SAN FRANCISCO, Feb. 17, 2011 /PRNewswire/ -- KKR Financial
Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced
its results for the fourth quarter and year ended December 31, 2010.
Fourth Quarter and Full Year 2010 Highlights
- Net income for the fourth quarter ended December 31, 2010 of $78.2
million, or $0.48 per diluted
common share. Net income for the year ended December 31, 2010 of $371.1 million, or $2.32 per diluted common share.
- Declared a cash distribution of $0.15 per common share for the fourth quarter of
2010.
- Book value per common share of $9.24 as of December 31,
2010 as compared to book value per common share of
$8.60 and $7.37 as of September 30, 2010 and
December 31, 2009, respectively.
For the fourth quarter and year ended December 31, 2010, KFN reported net income of
$78.2 million, or $0.48 per diluted common share, and $371.1 million, or $2.32 per diluted common share, respectively. For
the fourth quarter and year ended December
31, 2009, net income totaled $2.1
million, or $0.01 per diluted
common share, and $76.9 million, or
$0.50 per diluted common share,
respectively.
KFN's fourth quarter 2010 results reflect net investment income
of $81.0 million, other income of
$22.4 million and non-investment
expenses of $25.0 million. Net
investment income of $81.0 million
for the three months ended December 31,
2010 compares to net investment income of $80.1 million for the three months ended
December 31, 2009. Net investment
income for the three months ended December
31, 2010 reflects a provision for loan losses of
$21.0 million and interest income
from discount accretion income due to prepayments of certain
holdings of $21.1 million. In
comparison, net investment income for the three months ended
December 31, 2009 reflects no
provision for loan losses and interest income from discount
accretion due to prepayments of certain holdings of $10.3 million. Other income of $22.4 million for the three months ended
December 31, 2010 is primarily due to
realized gains from asset sales and compares to an other loss of
$62.9 million for the three months
ended December 31, 2009 that was
primarily attributable to $62.5
million of realized and unrealized losses from the Company's
residential mortgage-backed securities holdings.
For the year ended December 31,
2010, KFN reported net investment income of $319.4 million, other income of $143.4 million and non-investment expenses of
$91.0 million. Net investment income
of $319.4 million for the year ended
December 31, 2010 reflects an
increase in net investment income of $75.8
million from $243.6 million
for the year ended December 31, 2009.
Additionally, net investment income for the year ended December 31, 2010 includes a provision for loan
losses of $29.1 million as compared
to $39.8 million for the year ended
December 31, 2009. Other income of
$143.4 million for the year ended
December 31, 2010 compares to an
other loss of $96.3 million for the
year ended December 31, 2009.
Portfolio Review and CLO Subsidiaries
The Company's portfolio primarily consists of below investment
grade corporate loans, often referred to as syndicated bank loans
or leveraged loans, and high yield debt securities. These holdings
have an aggregate par value of $7.8 billion and an aggregate estimated fair
value of $7.4 billion as of
December 31, 2010. As of December 31, 2010, the Company's corporate debt
portfolio had a market value of 95% of par value which exceeded the
carrying value on the Company's balance sheet of 92% of par value.
In comparison, the Company's corporate debt portfolio had a market
value of 92% and 87% of par value as of September 30, 2010 and December 31, 2009, respectively, and was carried
on the Company's balance sheet at 92% and 89% of par value as of
September 30, 2010 and December 31, 2009, respectively.
The majority of the Company's portfolio is held through its
collateralized loan obligation ("CLO") subsidiaries that are
structured as on-balance sheet securitizations and are used as long
term financing for its portfolio assets. As of December 31, 2010, the Company's CLOs held
corporate debt securities and loans with an aggregate par value of
$7.1 billion and an estimated
fair value of $6.8 billion. In
comparison, the Company's CLOs held corporate debt securities and
loans with an aggregate par value of $7.3
billion (estimated fair value of $6.8
billion) and $7.4 billion
(estimated fair value of $6.6
billion) as of September 30, 2010 and December 31,
2009, respectively.
