 Total $ 25,040 $ 170,365 The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 42,210 $ 82,430 Total $ 42,210 $ 82,430 |
LOANS (Tables)
LOANS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] | |
Schedule of corporate loans | The following table summarizes the Company’s loans as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Par Amortized Cost Estimated Fair Value Par Amortized Cost Estimated Fair Value Corporate loans, at estimated fair value $ 3,890,239 $ 3,872,205 $ 3,755,783 $ 5,722,646 $ 5,619,815 $ 5,188,610 Total $ 3,890,239 $ 3,872,205 $ 3,755,783 $ 5,722,646 $ 5,619,815 $ 5,188,610 |
Schedule of realized and unrealized (losses) gains from corporate loans | The following tables present the Company’s realized and unrealized gains (losses) from loans (amounts in thousands): Three Months Ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Net realized gains (losses) $ (18,720 ) $ (546 ) $ (229,672 ) $ (22,807 ) Net (increase) decrease in unrealized losses 64,646 (147,107 ) 300,072 (92,283 ) Net realized and unrealized gains (losses) $ 45,926 $ (147,653 ) $ 70,400 $ (115,090 ) |
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, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 3,573,587 $ 4,917,123 Total $ 3,573,587 $ 4,917,123 |
EQUITY METHOD INVESTMENTS AND23
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Schedule of realized and unrealized gains (losses) from investments | The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Net realized gains (losses) $ 724 $ (3,227 ) $ 4,910 $ (9,127 ) Net (increase) decrease in unrealized losses (4,176 ) (15,523 ) (39,272 ) (20,598 ) Net realized and unrealized gains (losses) $ (3,452 ) $ (18,750 ) $ (34,362 ) $ (29,725 ) The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships(1) Equity Investments Interests in Joint Ventures and Partnerships (1) Equity Investments Interests in Joint Ventures and Partnerships (1) Net realized gains (losses) $ — $ (4,566 ) $ 1,549 $ 9,176 $ (3,771 ) $ 3,008 $ 2,915 $ 9,176 Net (increase) decrease in unrealized losses (5,402 ) 41,930 (14,245 ) (62,630 ) (21,851 ) (46,509 ) (6,872 ) (80,103 ) Net realized and unrealized gains (losses) $ (5,402 ) $ 37,364 $ (12,696 ) $ (53,454 ) $ (25,622 ) $ (43,501 ) $ (3,957 ) $ (70,927 ) (1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016 , respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 2015 , respectively. |
Schedule of 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): Nine months ended September 30, 2016 Nine months ended September 30, 2015 Credit Natural Resources Other Credit Natural Resources Other Revenues(1) $ 71,714 $ 86,942 $ 71,808 $ 65,250 $ 231,248 $ 36,099 Expenses(1) $ 46,060 $ 126,414 $ 23,725 $ 40,424 $ 237,275 $ 39,019 Net income (loss) $ (6,644 ) $ (52,786 ) $ 48,084 $ (25,056 ) $ 32,892 $ (2,921 ) (1) Revenues and expenses exclude realized and unrealized gains and losses. |
Schedule of equity investments pledged as collateral | The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 25,040 $ 170,365 Total $ 25,040 $ 170,365 The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands): September 30, 2016 December 31, 2015 Pledged as collateral for collateralized loan obligation secured debt $ 42,210 $ 82,430 Total $ 42,210 $ 82,430 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Company's borrowings | Certain information with respect to the Company’s borrowings as of September 30, 2016 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 2007-1 subordinated notes(3)(4) $ 134,468 $ 21,155 62.74 % 1688 $ 75,945 CLO 2012-1 secured notes 367,500 376,667 2.90 2998 380,108 CLO 2012-1 subordinated notes(3) 18,000 10,226 14.71 2998 18,618 CLO 2013-1 secured notes 458,500 470,021 2.40 3210 488,310 CLO 2013-2 secured notes 339,250 343,686 2.72 3402 367,020 CLO 9 secured notes 463,749 470,905 2.69 3667 460,882 CLO 9 subordinated notes(3) 15,000 9,512 15.52 3667 14,907 CLO 9 subordinated notes to affiliates(3) 25,572 16,217 8.09 3667 25,414 CLO 10 secured notes 368,000 378,010 3.07 3363 362,465 CLO 10 subordinated notes to affiliates(3) 29,948 15,472 9.51 3363 29,498 CLO 11 secured notes 507,750 510,576 2.74 3849 504,497 CLO 11 subordinated notes(3) 28,250 21,709 17.74 3849 28,069 CLO 11 subordinated notes to affiliates(3) 19,362 14,879 9.45 3849 19,238 CLO 13 secured notes 375,000 385,329 3.03 4125 375,414 CLO 13 subordinated notes(3) 4,000 2,653 24.01 4125 4,004 CLO 13 subordinated notes to affiliates(3) 21,636 14,351 18.01 4125 21,660 CLO 2016-1 secured notes 66,665 64,808 2.29 615 69,304 CLO 2016-1 subordinated notes(3) 9,971 10,097 — 615 10,366 CLO 15 secured notes 370,500 370,803 3.06 4401 372,942 CLO 15 subordinated notes(3) 12,100 10,831 — 4401 12,180 Total collateralized loan obligation secured debt 3,635,221 3,517,907 3,640,841 8.375% Senior notes(5) 258,750 288,728 8.38 9177 — 7.500% Senior notes 115,043 123,108 7.50 9302 — Junior subordinated notes 283,517 249,730 4.01 7310 — Total borrowings $ 4,292,531 $ 4,179,473 $ 3,640,841 (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 to unaffiliated and affiliated parties 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) As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full. (5) On October 25, 2016, the Company announced its intention to redeem all of its outstanding 8.375% Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion. Certain information with respect to the Company’s borrowings as of December 31, 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 2007-1 secured notes $ 1,544,032 $ 1,630,293 2.10 % 1962 $ 1,732,855 CLO 2007-1 subordinated notes(3) 134,468 74,954 11.66 1962 150,912 CLO 2007-A subordinated notes(3) 15,096 17,060 14.49 654 48,856 CLO 2011-1 senior debt 249,301 249,301 1.67 1689 310,498 CLO 2012-1 secured notes 367,500 365,383 2.59 3272 361,684 CLO 2012-1 subordinated notes(3) 18,000 10,845 15.82 3272 17,715 CLO 2013-1 secured notes 458,500 450,280 2.05 3484 479,391 CLO 2013-2 secured notes 339,250 334,187 2.52 3676 347,989 CLO 9 secured notes 463,750 454,103 2.33 3941 463,574 CLO 9 subordinated notes(3) 15,000 9,972 15.92 3941 14,994 CLO 10 secured notes 368,000 363,977 2.75 3637 384,991 CLO 11 secured notes 507,750 491,699 2.38 4123 501,286 CLO 11 subordinated notes(3) 28,250 23,306 5.28 4123 27,890 CLO 13 secured notes 370,000 364,986 2.84 4399 323,781 CLO 13 subordinated notes(3) 4,000 3,400 — 4399 3,500 Total collateralized loan obligation secured debt 4,882,897 4,843,746 5,169,916 8.375% Senior notes 258,750 289,660 8.38 9451 — 7.500% Senior notes 115,043 123,346 7.50 9576 — Junior subordinated notes 283,517 248,498 5.43 7584 — Total borrowings $ 5,540,207 $ 5,505,250 $ 5,169,916 (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. |
DERIVATIVE INSTRUMENTS (Tables)
DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
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, 2016 and December 31, 2015 (amounts in thousands): As of September 30, 2016 As of December 31, 2015 Notional Estimated Fair Value Notional Estimated Fair Value Free-Standing Derivatives: Interest rate swaps $ 125,000 $ (47,907 ) $ 297,667 $ (41,743 ) Foreign exchange forward contracts and options (297,947 ) 24,642 (375,524 ) 38,608 Common stock warrants — 1,613 — — Options — 2,227 — 95 Total $ (19,425 ) $ (3,040 ) |
Schedule of net realized and unrealized gain (loss) on derivatives and foreign exchange | 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): Three Months Ended September 30, 2016 Three Months Ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ (9,316 ) $ 10,340 $ 1,024 $ — $ (8,489 ) $ (8,489 ) Foreign exchange forward contracts and options(1) (1,523 ) 723 (800 ) 12,872 (11,848 ) 1,024 Common stock warrants — (507 ) (507 ) — (411 ) (411 ) Options — 115 115 — (2,428 ) (2,428 ) Net realized and unrealized gains (losses) $ (10,839 ) $ 10,671 $ (168 ) $ 12,872 $ (23,176 ) $ (10,304 ) (1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. Nine Months Ended September 30, 2016 Nine Months Ended September 30, 2015 Realized gains (losses) Unrealized gains (losses) Total Realized gains (losses) Unrealized gains (losses) Total Interest rate swaps $ (9,316 ) $ (7,325 ) $ (16,641 ) $ (5,297 ) $ 5,924 $ 627 Foreign exchange forward contracts and options(1) 16,089 (14,614 ) 1,475 27,107 (24,571 ) 2,536 Common stock warrants 142 (672 ) (530 ) — (2,412 ) (2,412 ) Total rate of return swaps — — — 304 130 434 Options — 2,132 2,132 — (4,730 ) (4,730 ) Net realized and unrealized gains (losses) $ 6,915 $ (20,479 ) $ (13,564 ) $ 22,114 $ (25,659 ) $ (3,545 ) (1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets. |
FAIR VALUE OF FINANCIAL INSTR26
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Fair Value Disclosures [Abstract] | |
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, 2016 (amounts in thousands): As of September 30, 2016 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 $ 1,061,743 $ 1,061,743 $ 1,061,743 $ — $ — Liabilities: Senior notes 411,836 382,579 382,579 — — Junior subordinated notes 249,730 188,933 — — 188,933 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, 2015 (amounts in thousands): As of December 31, 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 $ 807,496 $ 807,496 $ 807,496 $ — $ — Liabilities: Senior notes 413,006 394,390 394,390 — — Junior subordinated notes 248,498 216,757 — — 216,757 |
