KKR Financial Receives Seven Day Standstill On Debt Repayment; Parent Denies IPO Delayed

The Wall Street Journal reports Kohlberg Kravis Roberts-owned KKR Financial Corp. has received a seven-day standstill period to try and craft new terms on the repayment of $5 billion in short-term debt following its request to delay repayment. The mortgage-backed commercial paper is owned by 15 different companies including GE, the money management arms of U.S. Bankcorp and Legg Mason, as well as several money-market funds. One industry expert believes it may make sense for the investors in KKR's debt to accept a repayment delay to avoid forced sales "at incredibly distressed prices." The debt didn't include backup provisions, as is usually customary with commercial paper, due to the fact it was heavily collateralized by mortgage assets. KKR Financial initially issued the debt to invest in high-quality jumbo mortgages. In separate news, KKR Financial parent Kohlberg Kravis Roberts rebuffed a story in Thursday's online edition of the Times of London claiming the leveraged buyout firm had put its $1.25 billion IPO on hold. KKR said in a statement: "As evidenced by the recent filing of an amendment to the registration statement, we are continuing to work on the IPO and have not postponed." Analysts have expressed their opposition to the timing of KKR's IPO, citing the subprime meltdown and ensuing global liquidity crunch that have made it difficult for buyout firms to obtain funds.

Sources: Wall Street Journal, Times of London, Reuters I, II, Hedge Week
Commentary: KKR Financial Looks to Raise $500M in Share Sale • KKR Financial Plunges on Mortgage Losses • KKR Files for $1.25 Billion IPO
Stocks/ETFs to watch: KFN, KKR, GE, LM, USB. Competitors: BX, AHR, DFR, LUM. ETFs: PSP

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