As of December 31, 2010, the
Company's corporate debt securities and loans not held in CLOs had
an aggregate par value of $664.9
million and an estimated fair value of $574.6 million. In comparison, the aggregate par
value of the Company's corporate debt securities and loans not held
in CLOs totaled $703.2 million
(estimated fair value of $569.4
million) and $759.6 million
(estimated fair value of $588.5
million) as of September 30, 2010 and December 31,
2009, respectively.
Book Value
The Company's book value per common share increased to
$9.24 as of December 31, 2010 from $8.60 as of September 30, 2010 and
$7.37 as of December 31, 2009.
The increase in book value per share of $0.64 from September 30, 2010 is primarily
attributable to net income of $78.2
million for the three months ended December 31, 2010 and an increase in accumulated
other comprehensive income, a component of shareholders' equity,
primarily due to appreciation in the estimated fair values of high
yield debt securities and certain interest rate swaps classified as
cash flow hedges.
Distributions
On February 3, 2011, the Company's
board of directors declared a cash distribution of $0.15 per common share for the quarter ended
December 31, 2010. The distribution
is payable on March 4, 2011 to common shareholders of record
as of the close of business on February 18,
2011.
Information for Investors: Conference Call and
Webcast
The Company will host a conference call and audio webcast to
review its results for the fourth quarter ended December 31, 2010 on February 17, 2011, at 5:00 p.m. EDT. The
conference call may be accessed by dialing (800) 967-7154
(Domestic) or (719) 325-2472 (International); a pass code is not
required. A telephonic replay of the call will be available through
March 3, 2011 by dialing (888)
203-1112 (Domestic) and (719) 457-0820 (International) / pass code
1470104. Supplemental materials that will be discussed during the
call and the live audio web cast will be available in the Investor
Relations section of the Company's website at
http://www.kkr.com/kfn_ir/kfn_events.cfm. An audio replay of the
web cast will be archived in the Investor Relations section of the
Company's website.
From time to time the Company may use its website as a channel
of distribution of material company information. Financial and
other important information regarding the Company is routinely
posted on and accessible at the Investor Relations section for KFN
at www.kkr.com. In addition, you may automatically receive email
alerts and other information about the Company by enrolling your
email by visiting the "Email Alerts" area in KFN's Investor
Relations section.
About KKR Financial Holdings LLC
KKR Financial Holdings LLC is a publicly traded specialty
finance company. KFN's core business strategy focuses on corporate
debt throughout the capital structure with a particular emphasis on
debt issued by large capitalization firms with broad geographic and
product offerings. KFN executes its core business strategy through
its majority-owned subsidiaries. Additionally, KFN has made and may
make additional investments in other asset classes including
natural resources and real estate. KKR Financial Holdings LLC is
externally managed by KKR Financial Advisors LLC, a wholly-owned
subsidiary of KKR Asset Management LLC (formerly known as Kohlberg
Kravis Roberts & Co. (Fixed Income) LLC), which is a
wholly-owned subsidiary of Kohlberg Kravis Roberts & Co.
L.P. Additional information regarding KKR Financial Holdings LLC is
available at http://www.kkr.com.
"Safe Harbor" Statement Under the Private Securities
Litigation Reform Act of 1995: This press release contains
forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These
forward-looking statements are based on information available to
the Company as of the date of this press release and actual results
may differ. These forward-looking statements involve known and
unknown risks, uncertainties and other factors beyond the Company's
control. Any forward-looking statements speak only as of the
date of this press release and the Company expressly disclaims any
obligation to update or revise any of them to reflect actual
results, any changes in expectations or any change in events. If
the Company does update one or more forward-looking statements, no
inference should be drawn that it will make additional updates with
respect to those or other forward-looking statements. For
additional information concerning risks, uncertainties and other
factors that may cause actual results to differ from those
anticipated in the forward-looking statements, and risks to the
Company's business in general, please refer to the Company's SEC
filings, including its Annual Report on Form 10-K for the
fiscal year ended December 31, 2009, filed with the SEC on
March 1, 2010 and its Quarterly Report on Form 10-Q for
the quarter ended September 30, 2010, filed with the SEC on
November 4, 2010.