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, 2016 , and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): 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 $ — $ 25,040 $ 144,837 $ 169,877 Residential mortgage-backed securities — — 43,314 43,314 Total securities — 25,040 188,151 213,191 Loans — 3,562,107 193,676 3,755,783 Equity investments, at estimated fair value 40,455 49,065 123,548 213,068 Interests in joint ventures and partnerships, at estimated fair value — — 779,027 779,027 Derivatives: Foreign exchange forward contracts and options — 27,552 1,507 29,059 Warrants — — 1,613 1,613 Options — — 2,227 2,227 Total derivatives — 27,552 5,347 32,899 Total $ 40,455 $ 3,663,764 $ 1,289,749 $ 4,993,968 Liabilities: Collateralized loan obligation secured notes $ — $ 3,456,988 $ — $ 3,456,988 Collateralized loan obligation secured notes to affiliates — 60,919 — 60,919 Derivatives: Interest rate swaps — 47,907 — 47,907 Foreign exchange forward contracts and options — 3,887 530 4,417 Total derivatives — 51,794 530 52,324 Total $ — $ 3,569,701 $ 530 $ 3,570,231 The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands): 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, 2015 Assets: Securities: Corporate debt securities $ — $ 172,912 $ 194,986 $ 367,898 Residential mortgage-backed securities — — 49,621 49,621 Total securities — 172,912 244,607 417,519 Loans — 4,889,876 298,734 5,188,610 Equity investments, at estimated fair value 40,765 75,533 146,648 262,946 Interests in joint ventures and partnerships, at estimated fair value — — 888,408 888,408 Derivatives: 0 Foreign exchange forward contracts and options — 37,120 3,637 40,757 Options — — 95 95 Total derivatives — 37,120 3,732 40,852 Total $ 40,765 $ 5,175,441 $ 1,582,129 $ 6,798,335 Liabilities: Collateralized loan obligation secured notes $ — $ 4,843,746 $ — $ 4,843,746 Derivatives: Interest rate swaps — 41,743 — 41,743 Foreign exchange forward contracts and options — 1,399 750 2,149 Total derivatives — 43,142 750 43,892 Total $ — $ 4,886,888 $ 750 $ 4,887,638 |
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, 2016 (amounts in thousands): Assets Corporate Debt Securities Residential Mortgage- Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Warrants Options Beginning balance as of July 1, 2016 $ 149,372 $ 45,800 $ 200,841 $ 123,374 $ 758,321 $ 1,652 $ 2,120 $ 2,112 Total gains or losses (for the period): Included in earnings(1) (4,505 ) 919 1,884 174 36,668 (675 ) (507 ) 115 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases — — 3,979 — 1,574 — — — Sales — — (13,264 ) — — — — — Settlements (30 ) (3,405 ) 236 — (17,536 ) — — — Ending balance as of September 30, 2016 $ 144,837 $ 43,314 $ 193,676 $ 123,548 $ 779,027 $ 977 $ 1,613 $ 2,227 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (4,505 ) $ 919 $ 1,883 $ 174 $ 36,669 $ (675 ) $ (507 ) $ 115 (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, 2016 (amounts in thousands): Assets Corporate Debt Securities Residential Mortgage-Backed Securities Corporate Loans Equity Investments, at Estimated Fair Value Interests in Joint Ventures and Partnerships Foreign Exchange Options, Net Warrants Options Beginning balance as of January 1, 2016 $ 194,986 $ 49,621 $ 298,734 $ 146,648 $ 888,408 $ 2,887 $ — $ 95 Total gains or losses (for the period): Included in earnings(1) (50,054 ) 1,999 (49,886 ) (25,287 ) (43,080 ) (1,910 ) (672 ) 2,132 Transfers into Level 3 — — — — — — — — Transfers out of Level 3 — — — — — — — — Purchases — — 7,282 — 61,397 — — — Sales — — (39,949 ) (5,130 ) — — — — Settlements (95 ) (8,306 ) (22,505 ) 7,317 (127,698 ) — 2,285 — Ending balance as of September 30, 2016 $ 144,837 $ 43,314 $ 193,676 $ 123,548 $ 779,027 $ 977 $ 1,613 $ 2,227 Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1) $ (50,054 ) $ 1,999 $ (49,886 ) $ (25,287 ) $ (43,080 ) $ (1,910 ) $ (672 ) $ 2,132 (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 three months ended September 30, 2015 (amounts in thousands): 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): 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 statements for further discussion. |
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 and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of September 30, 2016 (dollar amounts in thousands): Balance as of September 30, 2016 Valuation Techniques(1) Unobservable Inputs(2) Weighted Average(3) Range Impact to Valuation from an Increase in Input(4) Assets: Corporate debt securities $ 144,837 Yield analysis Yield 13% 5% - 15% Decrease Net leverage 10x 9x-10x Decrease EBITDA multiple 8x 7x - 9x Increase Discount margin 1500 1500bps Decrease Market comparables LTM EBITDA multiple 9x 9x Increase Residential mortgage – backed securities $ 43,314 Discounted cash flows Probability of default 2% 0% - 3% Decrease Loss severity 43% 35% - 50% Decrease Constant prepayment rate 18% 12% - 23% (5 ) Corporate loans(6) $ 193,676 Yield Analysis Yield 15% 3% -28% Decrease Net leverage 10x 3x - 36x Decrease EBITDA multiple 9x 7x - 13x Increase Equity investments, at estimated fair value(7) $ 123,548 Inputs to both market comparables and discounted cash flow Illiquidity discount 11% 0% - 15% Decrease Weight ascribed to market comparables 27% 0% - 100% (8 ) Weight ascribed to discounted cash flows 73% 0% - 100% (9 ) Market comparables LTM EBITDA multiple 9x 0x - 15x Increase Forward EBITDA multiple 7x 3x - 13x Increase Discounted cash flows Weighted average cost of capital 9% 6% - 14% Decrease LTM EBITDA exit multiple 8x 1x - 9x Increase Interests in joint ventures and partnerships(11) $ 779,027 Inputs to market comparables, discounted cash flow and yield analysis Weight ascribed to market comparables 21% 0% - 100% (8 ) Weight ascribed to discounted cash flows 72% 0% - 100% (9 ) Weight ascribed to yield analysis 7% 0% - 100% (10 ) Market comparables LTM EBITDA multiple 5x 1x- 9x Increase Forward EBITDA multiple 8x 8x Increase Capitalization Rate 7% 6% - 12% Decrease Discounted cash flows Weighted average cost of capital 10% 6% - 24% Decrease Average price per BOE(12) $20.45 $17.44-$23.46 Increase Yield analysis Yield 14% 14% Decrease Net leverage 1x 1x Decrease EBITDA multiple 7x 7x Increase Foreign exchange options, net $ 977 Option pricing model Forward and spot rates 11,635 6 - 13,500 (13 ) Options(14) $ 2,227 Inputs to both market comparables and discounted cash flow Illiquidity discount 10% 10% Decrease Weight ascribed to market comparables 50% 50% (8 ) Weight ascribed to discounted cash flows 50% 50% (9 ) , Market comparables LTM EBITDA multiple 8x 8x Increase Forward EBITDA multiple 7x 7x Increase Discounted cash flows Weighted average cost of capital 15% 15% 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) Inputs exclude a single loan totaling $2.0 million , which had a yield, net leverage and EBITDA multiple of 513% , 35.6 x and 11.2 x, respectively. (7) 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, $6.1 million was valued solely using a market comparables technique and $44.2 million was valued solely using a discounted cash flow technique. (8) 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 or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach. (9) 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 or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach. (10) The directional change from an increase in the weight ascribed to the yield analysis approach would increase the fair value of the Level 3 investments if the yield analysis approach results in a higher valuation than the market comparables or discounted cash flow approach. The opposite would be true if the yield analysis approach results in a lower valuation than the market comparables or discounted cash flow approach. (11) Inputs exclude $346.3 million of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships, $165.3 million was valued solely using a discounted cash flow technique, while $7.8 million was valued solely using a market comparables technique and $24.1 million was valued solely using a yield analysis. (12) Natural resources assets with an estimated fair value of $120.4 million as of September 30, 2016 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. (13) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees. (14) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. The table above excludes warrants of $1.6 million , comprised of equity-like securities in a company that were valued using an independent third party valuation firm primarily based on the contractual agreement and public disclosures of the expected sale value. 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, 2015 (dollar amounts in thousands): 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 $ 194,986 Yield analysis Yield 23% 6% - 31% Decrease Net leverage 10x 10x-12x Decrease EBITDA multiple 7x 7x - 10x Increase Discount margin 750 750bps Decrease Residential mortgage – backed securities $ 49,621 Discounted cash flows Probability of default 1% 0% - 3% Decrease Loss severity 40% 35% - 45% Decrease Constant prepayment rate 15% 12% - 18% (5 ) Corporate loans $ 298,734 Yield Analysis Yield 11% 3% - 18% Decrease Net leverage 7x 1x - 19x Decrease EBITDA multiple 9x 6x - 15x Increase Equity investments, at estimated fair value(6) $ 146,648 Inputs to market comparables, discounted cash flow and broker quotes Illiquidity discount 11% 0% - 15% Decrease Weight ascribed to market comparables 52% 0% - 100% (7 ) Weight ascribed to discounted cash flows 42% 0% - 100% (8 ) Weight ascribed to broker quotes 6% 0% - 100% (9 ) Market comparables LTM EBITDA multiple 8x 4x - 13x Increase Forward EBITDA multiple 8x 3x - 11x Increase Discounted cash flows Weighted average cost of capital 9% 7% - 14% Decrease LTM EBITDA exit multiple 8x 0x - 9x Increase Broker quotes Offered quotes 4 0 - 5 Increase Interests in joint ventures and partnerships(10) $ 888,408 Inputs to both market comparables and discounted cash flow Weight ascribed to market comparables 43% 0% - 100% (7 ) Weight ascribed to discounted cash flows 57% 0% - 100% (8 ) Market comparables LTM EBITDA multiple 5x 1x - 9x Decrease Discounted cash flows Weighted average cost of capital 8% 6% - 20% Decrease Average price per BOE(11) $20.61 $14.33 - $23.22 Increase Yield analysis Yield 16% 16% Decrease Net leverage 2x 2x Decrease EBITDA multiple 8x 8x Increase Foreign exchange options, net $ 2,887 Option pricing model Forward and spot rates 11,500 6 -14,000 (12 ) Options(13) $ 95 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 9x 9x Increase Forward EBITDA multiple 8x 8x Increase Discounted cash flows Weighted average cost of capital 14% 14% Decrease LTM EBITDA exit multiple 8x 8x 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, $6.4 million was valued solely using broker quotes, while $11.3 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 and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable. (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 and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable. (9) The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable. (10) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $164.4 million was valued solely using a discounted cash flow technique, while $98.9 million was valued solely using a market comparables technique and $17.5 million was valued solely using a yield analysis. (11) Natural resources assets with an estimated fair value of $114.1 million as of December 31, 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. (12) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees. (13) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique. |
