KKR 
By KKR & Co. (Guernsey) L.P. (Euronext Amsterdam: KKR), referred to as KKR Guernsey1, today reported financial information of KKR2 for the quarter ended March 31, 2010.
FINANCIAL HIGHLIGHTS3
Assets under management (?AUM?) were $54.7 billion as of March 31, 2010.
Fee related earnings (?FRE?) were $90.4 million for the quarter ended March 31, 2010.
Economic net income (?ENI?) was $674.8 million for the quarter ended March 31, 2010.
Committed dollars invested amounted to $1,142.7 million for the quarter ended March 31, 2010.
Uncalled commitments to our investment funds amounted to $14.2 billion as of March 31, 2010.
Book value was $4.7 billion or $6.93 per unit as of March 31, 2010.
SEGMENT REVIEW
Private Markets
AUM in the private markets segment was $40.9 billion as of March 31, 2010, an increase of $2.1 billion or 5.4% compared to AUM of $38.8 billion as of December 31, 2009. The increase was primarily due to an increase in the fair value of our private equity portfolio, offset by distributions during the quarter.
Fee paying assets under management (?FPAUM?) in the private markets segment were $35.9 billion as of March 31, 2010, a decrease of $0.6 billion or 1.6% compared to FPAUM of $36.5 billion as of December 31, 2009. The decrease was primarily due to distributions, offset by new capital raised during the quarter.
FRE in the private markets segment was $56.2 million for the quarter ended March 31, 2010, a decrease of $13.0 million or 18.8% compared to FRE of $69.2 million for the quarter ended December 31, 2009. The decrease was due primarily to a higher level of gross monitoring fees in the fourth quarter of 2009 associated with a $46.1 million termination payment on a monitoring agreement with a portfolio company. This termination payment favorably impacted FRE in the fourth quarter of 2009 by $28.6 million, net of associated fee credits. There were no such payments during the first quarter of 2010. The decrease was partially offset by lower operating expenses primarily as a result of a reduction in professional and other service provider fees. Pro forma4 FRE for the quarter ended March 31, 2009 was $42.0 million.
ENI in the private markets segment was $193.7 million for the quarter ended March 31, 2010, an increase of $48.2 million or 33.1% compared to ENI of $145.6 million for the quarter ended December 31, 2009. The increase reflects $183.8 million of higher gross carried interest driven by greater unrealized gains in our private equity portfolio in the first quarter of 2010 as compared to the fourth quarter of 2009. This increase was partially offset by increases in the allocation to the carry pool5 and management fee refunds of $59.2 million and $61.0 million, respectively. As of March 31, 2010, the amount subject to management fee refunds, which may reduce carried interest in future periods, approximated $78 million. Pro forma ENI was $(10.6) million for the quarter ended March 31, 2009.
Public Markets
AUM in the public markets segment was $13.8 billion as of March 31, 2010, an increase of $0.4 billion or 3.0% compared to AUM of $13.4 billion as of December 31, 2009. The increase was primarily due to increases in the fair value of our investment portfolio and new capital raised, offset by distributions during the quarter.
FPAUM in the public markets segment was $6.6 billion as of March 31, 2010, an increase of $0.3 billion or 5.3% compared to FPAUM of $6.3 billion as of December 31, 2009. The increase was primarily due to increases in the fair value of our investment portfolio and new capital raised, offset by distributions during the quarter.
FRE in the public markets segment was $15.7 million for the quarter ended March 31, 2010, an increase of $13.3 million compared to FRE of $2.4 million for the quarter ended December 31, 2009. The increase was due primarily to a $12.5 million incentive fee earned during the first quarter of 2010, whereas no incentive fee was earned in the fourth quarter of 2009. Pro forma FRE for the quarter ended March 31, 2009 was $0.8 million.
ENI in the public markets segment was $16.3 million for the quarter ended March 31, 2010, an increase of $14.8 million compared to ENI of $1.5 million for the quarter ended December 31, 2009. The increase was due primarily to the increase in FRE described above. Pro forma ENI was $0.1 million for the quarter ended March 31, 2009.
Capital Markets and Principal Activities
FRE in the capital markets and principal activities segment was $18.5 million for the quarter ended March 31, 2010, an increase of $2.7 million, or 16.7%, compared to FRE of $15.8 million for the quarter ended December 31, 2009. The increase was due primarily to an increase in transaction fees from our capital markets business during the first quarter of 2010. Pro forma FRE for the quarter ended March 31, 2009 was $(3.2) million.
ENI in the capital markets and principal activities segment was $464.8 million for the quarter ended March 31, 2010, an increase of $96.5 million, or 26.2%, compared to ENI of $368.2 million for the quarter ended December 31, 2009. The increase was primarily attributable to higher levels of appreciation of our principal investments during the first quarter of 2010. Pro forma ENI was $13.1 million for the quarter ended March 31, 2009.
