U.S. News

KKR Says Credit Market Woes Could Hurt Its Returns


Private equity firm Kohlberg Kravis Roberts said in a regulatory filing that weak debt market conditions could cut into its investment returns, and confirmed it is the subject of a U.S. Department of Justice probe for anti-trust violations.

KKR , among the world's largest private equity firms, has filed to take part of the partnership public, a move that follows rival Blackstone Group move into the public market.

The timing of KKR's IPO comes amid a freeze in the debt and credit markets -- the lifeblood of the private equity industry -- and led some analysts to speculate the firm is better off putting
the IPO on ice.

Leveraged buyout financing could become more expensive and restrictive, cutting into returns at KKR's funds as well as income at the overall company, according to the firm's revised initial
public offering filing on Monday.

New York-based KKR is among the firms involved in LBOs of Texas utility TXU and First Data -- deals that have yet to be completed and face resistance from debt investors. KKR's total equity investment in three pending deals is around $5.25 billion, it said.

"We have received contractual commitments from financial institutions to provide the requisite debt financing for these transactions. However, whether and when those acquisitions will be
consummated depends on a number of other factors," according to the filing.

KKR also confirmed Monday that it received a request for documents from the U.S. Department of Justice on whether it engaged in actions that violated antitrust laws.

Reuters and other media reported last October that DOJ officials were investigating private equity firms over whether they were engaging in anti-competitive behavior. At the time,
several major auctions of U.S. and European companies involved large teams of buyout firms pursuing bids.

Officials were probing whether competing private equity bidders backed out of auctions in order to allow fellow buyout firms to purchase a company at a better price.

KKR has filed to go public, and issued its confirmation of the DOJ request in an amended IPO filing. The New York-based firm says it is cooperating with the investigation. The Wall Street Journal reported in October that KKR and Silver Lake Partners received DOJ letters.