MANAGEMENT AGREEMENT AND RELA27
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
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): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Base management fees, net $ 2,005 $ 2,633 $ 3,593 $ 8,096 CLO management fees 6,095 6,816 18,550 21,390 Incentive fees — — — — Total related party management compensation $ 8,100 $ 9,449 $ 22,143 $ 29,486 |
Schedule of estimate fair value of contributions and distributions | The table below summarizes the estimated fair value of distributions at the time of transfer (amounts in thousands): Nine months ended September 30, 2016 Loans $ 45,225 Equity investments, at estimated fair value 26,098 CLO subordinated notes 60,640 Total distributions to Parent $ 131,963 |
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): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Base management fees, gross $ 5,527 $ 7,702 $ 16,312 $ 24,029 CLO management fees credit(1) (3,522 ) (5,069 ) (12,719 ) (15,933 ) Total base management fees, net $ 2,005 $ 2,633 $ 3,593 $ 8,096 (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): Three months ended September 30, 2016 Three months ended September 30, 2015 Nine months ended September 30, 2016 Nine months ended September 30, 2015 Charged and retained CLO management fees(1) $ 2,573 $ 1,747 $ 5,831 $ 5,457 CLO management fees credit 3,522 5,069 12,719 15,933 Total CLO management fees $ 6,095 $ 6,816 $ 18,550 $ 21,390 (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, 2016 | |
Segment Reporting [Abstract] | |
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 for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands): Three months ended September 30, Credit Natural Resources Other Reconciling Items(1) Total Consolidated 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Total revenues $ 65,416 $ 79,698 $ 2,387 $ 3,876 $ 3,214 $ 5,535 $ — $ — $ 71,017 $ 89,109 Total investment costs and expenses 128,549 47,948 1,594 2,016 450 388 — — 130,593 50,352 Total other income (loss) 192,435 (149,952 ) 21,974 (36,236 ) (1,043 ) 739 — — 213,366 (185,449 ) Total other expenses 16,815 11,285 192 114 134 99 — 49 17,141 11,547 Income tax expense (benefit) 126 64 — — 214 30 — — 340 94 Net income (loss) $ 112,361 $ (129,551 ) $ 22,575 $ (34,490 ) $ 1,373 $ 5,757 $ — $ (49 ) $ 136,309 $ (158,333 ) Net income (loss) attributable to noncontrolling interests 1,492 (2,727 ) — (3,949 ) — — — — 1,492 (6,676 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ 110,869 $ (126,824 ) $ 22,575 $ (30,541 ) $ 1,373 $ 5,757 $ — $ (49 ) $ 134,817 $ (151,657 ) (1) Consists of insurance and directors’ expenses which are not allocated to individual segments. Nine months ended September 30, Credit Natural Resources Other Reconciling Items(1) Total Consolidated 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 Total revenues $ 208,716 $ 265,176 $ 8,285 $ 13,055 $ 12,483 $ 14,355 $ — $ — $ 229,484 $ 292,586 Total investment costs and expenses 235,198 163,246 5,102 6,062 1,344 1,147 — — 241,644 170,455 Total other income (loss) 37,245 (216,786 ) 3,366 (50,337 ) (12,181 ) 20,545 — — 28,430 (246,578 ) Total other expenses 49,665 39,702 449 800 283 333 — 149 50,397 40,984 Income tax expense (benefit) 122 126 — — 91 1,044 — — 213 1,170 Net income (loss) $ (39,024 ) $ (154,684 ) $ 6,100 $ (44,144 ) $ (1,416 ) $ 32,376 $ — $ (149 ) $ (34,340 ) $ (166,601 ) Net income (loss) attributable to noncontrolling interests (10,167 ) (8,403 ) (5,157 ) (7,049 ) — — — — (15,324 ) (15,452 ) Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries $ (28,857 ) $ (146,281 ) $ 11,257 $ (37,095 ) $ (1,416 ) $ 32,376 $ — $ (149 ) $ (19,016 ) $ (151,149 ) (1) Consists of insurance and directors’ expenses 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, 2016 and December 31, 2015 (amounts in thousands): Credit Natural Resources Other Reconciling Items Total Consolidated(1) As of September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 September 30, 2016 December 31, 2015 Total assets $ 5,874,168 $ 7,303,305 $ 233,925 $ 230,815 $ 222,498 $ 254,275 $ — $ — $ 6,330,591 $ 7,788,395 (1) Total consolidated assets as of September 30, 2016 included $65.8 million of noncontrolling interests, of which $37.5 million was related to the Credit segment and $28.3 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included $82.9 million of noncontrolling interests, of which $50.3 million was related to the Credit segment and $32.6 million was related to the Natural Resources segment. |
ORGANIZATION (Details)
ORGANIZATION (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Series A LLC Preferred Shares | |
Definitive merger agreement | |
Preferred shares, dividend rate (as a percent) | 7.375% |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Collateralized Debt Obligation disclosures | ||
Collateralized loan obligation secured notes | $ 4,292,531 | $ 5,540,207 |
Minimum percentage of voting interest required to consolidate non-VIEs | 50.00% | |
Collateralized Debt Obligation (CLOs) VIEs | ||
Collateralized Debt Obligation disclosures | ||
Corporate debt investment, par amount | $ 3,700,000 | 5,500,000 |
Estimated fair value of corporate debt investments | 3,600,000 | 5,100,000 |
Collateralized loan obligation secured notes | $ 3,600,000 | $ 4,900,000 |
SECURITIES (Details)
SECURITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Securities Available-for-Sale | |||||
Par | $ 370,923 | $ 370,923 | $ 520,135 | ||
Amortized Cost | 307,887 | 307,887 | 474,201 | ||
Estimated Fair Value | 213,191 | 213,191 | 417,519 | ||
Net realized and unrealized gains | |||||
Net realized gains (losses) | 724 | $ (3,227) | 4,910 | $ (9,127) | |
Net (increase) decrease in unrealized losses | (4,176) | (15,523) | (39,272) | (20,598) | |
Net realized and unrealized gains (losses) | (3,452) | $ (18,750) | (34,362) | $ (29,725) | |
Securities, at estimated fair value | |||||
Securities Available-for-Sale | |||||
Par | 370,923 | 370,923 | 520,135 | ||
Amortized Cost | 307,887 | 307,887 | 474,201 | ||
Estimated Fair Value | $ 213,191 | $ 213,191 | $ 417,519 |
SECURITIES (Details 2)
SECURITIES (Details 2) - security | Sep. 30, 2016 | Dec. 31, 2015 |
Corporate Debt Securities | ||
Gross unrealized losses and estimated fair value of available-for-sale securities | ||
Number of corporate debt securities in default | 0 | 0 |
SECURITIES (Details 3)
SECURITIES (Details 3) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Concentration risk | ||
Securities | $ 213,191 | $ 417,519 |
Estimated fair value of securities pledged as collateral | ||
Pledged as collateral for collateralized loan obligation secured debt | 25,040 | 170,365 |
Total | $ 25,040 | $ 170,365 |
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) | 67.00% | 52.00% |
Securities | $ 114,400 | $ 192,500 |
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) | 98.00% | 89.00% |
LOANS (Details)
LOANS (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Summary of corporate loans | ||
Par | $ 3,890,239 | $ 5,722,646 |
Amortized Cost | 3,872,205 | 5,619,815 |
Estimated Fair Value | 3,755,783 | 5,188,610 |
Corporate loans, at estimated fair value | ||
Summary of corporate loans | ||
Par | 3,890,239 | 5,722,646 |
Amortized Cost | 3,872,205 | 5,619,815 |
Estimated Fair Value | $ 3,755,783 | $ 5,188,610 |
LOANS (Details 2)
LOANS (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Corporate loans | ||||
Net realized and unrealized (losses) gains | ||||
Credit risk loss | $ 3,400 | $ 122,400 | $ 54,900 | $ 136,700 |
Corporate loans, at estimated fair value | ||||
Net realized and unrealized (losses) gains | ||||
Net realized gains (losses) | (18,720) | (546) | (229,672) | (22,807) |
Net (increase) decrease in unrealized losses | 64,646 | (147,107) | 300,072 | (92,283) |
Net realized and unrealized gains (losses) | $ 45,926 | $ (147,653) | $ 70,400 | $ (115,090) |
LOANS (Details 3)
LOANS (Details 3) $ in Millions | Sep. 30, 2016USD ($)loan | Dec. 31, 2015USD ($)issuerloan |
Recorded investment in impaired loans and related allowances for credit losses | ||
Number of loans in default | loan | 0 | 1 |
Estimated fair value of corporate loans in default | $ 113.6 | |
Number of issuers in default | issuer | 1 | |
Corporate loans, at estimated fair value | ||
Recorded investment in impaired loans and related allowances for credit losses | ||
Par amount of non-accrual loans | $ 104.2 | $ 435.2 |
Estimated fair value of non-accrual loans | $ 35.5 | $ 127.5 |
LOANS (Details 4)
LOANS (Details 4) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Concentration risk | ||
Loans, at estimated fair value | $ 3,755,783 | $ 5,188,610 |
Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top Twenty Issuers | ||
Concentration risk | ||
Concentration risk (as a percent) | 21.00% | 31.00% |
Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top three largest | ||
Concentration risk | ||
Concentration risk (as a percent) | 4.00% | 8.00% |
Loans, at estimated fair value | $ 152,200 | $ 434,600 |
LOANS (Details 5)
LOANS (Details 5) - Estimated Fair Value - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Pledged assets | ||
Pledged as collateral for collateralized loan obligation secured debt | $ 3,573,587 | $ 4,917,123 |
Total | $ 3,573,587 | $ 4,917,123 |
EQUITY METHOD INVESTMENTS AND39
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Equity Method Investments and Joint Ventures [Abstract] | ||
Interests in joint ventures and partnerships, at estimated fair value | $ 779,027 | $ 888,408 |
Equity investments, at estimated fair value | 213,068 | 262,946 |
Estimated fair value of equity method investments | $ 423,300 | $ 506,500 |
Maritime Finance Company | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 31.00% | |
LCI Helicopters Limited | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 33.00% | |
Mineral Acquisition Company | ||
Schedule of Equity Method Investments [Line Items] | ||
Ownership percentage | 70.00% |