CAPITAL AND LIQUIDITY
As of March 31, 2010, KKR had an available cash balance of $620.8 million and $350.5 million of outstanding debt obligations. As of March 31, 2010, KKR's availability for further borrowings was approximately $1.5 billion. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of March 31, 2010.
As of March 31, 2010, KKR's portion of total uncalled commitments to its investment funds was $1,149.1 million, consisting of the following (amounts in thousands):
| Uncalled | |||
| Commitments | |||
Private Markets | |||
| KKR E2 Investors (Annex Fund) | $ | 36,274 | |
| European III Fund | 432,703 | ||
| Asian Fund | 172,513 | ||
| 2006 Fund | 434,271 | ||
| KKR Natural Resources | 7,500 | ||
| Total Private Markets Commitments | 1,083,261 | ||
Public Markets | |||
| Capital Solutions | 20,810 | ||
| KKR Mezzanine Fund | 45,000 | ||
| Total Public Markets Commitments | 65,810 | ||
| Total Uncalled Commitments | $ | 1,149,071 | |
DISTRIBUTION
A distribution of $0.08 per KKR Guernsey unit, subject to applicable taxes withheld by KKR's corporate subsidiary of $0.024, will be payable on or about June 10, 2010 to KKR Guernsey unitholders of record as of the close of business on May 27, 2010.
U.S. LISTING AND OFFERING
KKR & Co. L.P. has filed registration statements with the U.S. Securities and Exchange Commission (the ?SEC?) to list on the New York Stock Exchange the outstanding common units which are currently listed on Euronext Amsterdam by NYSE Euronext (?Euronext Amsterdam?), the regulated market of Euronext Amsterdam N.V., and to register a proposed primary offering of its common units. A copy of the registration statements and other documents that KKR & Co. L.P. has filed with the SEC are available on the SEC website at www.sec.gov.
KKR GUERNSEY FINANCIAL INFORMATION
As of March 31, 2010, KKR Guernsey had 204,902,226 common units outstanding, which represents 30% of the 683,007,420 total outstanding common units on a fully diluted basis. The common units are listed on Euronext Amsterdam, are non-voting and are subject to a number of ownership and transfer restrictions. KKR Guernsey's general partner is governed by a board of directors consisting of a majority of independent directors.
KKR Guernsey's holdings of limited partner interests in Group Holdings are accounted for using the equity method of accounting. The recorded value of KKR Guernsey's holdings of limited partner interests in Group Holdings was approximately $1.1 billion as of March 31, 2010. During the first quarter of 2010, the value increased due predominantly to net income recognized by Group Holdings, offset by capital distributions. KKR Guernsey held no other assets and had no liabilities as of March 31, 2010.
KKR Guernsey does not have any material operations other than its holdings of limited partner interests in Group Holdings. During the quarter ended March 31, 2010, KKR Guernsey received approximately $12 million in cash from Group Holdings in order to fund a distribution in a like amount to KKR Guernsey's unitholders. KKR Guernsey expects to receive cash from Group Holdings in an amount sufficient to make the current and any future distribution payments and to pay other obligations.
This document constitutes KKR Guernsey's interim management statement, which is available at the Investor Relations page on KKR's website at www.kkr.com.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be on held Friday May 14, 2010 at 10:00 AM EDT (New York City) / 3:00 PM BST (Guernsey) / 4:00 PM CEST (Amsterdam). The conference call may be accessed by dialing (866) 316-1364 (U.S.) or +1 (913) 312-0851 (non-U.S.); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Relations section of KKR's website at http://www.kkr.com/investor_relations/events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (888) 203-1112 (U.S.) and +1 (719) 457-0820 (non-U.S.) / pass code 4064134, beginning approximately two hours after the broadcast.
ABOUT KKR GUERNSEY
KKR & Co. (Guernsey) L.P. (Euronext Amsterdam: KKR) is a Guernsey limited partnership referred to as KKR Guernsey, which represents a 30% economic interest in KKR. KKR Guernsey's common units and related restricted depositary units are subject to a number of ownership and transfer restrictions. Information concerning these ownership and transfer restrictions is included at the Investor Relations section of KKR's website at www.kkr.com. KKR Guernsey was formerly known as KKR Private Equity Investors, L.P.
ABOUT KKR
Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global alternative asset manager with $54.7 billion in assets under management as of March 31, 2010. With over 600 people and 14 offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platforms. KKR is publicly traded through KKR & Co. (Guernsey) L.P. (Euronext Amsterdam: KKR). For additional information, please visit KKR's website at www.kkr.com.
NO OFFERING STATEMENT
This release does not constitute an offer of securities for sale in the United States or elsewhere. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from KKR or KKR Guernsey and that will contain detailed information about them and management, as well as financial statements.