Schedule I
KKR
Financial Holdings LLC
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in
thousands, except per share information)
|
|
|
|
For the three
months ended
December 31, 2010
|
|
For the three
months ended
December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
For the year ended
December 31, 2010
|
|
For the year ended
December 31, 2009
|
|
|
|
|
|
|
|
|
|
Net investment
income:
|
|
|
|
|
|
|
|
|
|
|
Loan interest income
|
|
$
|
114,822
|
|
$
|
112,461
|
|
$
|
397,634
|
|
$
|
477,044
|
|
|
Securities interest
income
|
|
25,328
|
|
20,957
|
|
104,395
|
|
94,762
|
|
|
Other investment
income
|
|
1,244
|
|
95
|
|
3,330
|
|
919
|
|
|
Total investment
income
|
|
141,394
|
|
133,513
|
|
505,359
|
|
572,725
|
|
|
Interest expense
|
|
31,298
|
|
48,462
|
|
131,700
|
|
268,087
|
|
|
Interest expense to
affiliates
|
|
8,080
|
|
4,932
|
|
25,152
|
|
21,287
|
|
|
Provision for loan
losses
|
|
21,034
|
|
—
|
|
29,121
|
|
39,795
|
|
|
Net investment income
|
|
80,982
|
|
80,119
|
|
319,386
|
|
243,556
|
|
|
Other income
(loss):
|
|
|
|
|
|
|
|
|
|
|
Net realized and unrealized gain
(loss) on investments
|
|
25,506
|
|
(6,711)
|
|
109,309
|
|
(92,287)
|
|
|
Net realized and unrealized
(loss) gain on derivatives and foreign exchange
|
|
(1,257)
|
|
2,077
|
|
(4,694)
|
|
60,908
|
|
|
Net realized and unrealized loss
on residential mortgage-backed securities, residential mortgage
loans, and residential mortgage-backed securities issued, carried
at estimated fair value
|
|
(3,632)
|
|
(62,483)
|
|
(11,396)
|
|
(107,028)
|
|
|
Net realized and unrealized gain
(loss) on securities sold, not yet purchased
|
|
—
|
|
662
|
|
(756)
|
|
3,582
|
|
|
Net gain on restructuring and
extinguishment of debt
|
|
—
|
|
—
|
|
39,999
|
|
30,836
|
|
|
Other income
|
|
1,805
|
|
3,564
|
|
10,890
|
|
7,714
|
|
|
Total other income
(loss)
|
|
22,422
|
|
(62,891)
|
|
143,352
|
|
(96,275)
|
|
|
Non-investment
expenses:
|
|
|
|
|
|
|
|
|
|
|
Related party management
compensation
|
|
16,607
|
|
8,191
|
|
69,125
|
|
44,323
|
|
|
General, administrative and
directors expenses
|
|
6,389
|
|
3,476
|
|
16,516
|
|
10,393
|
|
|
Professional services
|
|
1,996
|
|
1,468
|
|
5,331
|
|
7,384
|
|
|
Loan servicing
|
|
—
|
|
1,844
|
|
—
|
|
7,961
|
|
|
Total non-investment
expenses
|
|
24,992
|
|
14,979
|
|
90,972
|
|
70,061
|
|
|
Income before income tax
expense
|
|
78,412
|
|
2,249
|
|
371,766
|
|
77,220
|
|
|
Income tax expense
|
|
213
|
|
133
|
|
702
|
|
284
|
|
|
Net income
|
|
$
|
78,199
|
|
$
|
2,116
|
|
$
|
371,064
|
|
$
|
76,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common
share:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.48
|
|
$
|
0.01
|
|
$
|
2.33
|
|
$
|
0.50
|
|
|
Diluted
|
|
$
|
0.48
|
|
$
|
0.01
|
|
$
|
2.32
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
160,662
|
|
156,997
|
|
157,936
|
|
153,756
|
|
|
Diluted
|
|
163,173
|
|
156,997
|
|
158,771
|
|
153,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule II
KKR
Financial Holdings LLC