EQUITY METHOD INVESTMENTS AND40
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 2) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Gain (Loss) on Investments [Line Items] | ||||
Net realized and unrealized gains (losses) | $ 74,436 | $ (232,549) | $ (33,085) | $ (219,058) |
Net income (loss) attributable to noncontrolling interests | 1,492 | (6,676) | (15,324) | (15,452) |
Equity Investments | ||||
Gain (Loss) on Investments [Line Items] | ||||
Net realized gains (losses) | 0 | 1,549 | (3,771) | 2,915 |
Net (increase) decrease in unrealized losses | (5,402) | (14,245) | (21,851) | (6,872) |
Net realized and unrealized gains (losses) | (5,402) | (12,696) | (25,622) | (3,957) |
Interests in Joint Ventures and Partnerships | ||||
Gain (Loss) on Investments [Line Items] | ||||
Net realized gains (losses) | (4,566) | 9,176 | 3,008 | 9,176 |
Net (increase) decrease in unrealized losses | 41,930 | (62,630) | (46,509) | (80,103) |
Net realized and unrealized gains (losses) | $ 37,364 | $ (53,454) | $ (43,501) | $ (70,927) |
EQUITY METHOD INVESTMENTS AND41
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 3) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Credit | ||
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract] | ||
Revenues | $ 71,714 | $ 65,250 |
Expenses | 46,060 | 40,424 |
Net income (loss) | (6,644) | (25,056) |
Natural Resources | ||
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract] | ||
Revenues | 86,942 | 231,248 |
Expenses | 126,414 | 237,275 |
Net income (loss) | (52,786) | 32,892 |
Other | ||
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract] | ||
Revenues | 71,808 | 36,099 |
Expenses | 23,725 | 39,019 |
Net income (loss) | $ 48,084 | $ (2,921) |
EQUITY METHOD INVESTMENTS AND42
EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 4) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Equity Investments | ||
Financial Instruments Owned and Pledged as Collateral [Line Items] | ||
Total | $ 42,210 | $ 82,430 |
BORROWINGS (Details)
BORROWINGS (Details) - USD ($) $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Details of Company's borrowings | ||
Total borrowings | $ 4,292,531 | $ 5,540,207 |
Collateralized loan obligation secured notes to affiliates | 3,456,988 | 4,843,746 |
Total borrowings, carrying value | 4,179,473 | 5,505,250 |
Collateral amount | 3,640,841 | 5,169,916 |
CLO 2007-1 subordinated notes | ||
Details of Company's borrowings | ||
Par | 134,468 | 134,468 |
Collateralized loan obligation secured notes to affiliates | $ 21,155 | $ 74,954 |
Weighted Average Borrowing Rate | 62.74% | 11.66% |
Weighted Average Remaining Maturity (in days) | 1688 days | 1962 days |
Collateral amount | $ 75,945 | $ 150,912 |
CLO 2007-1 secured notes | ||
Details of Company's borrowings | ||
Par | 1,544,032 | |
Collateralized loan obligation secured notes to affiliates | $ 1,630,293 | |
Weighted Average Borrowing Rate | 2.10% | |
Weighted Average Remaining Maturity (in days) | 1962 days | |
Collateral amount | $ 1,732,855 | |
CLO 2007-A subordinated notes | ||
Details of Company's borrowings | ||
Par | 15,096 | |
Collateralized loan obligation secured notes to affiliates | $ 17,060 | |
Weighted Average Borrowing Rate | 14.49% | |
Weighted Average Remaining Maturity (in days) | 654 days | |
Collateral amount | $ 48,856 | |
CLO 2011-1 senior debt | ||
Details of Company's borrowings | ||
Par | 249,301 | |
Collateralized loan obligation secured notes to affiliates | $ 249,301 | |
Weighted Average Borrowing Rate | 1.67% | |
Weighted Average Remaining Maturity (in days) | 1689 days | |
Collateral amount | $ 310,498 | |
CLO 2012-1 secured notes | ||
Details of Company's borrowings | ||
Par | 367,500 | 367,500 |
Collateralized loan obligation secured notes to affiliates | $ 376,667 | $ 365,383 |
Weighted Average Borrowing Rate | 2.90% | 2.59% |
Weighted Average Remaining Maturity (in days) | 2998 days | 3272 days |
Collateral amount | $ 380,108 | $ 361,684 |
CLO 2012-1 subordinated notes | ||
Details of Company's borrowings | ||
Par | 18,000 | 18,000 |
Collateralized loan obligation secured notes to affiliates | $ 10,226 | $ 10,845 |
Weighted Average Borrowing Rate | 14.71% | 15.82% |
Weighted Average Remaining Maturity (in days) | 2998 days | 3272 days |
Collateral amount | $ 18,618 | $ 17,715 |
CLO 2013-1 secured notes | ||
Details of Company's borrowings | ||
Par | 458,500 | 458,500 |
Collateralized loan obligation secured notes to affiliates | $ 470,021 | $ 450,280 |
Weighted Average Borrowing Rate | 2.40% | 2.05% |
Weighted Average Remaining Maturity (in days) | 3210 days | 3484 days |
Collateral amount | $ 488,310 | $ 479,391 |
CLO 2013-2 secured notes | ||
Details of Company's borrowings | ||
Par | 339,250 | 339,250 |
Collateralized loan obligation secured notes to affiliates | $ 343,686 | $ 334,187 |
Weighted Average Borrowing Rate | 2.72% | 2.52% |
Weighted Average Remaining Maturity (in days) | 3402 days | 3676 days |
Collateral amount | $ 367,020 | $ 347,989 |
CLO 9 secured notes | ||
Details of Company's borrowings | ||
Par | 463,749 | 463,750 |
Collateralized loan obligation secured notes to affiliates | $ 470,905 | $ 454,103 |
Weighted Average Borrowing Rate | 2.69% | 2.33% |
Weighted Average Remaining Maturity (in days) | 3667 days | 3941 days |
Collateral amount | $ 460,882 | $ 463,574 |
CLO 9 subordinated notes | ||
Details of Company's borrowings | ||
Par | 15,000 | 15,000 |
Collateralized loan obligation secured notes to affiliates | $ 9,512 | $ 9,972 |
Weighted Average Borrowing Rate | 15.52% | 15.92% |
Weighted Average Remaining Maturity (in days) | 3667 days | 3941 days |
Collateral amount | $ 14,907 | $ 14,994 |
CLO 9 subordinated notes to affiliates | ||
Details of Company's borrowings | ||
Par | 25,572 | |
Collateralized loan obligation secured notes to affiliates | $ 16,217 | |
Weighted Average Borrowing Rate | 8.09% | |
Weighted Average Remaining Maturity (in days) | 3667 days | |
Collateral amount | $ 25,414 | |
CLO 10 secured notes | ||
Details of Company's borrowings | ||
Par | 368,000 | 368,000 |
Collateralized loan obligation secured notes to affiliates | $ 378,010 | $ 363,977 |
Weighted Average Borrowing Rate | 3.07% | 2.75% |
Weighted Average Remaining Maturity (in days) | 3363 days | 3637 days |
Collateral amount | $ 362,465 | $ 384,991 |
CLO 10 subordinated notes to affiliates | ||
Details of Company's borrowings | ||
Par | 29,948 | |
Collateralized loan obligation secured notes to affiliates | $ 15,472 | |
Weighted Average Borrowing Rate | 9.51% | |
Weighted Average Remaining Maturity (in days) | 3363 days | |
Collateral amount | $ 29,498 | |
CLO 11 secured notes | ||
Details of Company's borrowings | ||
Par | 507,750 | 507,750 |
Collateralized loan obligation secured notes to affiliates | $ 510,576 | $ 491,699 |
Weighted Average Borrowing Rate | 2.74% | 2.38% |
Weighted Average Remaining Maturity (in days) | 3849 days | 4123 days |
Collateral amount | $ 504,497 | $ 501,286 |
CLO 11 subordinated notes | ||
Details of Company's borrowings | ||
Par | 28,250 | 28,250 |
Collateralized loan obligation secured notes to affiliates | $ 21,709 | $ 23,306 |
Weighted Average Borrowing Rate | 17.74% | 5.28% |
Weighted Average Remaining Maturity (in days) | 3849 days | 4123 days |
Collateral amount | $ 28,069 | $ 27,890 |
CLO 11 subordinated notes to affiliates | ||
Details of Company's borrowings | ||
Par | 19,362 | |
Collateralized loan obligation secured notes to affiliates | $ 14,879 | |
Weighted Average Borrowing Rate | 9.45% | |
Weighted Average Remaining Maturity (in days) | 3849 days | |
Collateral amount | $ 19,238 | |
CLO 13 secured notes | ||
Details of Company's borrowings | ||
Par | 375,000 | 370,000 |
Collateralized loan obligation secured notes to affiliates | $ 385,329 | $ 364,986 |
Weighted Average Borrowing Rate | 3.03% | 2.84% |
Weighted Average Remaining Maturity (in days) | 4125 days | 4399 days |
Collateral amount | $ 375,414 | $ 323,781 |
CLO 13 subordinated notes | ||
Details of Company's borrowings | ||
Par | 4,000 | 4,000 |
Collateralized loan obligation secured notes to affiliates | $ 2,653 | $ 3,400 |
Weighted Average Borrowing Rate | 24.01% | 0.00% |
Weighted Average Remaining Maturity (in days) | 4125 days | 4399 days |
Collateral amount | $ 4,004 | $ 3,500 |
CLO 13 subordinated notes to affiliates | ||
Details of Company's borrowings | ||
Par | 21,636 | |
Collateralized loan obligation secured notes to affiliates | $ 14,351 | |
Weighted Average Borrowing Rate | 18.01% | |
Weighted Average Remaining Maturity (in days) | 4125 days | |
Collateral amount | $ 21,660 | |
CLO 2016-1 secured notes | ||
Details of Company's borrowings | ||
Par | 66,665 | |
Collateralized loan obligation secured notes to affiliates | $ 64,808 | |
Weighted Average Borrowing Rate | 2.29% | |
Weighted Average Remaining Maturity (in days) | 615 days | |
Collateral amount | $ 69,304 | |
CLO 2016-1 subordinated notes | ||
Details of Company's borrowings | ||
Par | 9,971 | |
Collateralized loan obligation secured notes to affiliates | $ 10,097 | |
Weighted Average Borrowing Rate | 0.00% | |
Weighted Average Remaining Maturity (in days) | 615 days | |
Collateral amount | $ 10,366 | |
CLO 15 secured notes | ||
Details of Company's borrowings | ||
Par | 370,500 | |
Collateralized loan obligation secured notes to affiliates | $ 370,803 | |
Weighted Average Borrowing Rate | 3.06% | |
Weighted Average Remaining Maturity (in days) | 4401 days | |
Collateral amount | $ 372,942 | |
CLO 15 subordinated notes | ||
Details of Company's borrowings | ||
Par | 12,100 | |
Collateralized loan obligation secured notes to affiliates | $ 10,831 | |
Weighted Average Borrowing Rate | 0.00% | |
Weighted Average Remaining Maturity (in days) | 4401 days | |
Collateral amount | $ 12,180 | |
Total collateralized loan obligation secured debt | ||
Details of Company's borrowings | ||
Par | 3,635,221 | 4,882,897 |
Collateralized loan obligation secured notes to affiliates | 3,517,907 | 4,843,746 |
Collateral amount | 3,640,841 | 5,169,916 |
8.375% Senior notes(5) | ||
Details of Company's borrowings | ||
Par | 258,750 | 258,750 |
Collateralized loan obligation secured notes to affiliates | $ 288,728 | $ 289,660 |
Weighted Average Borrowing Rate | 8.38% | 8.38% |
Weighted Average Remaining Maturity (in days) | 9177 days | 9451 days |