FORWARD-LOOKING STATEMENTS
This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR's and KKR Guernsey's beliefs, assumptions and expectations of their future performance, taking into account all information currently available to them. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or KKR Guernsey or are within their control. If a change occurs, KKR's and KKR Guernsey's business, financial condition, liquidity and results of operations, including net asset value, assets under management, fee paying assets under management, fee related earnings, economic net income, committed dollars invested, uncalled commitments and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the possibility that the listing of the interests in the combined business on the New York Stock Exchange and/or the proposed primary offering of KKR's common units may or may not occur; the risk that the anticipated benefits of the combined business may not be achieved; the general volatility of the capital markets; changes in KKR's or KKR Guernsey's business strategy; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR's competition. Neither KKR nor KKR Guernsey undertakes any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR's and KKR Guernsey's business strategy is focused on the long-term and financial results are subject to significant volatility. Additional information about factors affecting KKR and KKR Guernsey are available in KKR Guernsey's consent solicitation statement dated July 24, 2009, which is available at the Investor Relations section at www.kkr.com.
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| KKR | ||||||||||||||||||||||||||||||
| TOTAL REPORTABLE SEGMENTS (UNAUDITED) | ||||||||||||||||||||||||||||||
| (Amounts in thousands) | ||||||||||||||||||||||||||||||
| Actual | Actual | Pro-Forma | ||||||||||||||||||||||||||||
Quarter Ended March 31, 2010 | Quarter Ended December 31, 2009 | Quarter Ended March 31, 2009 | ||||||||||||||||||||||||||||
| Fees | ||||||||||||||||||||||||||||||
| Management and incentive fees: | ||||||||||||||||||||||||||||||
| Management fees | $ | 111,029 | $ | 113,615 | $ | 107,638 | ||||||||||||||||||||||||
| Incentive fees | 12,500 | - | - | |||||||||||||||||||||||||||
| Management and incentive fees | 123,529 | 113,615 | 107,638 | |||||||||||||||||||||||||||
| Monitoring and transaction fees: | ||||||||||||||||||||||||||||||
| Monitoring fees | 22,532 | 68,383 | 21,960 | |||||||||||||||||||||||||||
| Transaction fees | 55,534 | 39,842 | 191 | |||||||||||||||||||||||||||
| Fee credits | (14,267 | ) | (26,260 | ) | (1,722 | ) | ||||||||||||||||||||||||
| Net monitoring and transaction fees | 63,799 | 81,965 | 20,429 | |||||||||||||||||||||||||||
Total fees | 187,328 | 195,580 | 128,067 | |||||||||||||||||||||||||||
| Expenses | ||||||||||||||||||||||||||||||
| Employee compensation and benefits | 52,253 | 48,018 | 40,021 | |||||||||||||||||||||||||||
| Other operating expenses | 44,686 | 60,095 | 48,394 | |||||||||||||||||||||||||||
| Total expenses | 96,939 | 108,113 | 88,415 | |||||||||||||||||||||||||||
| Fee Related Earnings | 90,389 | 87,467 | 39,652 | |||||||||||||||||||||||||||
| Investment income (loss) | ||||||||||||||||||||||||||||||
| Gross carried interest | 323,211 | 139,034 | (50,143 | ) | ||||||||||||||||||||||||||
| Less: allocation to KKR carry pool | (99,382 | ) | (40,077 | ) | (697 | ) | ||||||||||||||||||||||||
| Less: management fee refunds | (83,740 | ) | (22,720 | ) | - | |||||||||||||||||||||||||
| Net carried interest | 140,089 | 76,237 | (50,840 | ) | ||||||||||||||||||||||||||
| Other investment income (loss) | 444,702 | 352,576 | 14,002 | |||||||||||||||||||||||||||
| Total investment income (loss) | 584,791 | 428,813 | (36,838 | ) | ||||||||||||||||||||||||||
Income (Loss) before noncontrolling interests in Income of consolidated entities | 675,180 | 516,280 | 2,814 | |||||||||||||||||||||||||||
Income (Loss) attributable to noncontrolling interests | 376 | 1,025 | 307 | |||||||||||||||||||||||||||
| Economic Net Income (Loss) | $ | 674,804 | $ | 515,255 | $ | 2,507 | ||||||||||||||||||||||||
| Assets Under Management | $ | 54,708,700 | $ | 52,204,200 | $ | 43,757,900 | ||||||||||||||||||||||||
| Fee Paying Assets Under Management | $ | 42,528,900 | $ | 42,779,800 | $ | 41,624,100 | ||||||||||||||||||||||||
| Committed Dollars Invested | $ | 1,142,700 | $ | 456,700 | $ | 18,000 | ||||||||||||||||||||||||
| Uncalled Commitments | $ | 14,234,800 | $ | 14,544,427 | $ | 14,825,081 | ||||||||||||||||||||||||
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© Business Wire - 2010
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