CONSOLIDATED
BALANCE SHEETS (UNAUDITED)
(Amounts in
thousands, except share information)
|
|
|
December 31,
2010
|
December 31,
2009
|
|
Assets
|
|
|
|
Cash and cash equivalents
|
$313,829
|
$97,086
|
|
Restricted cash and cash
equivalents
|
571,425
|
342,706
|
|
Securities available-for-sale,
$728,558 and $740,949 pledged as collateral as of
December 31, 2010 and
December 31, 2009, respectively
|
838,894
|
755,686
|
|
Corporate loans, net of
allowance for loan losses of $209,030 and $237,308 as of
December 31, 2010 and
December 31, 2009, respectively
|
5,857,816
|
5,617,925
|
|
Corporate loans held for
sale
|
463,628
|
925,718
|
|
Residential mortgage-backed
securities, at estimated fair value, nil and $47,572 pledged as
collateral as of December 31, 2010 and December 31, 2009,
respectively
|
93,929
|
47,572
|
|
Residential mortgage loans, at
estimated fair value
|
—
|
2,097,699
|
|
Equity investments, at estimated
fair value, $12,036 and $110,812 pledged as collateral as of
December 31, 2010 and December 31, 2009,
respectively
|
99,955
|
120,269
|
|
Derivative assets
|
19,519
|
15,784
|
|
Interest and principal
receivable
|
57,414
|
98,313
|
|
Reverse repurchase
agreements
|
—
|
80,250
|
|
Other assets
|
102,003
|
100,997
|
|
Total
assets
|
$8,418,412
|
$10,300,005
|
|
Liabilities
|
|
|
|
Collateralized loan obligation
secured notes
|
$5,630,272
|
$5,667,716
|
|
Collateralized loan obligation
junior secured notes to affiliates
|
366,124
|
533,786
|
|
Senior secured credit
facility
|
—
|
175,000
|
|
Asset-based borrowing
facility
|
18,400
|
—
|
|
Convertible senior notes
|
344,142
|
275,800
|
|
Junior subordinated notes
|
283,517
|
283,517
|
|
Residential mortgage-backed
securities issued, at estimated fair value
|
—
|
2,034,772
|
|
Accounts payable, accrued
expenses and other liabilities
|
14,193
|
7,240
|
|
Accrued interest payable
|
22,846
|
25,297
|
|
Accrued interest payable to
affiliates
|
6,316
|
2,911
|
|
Related party payable
|
12,988
|
3,367
|
|
Securities sold, not yet
purchased
|
—
|
77,971
|
|
Derivative liabilities
|
76,566
|
45,970
|
|
Total
liabilities
|
6,775,364
|
9,133,347
|
|
Shareholders'
Equity
|
|
|
|
Preferred shares, no par value,
50,000,000 shares authorized and none issued and outstanding at
December 31, 2010 and December 31, 2009
|
—
|
—
|
|
Common shares, no par value,
500,000,000 shares authorized, and 177,848,565 and
158,359,757 shares issued and
outstanding at December 31, 2010 and December 31, 2009,
respectively
|
—
|
—
|
|
Paid-in-capital
|
2,756,200
|
2,563,634
|
|
Accumulated other comprehensive
income
|
133,596
|
152,728
|
|
Accumulated deficit
|
(1,246,748)
|
(1,549,704)
|
|
Total
shareholders' equity
|
1,643,048
|
1,166,658
|
|
Total
liabilities and shareholders' equity
|
$8,418,412
|
$10,300,005
|
|
|
|
|
|
|
|
|
Investor Contact
|
|
Laurie Poggi
|
|
415-315-3718
|
|
|
|
Media Contact
|
|
Peter McKillop/Kristi
Huller
|
|
media@kkr.com
|
|
212-750-8300
|
|
|
|
|
SOURCE KKR Financial Holdings LLC