Debt instrument, stated interest rate | 8.375% | 8.375% |
7.500% Senior notes | ||
Details of Company's borrowings | ||
Par | $ 115,043 | $ 115,043 |
Collateralized loan obligation secured notes to affiliates | $ 123,108 | $ 123,346 |
Weighted Average Borrowing Rate | 7.50% | 7.50% |
Weighted Average Remaining Maturity (in days) | 9302 days | 9576 days |
Debt instrument, stated interest rate | 7.50% | 7.50% |
Junior subordinated notes | ||
Details of Company's borrowings | ||
Par | $ 283,517 | $ 283,517 |
Collateralized loan obligation secured notes to affiliates | $ 249,730 | $ 248,498 |
Weighted Average Borrowing Rate | 4.01% | 5.43% |
Weighted Average Remaining Maturity (in days) | 7310 days | 7584 days |
BORROWINGS (Details 2)
BORROWINGS (Details 2) - USD ($) | Sep. 14, 2016 | Jun. 07, 2016 | Dec. 16, 2015 | May 07, 2015 | Aug. 31, 2016 | Apr. 30, 2016 | Mar. 31, 2016 | Nov. 30, 2015 | Jul. 31, 2015 | Feb. 28, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | May 31, 2016 | Dec. 31, 2015 |
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 2,075,332,000 | $ 1,445,941,000 | ||||||||||||||
Collateralized Loan Obligation Secured Notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Fair value, option, credit risk, gains (losses) on liabilities | $ 0 | $ 0 | 0 | 0 | ||||||||||||
CLO 2007-1 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 945,600,000 | 947,600,000 | 1,500,000,000 | |||||||||||||
Contractual notional amount terminated | $ 142,300,000 | |||||||||||||||
CLO 2005-2 Senior Secured Notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 140,200,000 | |||||||||||||||
CLO 2005-1 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 142,400,000 | |||||||||||||||
CLO 2006-1 senior secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 181,800,000 | |||||||||||||||
Contractual notional amount terminated | $ 84,000,000 | |||||||||||||||
CLO 13 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 375,000,000 | 375,000,000 | $ 370,000,000 | |||||||||||||
CLO 13 secured notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 370,000,000 | |||||||||||||||
Floating rate senior secured note | 350,000,000 | |||||||||||||||
Fixed rate senior secured note | $ 20,000,000 | |||||||||||||||
Fixed rate (as a percent) | 3.83% | |||||||||||||||
CLO 13 secured notes | Nonaffiliates | LIBOR | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.19% | |||||||||||||||
Senior Notes Legacy CLO | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | 583,600,000 | 1,100,000,000 | ||||||||||||||
2016-1 Notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | 280,000,000 | 280,000,000 | ||||||||||||||
Par amount of notes issued | $ 426,400,000 | |||||||||||||||
CLO 2011-1 senior debt | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 249,300,000 | 119,300,000 | 150,100,000 | |||||||||||||
Par amount of notes issued | 249,301,000 | |||||||||||||||
CLO 2013 Class F notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Proceeds from senior notes | 5,900,000 | 5,900,000 | ||||||||||||||
Par amount of notes issued | 7,000,000 | 7,000,000 | ||||||||||||||
Subordinated Notes to Affiliate | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 96,500,000 | |||||||||||||||
CLO 2007-A subordinated notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Collateralized loan obligation secured debt repaid | $ 15,100,000 | |||||||||||||||
Par amount of notes issued | 15,096,000 | |||||||||||||||
Notes CLO 15 | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 410,800,000 | |||||||||||||||
CLO 15 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 370,500,000 | 370,500,000 | ||||||||||||||
CLO 15 secured notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 370,500,000 | |||||||||||||||
CLO 15 secured notes | Nonaffiliates | LIBOR | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.05% | |||||||||||||||
CLO 15 subordinated notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 12,100,000 | 12,100,000 | ||||||||||||||
CLO 15 subordinated notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 12,100,000 | |||||||||||||||
CLO 2016-1 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 66,665,000 | 66,665,000 | ||||||||||||||
CLO 2016-1 secured notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 330,900,000 | |||||||||||||||
CLO 2016-1 secured notes | Nonaffiliates | LIBOR | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 1.70% | |||||||||||||||
CLO 2016-1 subordinated notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 9,971,000 | 9,971,000 | ||||||||||||||
CLO 2016-1 subordinated notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 25,700,000 | |||||||||||||||
Notes C L O13 | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 412,000,000 | |||||||||||||||
CLO 13 subordinated notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 4,000,000 | 4,000,000 | 4,000,000 | |||||||||||||
CLO 13 subordinated notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 4,000,000 | |||||||||||||||
CLO 2005-2 Class E Secured Notes - 1 | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Proceeds from senior notes | 15,100,000 | |||||||||||||||
Par amount of notes issued | 15,000,000 | 15,000,000 | ||||||||||||||
CLO 2005-2 Class E Secured Notes - 2 | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Proceeds from senior notes | 30,200,000 | |||||||||||||||
Par amount of notes issued | 30,000,000 | 30,000,000 | ||||||||||||||
CLO 2007-1 Class D and E secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Proceeds from senior notes | 35,100,000 | |||||||||||||||
Par amount of notes issued | $ 35,000,000 | $ 35,000,000 | ||||||||||||||
CLO 11 Notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 564,500,000 | |||||||||||||||
CLO 11 secured notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | 507,750,000 | 507,750,000 | 507,750,000 | |||||||||||||
CLO 11 secured notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 507,800,000 | |||||||||||||||
CLO 11 secured notes | Nonaffiliates | LIBOR | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Percentage of margin added to reference rate to determine interest rate on debt (in percentage) | 2.06% | |||||||||||||||
CLO 11 subordinated notes | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 28,250,000 | $ 28,250,000 | $ 28,250,000 | |||||||||||||
CLO 11 subordinated notes | Nonaffiliates | ||||||||||||||||
Details of Company's borrowings | ||||||||||||||||
Par amount of notes issued | $ 28,300,000 |
BORROWINGS (Details 3)
BORROWINGS (Details 3) - USD ($) | Jul. 22, 2015 | Mar. 02, 2015 |
CLO 11 Warehouse Facility | ||
Details of Company's borrowings | ||
Maximum borrowing capacity | $ 570,000,000 | |
CLO 13 Warehouse Facility | ||
Details of Company's borrowings | ||
Maximum borrowing capacity | $ 350,000,000 | |
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) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | $ (19,425) | $ (3,040) |
Free-Standing Derivatives: | Interest rate swaps | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Derivative asset, notional amount | 125,000 | 297,667 |
Estimated Fair Value | (47,907) | (41,743) |
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 | (297,947) | (375,524) |
Estimated Fair Value | 24,642 | 38,608 |
Free-Standing Derivatives: | Common stock warrants | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | 1,613 | 0 |
Free-Standing Derivatives: | Options | ||
Summary of aggregate notional amount and estimated net fair value of the derivative instruments | ||
Estimated Fair Value | $ 2,227 | $ 95 |
DERIVATIVE INSTRUMENTS (Detai47
DERIVATIVE INSTRUMENTS (Details 2) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Counterparty One | ||
Notional amount | ||
Net asset | $ 100 | $ 2,400 |
Collateral posted | 2,600 | 20,700 |
Counterparty Two | ||
Notional amount | ||
Net asset | 1,600 | 1,600 |
Collateral posted | 3,000 | |
Collateral held | 100 | |
Counterparty Three | ||
Notional amount | ||
Net asset | 8,200 | 9,100 |
Collateral held | 38,800 | 23,600 |
Free-Standing Derivatives: | Interest rate swaps | ||
Notional amount | ||
Notional | 125,000 | 297,700 |
Free-Standing Derivatives: | Foreign exchange forward contracts and options | ||
Notional amount | ||
Notional amount of liability | $ 297,947 | $ 375,524 |
DERIVATIVE INSTRUMENTS (Detai48
DERIVATIVE INSTRUMENTS (Details 3) - Free-Standing Derivatives: - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | $ (10,839) | $ 12,872 | $ 6,915 | $ 22,114 |
Unrealized gains (losses) | 10,671 | (23,176) | (20,479) | (25,659) |
Total | (168) | (10,304) | (13,564) | (3,545) |
Interest rate swaps | ||||
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | (9,316) | 0 | (9,316) | (5,297) |
Unrealized gains (losses) | 10,340 | (8,489) | (7,325) | 5,924 |
Total | 1,024 | (8,489) | (16,641) | 627 |
Foreign exchange forward contracts and options | ||||
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | (1,523) | 12,872 | 16,089 | 27,107 |
Unrealized gains (losses) | 723 | (11,848) | (14,614) | (24,571) |
Total | (800) | 1,024 | 1,475 | 2,536 |
Common stock warrants | ||||
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | 0 | 0 | 142 | 0 |
Unrealized gains (losses) | (507) | (411) | (672) | (2,412) |
Total | (507) | (411) | (530) | (2,412) |
Total rate of return swaps | ||||
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | 0 | 304 | ||
Unrealized gains (losses) | 0 | 130 | ||
Total | 0 | 434 | ||
Options | ||||
Effect on income from free-standing derivatives | ||||
Realized gains (losses) | 0 | 0 | 0 | 0 |
Unrealized gains (losses) | 115 | (2,428) | 2,132 | (4,730) |
Total | $ 115 | $ (2,428) | $ 2,132 | $ (4,730) |
FAIR VALUE OF FINANCIAL INSTR49
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Liabilities: | ||
Senior notes | $ 411,836 | $ 413,006 |
Junior subordinated notes | 249,730 | 248,498 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 1,061,743 | 807,496 |
Liabilities: | ||
Senior notes | 382,579 | 394,390 |
Junior subordinated notes | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 0 | 0 |
Liabilities: | ||
Senior notes | 0 | 0 |
Junior subordinated notes | 0 | 0 |
Significant Unobservable Inputs (Level 3) | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 0 | 0 |
Liabilities: | ||
Senior notes | 0 | 0 |
Junior subordinated notes | 188,933 | 216,757 |
Carrying Amount | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 1,061,743 | 807,496 |
Liabilities: | ||
Senior notes | 411,836 | 413,006 |
Junior subordinated notes | 249,730 | 248,498 |
Estimated Fair Value | ||
Assets: | ||
Cash, restricted cash, and cash equivalents | 1,061,743 | 807,496 |
Liabilities: | ||
Senior notes | 382,579 | 394,390 |
Junior subordinated notes | $ 188,933 | $ 216,757 |
FAIR VALUE OF FINANCIAL INSTR50
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands | Sep. 30, 2016 | Dec. 31, 2015 |
Assets: | ||
Corporate debt securities | $ 213,191 | $ 417,519 |
Total securities | 213,191 | 417,519 |
Loans | 3,755,783 | 5,188,610 |
Equity investments, at estimated fair value | 213,068 | 262,946 |
Interests in joint ventures and partnerships, at estimated fair value | 779,027 | 888,408 |
Derivatives: | ||
Total derivative assets | 32,899 | 40,852 |
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 3,456,988 | 4,843,746 |
Derivatives: | ||
Total derivative liabilities | 52,324 | 43,892 |
Recurring basis | Estimated Fair Value | ||
Assets: | ||
Total securities | 213,191 | 417,519 |
Loans | 3,755,783 | 5,188,610 |
Equity investments, at estimated fair value | 213,068 | 262,946 |
Interests in joint ventures and partnerships, at estimated fair value | 779,027 | 888,408 |
Derivatives: | ||
Total derivative assets | 32,899 | 40,852 |
Total | 4,993,968 | 6,798,335 |
Derivatives: | ||
Total derivative liabilities | 52,324 | 43,892 |
Total | 3,570,231 | 4,887,638 |
Recurring basis | Estimated Fair Value | Unaffiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 3,456,988 | 4,843,746 |
Recurring basis | Estimated Fair Value | Affiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 60,919 | |
Recurring basis | Estimated Fair Value | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 169,877 | 367,898 |
Recurring basis | Estimated Fair Value | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 43,314 | 49,621 |
Recurring basis | Estimated Fair Value | Foreign exchange forward contracts and options | ||
Derivatives: | ||
Derivative assets | 29,059 | 40,757 |
Derivatives: | ||
Derivative liabilities | 4,417 | 2,149 |
Recurring basis | Estimated Fair Value | Warrants | ||
Derivatives: | ||
Derivative assets | 1,613 | |
Recurring basis | Estimated Fair Value | Options | ||
Derivatives: | ||
Derivative assets | 2,227 | 95 |
Recurring basis | Estimated Fair Value | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | 47,907 | 41,743 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Assets: | ||
Total securities | 0 | 0 |
Loans | 0 | 0 |
Equity investments, at estimated fair value | 40,455 | 40,765 |
Interests in joint ventures and partnerships, at estimated fair value | 0 | 0 |
Derivatives: | ||
Total derivative assets | 0 | 0 |
Total | 40,455 | 40,765 |
Derivatives: | ||
Total derivative liabilities | 0 | 0 |
Total | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Unaffiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Affiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 0 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign exchange forward contracts and options | ||
Derivatives: | ||
Derivative assets | 0 | 0 |
Derivatives: | ||
Derivative liabilities | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Warrants | ||
Derivatives: | ||
Derivative assets | 0 | |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Options | ||
Derivatives: | ||
Derivative assets | 0 | 0 |
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | 0 | 0 |
Recurring basis | Significant Other Observable Inputs (Level 2) | ||
Assets: | ||
Total securities | 25,040 | 172,912 |
Loans | 3,562,107 | 4,889,876 |
Equity investments, at estimated fair value | 49,065 | 75,533 |
Interests in joint ventures and partnerships, at estimated fair value | 0 | 0 |
Derivatives: | ||
Total derivative assets | 27,552 | 37,120 |
Total | 3,663,764 | 5,175,441 |
Derivatives: | ||
Total derivative liabilities | 51,794 | 43,142 |
Total | 3,569,701 | 4,886,888 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Unaffiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 3,456,988 | 4,843,746 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Affiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 60,919 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 25,040 | 172,912 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 0 | 0 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Foreign exchange forward contracts and options | ||
Derivatives: | ||
Derivative assets | 27,552 | 37,120 |
Derivatives: | ||
Derivative liabilities | 3,887 | 1,399 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Warrants | ||
Derivatives: | ||
Derivative assets | 0 | |
Recurring basis | Significant Other Observable Inputs (Level 2) | Options | ||
Derivatives: | ||
Derivative assets | 0 | 0 |
Recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | 47,907 | 41,743 |
Recurring basis | Significant Unobservable Inputs (Level 3) | ||
Assets: | ||
Total securities | 188,151 | 244,607 |
Loans | 193,676 | 298,734 |
Equity investments, at estimated fair value | 123,548 | 146,648 |
Interests in joint ventures and partnerships, at estimated fair value | 779,027 | 888,408 |
Derivatives: | ||
Total derivative assets | 5,347 | 3,732 |
Total | 1,289,749 | 1,582,129 |
Derivatives: | ||
Total derivative liabilities | 530 | 750 |
Total | 530 | 750 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Unaffiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 0 | 0 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Affiliated Entity | ||
Liabilities: | ||
Collateralized loan obligation secured notes, at estimated fair value | 0 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | ||
Assets: | ||
Corporate debt securities | 144,837 | 194,986 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | ||
Assets: | ||
Residential mortgage-backed securities | 43,314 | 49,621 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Foreign exchange forward contracts and options | ||
Derivatives: | ||
Derivative assets | 1,507 | 3,637 |
Derivatives: | ||
Derivative liabilities | 530 | 750 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Warrants | ||
Derivatives: | ||
Derivative assets | 1,613 | |
Recurring basis | Significant Unobservable Inputs (Level 3) | Options | ||
Derivatives: | ||
Derivative assets | 2,227 | 95 |
Recurring basis | Significant Unobservable Inputs (Level 3) | Interest rate swaps | ||
Derivatives: | ||
Derivative liabilities | $ 0 | $ 0 |
FAIR VALUE OF FINANCIAL INSTR51
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Collateralized Loan Obligation Secured Notes | ||||
Reconciliation of liabilities measured on Level 3 basis | ||||
Balance at the beginning of the period | $ 5,501,099 | |||
Included in earnings | 0 | |||
Transfers into Level 3 | 0 | |||
Transfers out of level 3 | (5,501,099) | |||
Purchases | 0 | |||
Sales | 0 | |||
Settlements | 0 | |||
Balance at the end of the period | $ 0 | 0 | ||
Change in unrealized gains or losses for the period included in earnings for liabilities held at the end of the reporting period | 0 | |||
Corporate Debt Securities | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | $ 149,372 | 225,891 | $ 194,986 | 317,034 |
Included in earnings | (4,505) | (11,727) | (50,054) | (23,486) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | (9,086) | 0 | (89,665) |
Settlements | (30) | 3,038 | (95) | 4,233 |
Balance at the end of the period | 144,837 | 208,116 | 144,837 | 208,116 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (4,505) | (11,727) | (50,054) | (26,145) |
Residential Mortgage- Backed Securities | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 45,800 | 52,389 | 49,621 | 55,184 |
Included in earnings | 919 | 2,454 | 1,999 | 5,469 |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | 0 | 0 | 0 |
Settlements | (3,405) | (4,704) | (8,306) | (10,514) |
Balance at the end of the period | 43,314 | 50,139 | 43,314 | 50,139 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 919 | 581 | 1,999 | 758 |
Corporate Loans | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 200,841 | 341,047 | 298,734 | 347,077 |
Included in earnings | 1,884 | (6,882) | (49,886) | (64,930) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 3,979 | 0 | 7,282 | 12,307 |
Sales | (13,264) | 0 | (39,949) | (25,511) |
Settlements | 236 | (2,539) | (22,505) | 62,683 |
Balance at the end of the period | 193,676 | 331,626 | 193,676 | 331,626 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 1,883 | (6,882) | (49,886) | (64,043) |
Equity Investments, at Estimated Fair Value | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 123,374 | 166,879 | 146,648 | 81,719 |
Included in earnings | 174 | (8,453) | (25,287) | (29,567) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | 0 | (5,130) | 0 |
Settlements | 0 | 451 | 7,317 | 106,725 |
Balance at the end of the period | 123,548 | 158,877 | 123,548 | 158,877 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 174 | (8,453) | (25,287) | (28,871) |
Interests in Joint Ventures and Partnerships | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 758,321 | 739,597 | 888,408 | 718,772 |
Included in earnings | 36,668 | (63,887) | (43,080) | (84,045) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 1,574 | 3,767 | 61,397 | 53,133 |
Sales | 0 | 0 | 0 | 0 |
Settlements | (17,536) | (23,822) | (127,698) | (32,205) |
Balance at the end of the period | 779,027 | 655,655 | 779,027 | 655,655 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | 36,669 | (63,887) | (43,080) | (84,045) |
Foreign Exchange Options, Net | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 1,652 | 2,887 | ||
Included in earnings | (675) | (1,910) | ||
Transfers into Level 3 | 0 | 0 | ||
Transfers out of Level 3 | 0 | 0 | ||
Purchases | 0 | 0 | ||
Sales | 0 | 0 | ||
Settlements | 0 | 0 | ||
Balance at the end of the period | 977 | 977 | ||
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (675) | (1,910) | ||
Warrants | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 2,120 | 411 | 0 | 0 |
Included in earnings | (507) | (411) | (672) | (2,412) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | 0 | 0 | 0 |
Settlements | 0 | 0 | 2,285 | 2,412 |
Balance at the end of the period | 1,613 | 0 | 1,613 | 0 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | (507) | (411) | (672) | (2,412) |
Options | ||||
Reconciliation of assets measured on Level 3 basis | ||||
Balance at the beginning of the period | 2,112 | 2,910 | 95 | 5,212 |
Included in earnings | 115 | (2,429) | 2,132 | (4,731) |
Transfers into Level 3 | 0 | 0 | 0 | 0 |
Transfers out of Level 3 | 0 | 0 | 0 | 0 |
Purchases | 0 | 0 | 0 | 0 |
Sales | 0 | 0 | 0 | 0 |
Settlements | 0 | 0 | 0 | 0 |
Balance at the end of the period | 2,227 | 481 | 2,227 | 481 |
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $ 115 | $ (2,429) | $ 2,132 | $ (4,731) |
FAIR VALUE OF FINANCIAL INSTR52
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) $ / shares in Units, $ in Thousands | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016USD ($)$ / barrel | Dec. 31, 2015USD ($)$ / shares$ / barrel | |
Crude Oil | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 23.00% | 25.00% |
Natural Gas | ||
Valuation techniques used for assets, measured at fair value | ||
Percentage of share in total revenue | 77.00% | 75.00% |
Natural Resources | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 120,400 | $ 114,100 |
Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to each valuation technique | 0.00% | 0.00% |
Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to each valuation technique | 100.00% | 100.00% |
Significant Unobservable Inputs (Level 3) | Option pricing model | Weighted Average | Foreign Exchange Options, Net | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 11,500 | |
Significant Unobservable Inputs (Level 3) | Option pricing model | Minimum | Foreign Exchange Options, Net | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 6 | |
Significant Unobservable Inputs (Level 3) | Option pricing model | Maximum | Foreign Exchange Options, Net | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 14,000 | |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 144,837 | $ 194,986 |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 13.00% | 23.00% |
Net leverage | 10 | 10 |
EBITDA multiple | 8 | 7 |
Discount margin | 15.00% | 7.50% |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 5.00% | 6.00% |
Net leverage | 9 | 10 |
EBITDA multiple | 7 | 7 |
Discount margin | 15.00% | 7.50% |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 15.00% | 31.00% |
Net leverage | 10 | 12 |
EBITDA multiple | 9 | 10 |
Discount margin | 15.00% | 7.50% |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 9 | |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 9 | |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 9 | |
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 43,314 | $ 49,621 |
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | Discounted cash flows | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 2.00% | 1.00% |
Loss severity | 43.00% | 40.00% |
Constant prepayment rate | 18.00% | 15.00% |
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | Discounted cash flows | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 0.00% | 0.00% |
Loss severity | 35.00% | 35.00% |
Constant prepayment rate | 12.00% | 12.00% |
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | Discounted cash flows | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Probability of default | 3.00% | 3.00% |
Loss severity | 50.00% | 45.00% |
Constant prepayment rate | 23.00% | 18.00% |
Significant Unobservable Inputs (Level 3) | Corporate Loans | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 193,676 | $ 298,734 |
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 15.00% | 11.00% |
Net leverage | 10 | 7 |
EBITDA multiple | 9 | 9 |
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 3.00% | 3.00% |
Net leverage | 3 | 1 |
EBITDA multiple | 7 | 6 |
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 28.00% | 18.00% |
Net leverage | 36 | 19 |
EBITDA multiple | 13 | 15 |
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 2,000 | |
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability | Yield analysis | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 513.00% | |
EBITDA multiple | 11.2 | |
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability | Yield analysis | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Net leverage | 35.6 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 123,548 | $ 146,648 |
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% |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 44,200 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 9.00% | 9.00% |
LTM EBITDA exit multiple | 8 | 8 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 6.00% | 7.00% |
LTM EBITDA exit multiple | 1 | 0 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 14.00% | 14.00% |
LTM EBITDA exit multiple | 9 | 9 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 6,400 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Offered quotes (in dollars per share) | $ / shares | $ 4 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Offered quotes (in dollars per share) | $ / shares | 0 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Offered quotes (in dollars per share) | $ / shares | $ 5 | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 6,100 | $ 11,300 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 9 | 8 |
Forward EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 0 | 4 |
Forward EBITDA multiple | 3 | 3 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 15 | 13 |
Forward EBITDA multiple | 13 | 11 |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 11.00% | |
Weight ascribed to market comparables | 27.00% | |
Weight ascribed to discounted cash flows | 73.00% | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 0.00% | |
Weight ascribed to market comparables | 0.00% | |
Weight ascribed to discounted cash flows | 0.00% | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 15.00% | |
Weight ascribed to market comparables | 100.00% | |
Weight ascribed to discounted cash flows | 100.00% | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 11.00% | |
Weight ascribed to market comparables | 52.00% | |
Weight ascribed to discounted cash flows | 42.00% | |
Weight ascribed to broker quotes | 6.00% | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 0.00% | |
Weight ascribed to market comparables | 0.00% | |
Weight ascribed to discounted cash flows | 0.00% | |
Weight ascribed to broker quotes | 0.00% | |
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 15.00% | |
Weight ascribed to market comparables | 100.00% | |
Weight ascribed to discounted cash flows | 100.00% | |
Weight ascribed to broker quotes | 100.00% | |
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities and Equity Investments | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 346,300 | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | 779,027 | $ 888,408 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 24,100 | $ 17,500 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 14.00% | 16.00% |
Net leverage | 1 | 2 |
EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 14.00% | 16.00% |
Net leverage | 1 | 2 |
EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Yield | 14.00% | 16.00% |
Net leverage | 1 | 2 |
EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 165,300 | $ 164,400 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 10.00% | 8.00% |
Average price per BOE (in dollars per barrel) | $ / barrel | 20.45 | 20.61 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 6.00% | 6.00% |
Average price per BOE (in dollars per barrel) | $ / barrel | 17.44 | 14.33 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 24.00% | 20.00% |
Average price per BOE (in dollars per barrel) | $ / barrel | 23.46 | 23.22 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 7,800 | $ 98,900 |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 5 | 5 |
Forward EBITDA multiple | 8 | |
Capitalization Rate | 7.00% | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 1 | 1 |
Forward EBITDA multiple | 8 | |
Capitalization Rate | 6.00% | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 9 | 9 |
Forward EBITDA multiple | 8 | |
Capitalization Rate | 12.00% | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to market comparables | 21.00% | 43.00% |
Weight ascribed to discounted cash flows | 72.00% | 57.00% |
Weight ascribed to yield analysis | 7.00% | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | 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% |
Weight ascribed to yield analysis | 0.00% | |
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | 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% |
Weight ascribed to yield analysis | 100.00% | |
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 977 | $ 2,887 |
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 11,635 | |
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 6 | |
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Forward and spot rates | 13,500 | |
Significant Unobservable Inputs (Level 3) | Options | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 2,227 | $ 95 |
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 15.00% | 14.00% |
LTM EBITDA exit multiple | 6 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 15.00% | 14.00% |
LTM EBITDA exit multiple | 6 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Weighted average cost of capital | 15.00% | 14.00% |
LTM EBITDA exit multiple | 6 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 8 | 9 |
Forward EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 8 | 9 |
Forward EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
LTM EBITDA multiple | 8 | 9 |
Forward EBITDA multiple | 7 | 8 |
Significant Unobservable Inputs (Level 3) | Options | Inputs to both market comparables and discounted cash flow | ||
Valuation techniques used for assets, measured at fair value | ||
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Significant Unobservable Inputs (Level 3) | Options | Inputs to both market comparables and discounted cash flow | Weighted Average | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | 10.00% |
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Significant Unobservable Inputs (Level 3) | Options | Inputs to both market comparables and discounted cash flow | Minimum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | 10.00% |
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Significant Unobservable Inputs (Level 3) | Options | Inputs to both market comparables and discounted cash flow | Maximum | ||
Valuation techniques used for assets, measured at fair value | ||
Illiquidity discount | 10.00% | 10.00% |
Weight ascribed to market comparables | 50.00% | 50.00% |
Weight ascribed to discounted cash flows | 50.00% | 50.00% |
Significant Unobservable Inputs (Level 3) | Warrants | ||
Valuation techniques used for assets, measured at fair value | ||
Assets, fair value | $ 1,600 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Instrument | ||
Estimated future contributions for interests in joint ventures and partnerships | $ 94 | $ 163 |
Guarantees | ||
Non-recourse debt | 1,300 | 1,600 |
Corporate loans, at estimated fair value | ||
Debt Instrument | ||
Unfunded financing commitments for corporate loans | $ 4.3 | $ 8.6 |
MANAGEMENT AGREEMENT AND RELA54
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016USD ($)issuer | Sep. 30, 2015USD ($) | Sep. 30, 2016USD ($)issuerperiod | Sep. 30, 2015USD ($) | Dec. 31, 2015USD ($)issuer | |
Management Agreement and Related Party Transactions | |||||
Related party transaction expense | $ 8,100,000 | $ 9,449,000 | $ 22,143,000 | $ 29,486,000 | |
Distribution to parent | $ 80,811,000 | 141,566,000 | |||
CLO Management Fees | Maximum | |||||
Management Agreement and Related Party Transactions | |||||
Entity's percentage in subordinated notes | 100.00% | ||||
CLO Management Fees | CLO 2013-1, CLO 2013-2 | |||||
Management Agreement and Related Party Transactions | |||||
Entity's percentage in subordinated notes | 100.00% | ||||
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 | ||||
Manager | Incentive Fees | |||||
Management Agreement and Related Party Transactions | |||||
Fees, waived | $ 16,100,000 | $ 16,100,000 | |||
Related party transaction expense | 0 | 0 | 0 | 0 | |
Manager | Reimbursable General And Administrative Expenses | |||||
Management Agreement and Related Party Transactions | |||||
Related party transaction expense | 1,100,000 | 700,000 | 3,000,000 | 4,200,000 | |
Majority Shareholder | |||||
Management Agreement and Related Party Transactions | |||||
Distribution to parent | 17,900,000 | 52,100,000 | 80,800,000 | 141,600,000 | |
Collateral manager | CLO Management Fees | |||||
Management Agreement and Related Party Transactions | |||||
Fees, waived | 400,000 | 1,500,000 | |||
Related party transaction expense | 6,095,000 | $ 6,816,000 | 18,550,000 | $ 21,390,000 | |
Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Estimated fair value | $ 20,400,000 | $ 20,400,000 | $ 734,300,000 | ||
Percent to total investment in corporate loans, debt securities and other investments | Affiliated Investments | Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Concentration risk (as a percent) | 1.00% | 11.00% | |||
Investment in affiliates, number of issuers | issuer | 2 | 2 | 8 | ||
Equity Investments, at Estimated Fair Value | Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Estimated fair value | $ 20,100,000 | $ 20,100,000 | $ 11,000,000 | ||
Securities, at estimated fair value | Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Estimated fair value | 300,000 | 300,000 | |||
Corporate loans | Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Estimated fair value | 723,300,000 | ||||
Joint Ventures And Partnerships | Affiliated Entity | |||||
Management Agreement and Related Party Transactions | |||||
Estimated fair value | $ 670,900,000 | $ 670,900,000 | $ 805,500,000 |
MANAGEMENT AGREEMENT AND RELA55
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 2) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | $ 8,100,000 | $ 9,449,000 | $ 22,143,000 | $ 29,486,000 |
Manager | Base Management Fees | ||||
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | 2,005,000 | 2,633,000 | 3,593,000 | 8,096,000 |
Manager | Incentive Fees | ||||
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | 0 | 0 | 0 | 0 |
Collateral manager | CLO Management Fees | ||||
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | $ 6,095,000 | $ 6,816,000 | $ 18,550,000 | $ 21,390,000 |
MANAGEMENT AGREEMENT AND RELA56
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 3) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | $ 8,100 | $ 9,449 | $ 22,143 | $ 29,486 |
Manager | Base Management Fees | ||||
Management Agreement and Related Party Transactions | ||||
Base management fees, gross | 5,527 | 7,702 | 16,312 | 24,029 |
CLO management fees credit | (3,522) | (5,069) | (12,719) | (15,933) |
Total CLO management fees | $ 2,005 | $ 2,633 | $ 3,593 | $ 8,096 |
MANAGEMENT AGREEMENT AND RELA57
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 4) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Management Agreement and Related Party Transactions | ||||
Total CLO management fees | $ 8,100 | $ 9,449 | $ 22,143 | $ 29,486 |
Collateral manager | CLO Management Fees | ||||
Management Agreement and Related Party Transactions | ||||
Charged and retained CLO management fees | 2,573 | 1,747 | 5,831 | 5,457 |
CLO management fees credit | 3,522 | 5,069 | 12,719 | 15,933 |
Total CLO management fees | $ 6,095 | $ 6,816 | $ 18,550 | $ 21,390 |
MANAGEMENT AGREEMENT AND RELA58
MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 5) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Management Agreement and Related Party Transactions | ||
Asset distributions | $ 131,963 | $ 0 |
Majority Shareholder | ||
Management Agreement and Related Party Transactions | ||
Asset distributions | 131,963 | |
Majority Shareholder | Loans | ||
Management Agreement and Related Party Transactions | ||
Asset distributions | 45,225 | |
Majority Shareholder | Equity investments, at estimated fair value | ||
Management Agreement and Related Party Transactions | ||
Asset distributions | 26,098 | |
Majority Shareholder | CLO subordinated notes | ||
Management Agreement and Related Party Transactions | ||
Asset distributions | $ 60,640 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Segment Reporting Information | |||||
Total revenues | $ 71,017 | $ 89,109 | $ 229,484 | $ 292,586 | |
Total investment costs and expenses | 130,593 | 50,352 | 241,644 | 170,455 | |
Total other income (loss) | 213,366 | (185,449) | 28,430 | (246,578) | |
Total other expenses | 17,141 | 11,547 | 50,397 | 40,984 | |
Income tax expense (benefit) | 340 | 94 | 213 | 1,170 | |
Net income (loss) | 136,309 | (158,333) | (34,340) | (166,601) | |
Net income (loss) attributable to noncontrolling interests | 1,492 | (6,676) | (15,324) | (15,452) | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 134,817 | (151,657) | (19,016) | (151,149) | |
Total assets | 6,330,591 | 6,330,591 | $ 7,788,395 | ||
Noncontrolling interests | |||||
Segment Reporting Information | |||||
Net income (loss) | (15,324) | (15,452) | |||
Total assets | 65,800 | 65,800 | 82,900 | ||
Reportable Segments | Credit | |||||
Segment Reporting Information | |||||
Total revenues | 65,416 | 79,698 | 208,716 | 265,176 | |
Total investment costs and expenses | 128,549 | 47,948 | 235,198 | 163,246 | |
Total other income (loss) | 192,435 | (149,952) | 37,245 | (216,786) | |
Total other expenses | 16,815 | 11,285 | 49,665 | 39,702 | |
Income tax expense (benefit) | 126 | 64 | 122 | 126 | |
Net income (loss) | 112,361 | (129,551) | (39,024) | (154,684) | |
Net income (loss) attributable to noncontrolling interests | 1,492 | (2,727) | (10,167) | (8,403) | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 110,869 | (126,824) | (28,857) | (146,281) | |
Total assets | 5,874,168 | 5,874,168 | 7,303,305 | ||
Reportable Segments | Credit | Noncontrolling interests | |||||
Segment Reporting Information | |||||
Total assets | 37,500 | 37,500 | 50,300 | ||
Reportable Segments | Natural Resources | |||||
Segment Reporting Information | |||||
Total revenues | 2,387 | 3,876 | 8,285 | 13,055 | |
Total investment costs and expenses | 1,594 | 2,016 | 5,102 | 6,062 | |
Total other income (loss) | 21,974 | (36,236) | 3,366 | (50,337) | |
Total other expenses | 192 | 114 | 449 | 800 | |
Income tax expense (benefit) | 0 | 0 | 0 | 0 | |
Net income (loss) | 22,575 | (34,490) | 6,100 | (44,144) | |
Net income (loss) attributable to noncontrolling interests | 0 | (3,949) | (5,157) | (7,049) | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 22,575 | (30,541) | 11,257 | (37,095) | |
Total assets | 233,925 | 233,925 | 230,815 | ||
Reportable Segments | Natural Resources | Noncontrolling interests | |||||
Segment Reporting Information | |||||
Total assets | 28,300 | 28,300 | 32,600 | ||
Reportable Segments | Other | |||||
Segment Reporting Information | |||||
Total revenues | 3,214 | 5,535 | 12,483 | 14,355 | |
Total investment costs and expenses | 450 | 388 | 1,344 | 1,147 | |
Total other income (loss) | (1,043) | 739 | (12,181) | 20,545 | |
Total other expenses | 134 | 99 | 283 | 333 | |
Income tax expense (benefit) | 214 | 30 | 91 | 1,044 | |
Net income (loss) | 1,373 | 5,757 | (1,416) | 32,376 | |
Net income (loss) attributable to noncontrolling interests | 0 | 0 | 0 | 0 | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 1,373 | 5,757 | (1,416) | 32,376 | |
Total assets | 222,498 | 222,498 | 254,275 | ||
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 | 0 | 49 | 0 | 149 | |
Income tax expense (benefit) | 0 | 0 | 0 | 0 | |
Net income (loss) | 0 | (49) | 0 | (149) | |
Net income (loss) attributable to noncontrolling interests | 0 | 0 | 0 | 0 | |
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries | 0 | $ (49) | 0 | $ (149) | |
Total assets | $ 0 | $ 0 | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - USD ($) | Oct. 25, 2016 | Sep. 22, 2016 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Subsequent events | |||||
Dividends, preferred stock | $ 20,673,000 | $ 20,673,000 | |||
8.375% Senior notes(5) | |||||
Subsequent events | |||||
Par | $ 258,750,000 | $ 258,750,000 | |||
Subsequent Event | 8.375% Senior notes(5) | |||||
Subsequent events | |||||
Par | $ 258,800,000 | ||||
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed | 100.00% | ||||
Series A LLC Preferred Shares | |||||
Subsequent events | |||||
Dividends, preferred stock | $ 6,900,000 | ||||
Cash distribution declared (in dollars per share) | $ 0.460938 |