KKR Financial Holdings LLC Announces First Quarter 2012 Financial Results and a Quarterly Distribution of $0.18 per Common Share

SAN FRANCISCO, April 25, 2012 /PRNewswire/ -- KKR Financial Holdings LLC (NYSE: KFN) ("KFN" or the "Company") today announced its results for the first quarter ended March 31, 2012.

First Quarter 2012 Highlights

  • Net income for the first quarter ended March 31, 2012 totaled $88.0 million, or $0.48 per diluted common share.
  • Declared a quarterly cash distribution of $0.18 per common share for the first quarter of 2012.
  • Book value per common share of $9.81 as of March 31, 2012 as compared to book value per common share of $9.41 as of December 31, 2011.
  • Completed a $115.0 million 30-year 7.500% senior note offering that generated $111.4 million of net proceeds for the Company.

For the first quarter ended March 31, 2012, KFN reported net income of $88.0 million, or $0.48 per diluted common share, as compared to net income of $93.8 million, or $0.51 per diluted common share, for the first quarter ended March 31, 2011.

KFN's first quarter 2012 results included net investment income of $37.9 million, other income of $78.9 million and non-investment expenses of $32.8 million. Comparatively, KFN's first quarter 2011 results reflected net investment income of $79.5 million, other income of $46.4 million and non-investment expenses of $30.8 million. Net investment income decreased $41.6 million from the first quarter ended March 31, 2011 to 2012 primarily due to a $34.8 million increase in provision for loan losses and an $8.6 million increase in interest expense. Other income increased $32.5 million from the first quarter ended March 31, 2011 to 2012 largely due to a $24.4 million increase in net realized and unrealized gains on investments primarily as the result of sales and paydowns of certain investments, as well as a $3.1 million increase in net realized and unrealized gains on derivatives and foreign exchange. 

Portfolio Activity

Natural Resources Strategy
During the first quarter of 2012, the Company executed several transactions including the following: i) the acquisition of oil and gas working interests in acreage located in Louisiana, Mississippi and Texas for $69.8 million, of which $28.5 million was financed through the Company's non-recourse natural resources credit facility; ii) a commitment to acquire working interests in oil and gas properties located in North Texas for approximately $69 million, of which approximately $29 million will be financed through the Company's non-recourse natural resources credit facility; iii) a commitment of approximately $90 million to invest in a partnership with Chesapeake Energy Corporation to invest in mineral interests and overriding royalty interests in key oil and gas basins in the United States; and iv) a commitment of approximately $12 million to a consortium alongside Schlumberger and Tecpetrol, which will re-develop and provide services to optimize production of certain wells in Ecuador in return for a fixed dollar fee per barrel of incremental production.

Special Situations Strategy
During the first quarter of 2012, the Company deployed or committed to deploy approximately $35 million to several different special situations distressed opportunities, predominantly in Europe.

Senior Notes Offering

During the first quarter ended March 31, 2012, the Company received net proceeds totaling $111.4 million through the issuance of  $115.0 million of 7.500% Senior Notes due March 20, 2042. The net proceeds from this offering will be used for general corporate purposes. 

Book Value

Book value per share increased to $9.81 from $9.41 as of December 31, 2011. The increase in book value per share from December 31, 2011 was primarily driven by the Company's earnings for the first quarter of $0.48 per diluted common share and an increase in the Company's accumulated other comprehensive income, a component of shareholders' equity, of $0.18 per share primarily as a result of increases in value of certain securities-available-for sale and interest rate swaps designated as cash flow hedges, slightly offset by the Company's distribution to shareholders for the fourth quarter and year ended 2011 of $0.26 per common share.

Distributions

On April 24, 2012, the Company's board of directors declared a cash distribution of $0.18 per common share. The distribution is payable on May 22, 2012 to common shareholders of record as of the close of business on May 8, 2012.

Information for Investors: Conference Call and Webcast
The Company will host a conference call and audio webcast to review its results for the first quarter ended March 31, 2012 on April 25, 2012, at 6:00 a.m. PT (9:00 a.m. ET). The conference call may be accessed by dialing (888) 215-6918 (Domestic) or +1 (913) 312-0650 (International); a pass code is not required. A telephonic replay of the call will be available through May 9, 2012 by dialing (888) 203-1112 (Domestic) and +1 (719) 457-0820 (International) / pass code 6864908. 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://ir.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 at http://ir.kkr.com/kfn_ir/kfn_events.cfm.

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 specialty finance company with expertise in a range of asset classes. KFN's core business strategy is to leverage the proprietary resources of its manager with the objective of generating both current income and capital appreciation. KFN executes its core business strategy through its majority-owned subsidiaries. KFN is externally managed by KKR Financial Advisors LLC, a wholly-owned subsidiary of KKR Asset Management LLC, which is a wholly-owned subsidiary of Kohlberg Kravis Roberts & Co. L.P.  Additional information regarding KFN 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, including statements with regards to the use of proceeds from the Company's debt offering in the quarter ended March 31, 2012 and commitments to deploy capital. 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, 2011, filed with the SEC on February 28, 2012.

 

Schedule I
KKR Financial Holdings LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands, except per share information)

 



For the three
months ended
March 31,
2012


For the three
months ended
March 31,
2011


Net investment income:






Loan interest income


$

104,094


$

109,645


Securities interest income


22,576


22,556


Other investment income


11,264


3,129


Total investment income


137,934


135,330


Interest expense


40,715


32,121


Interest expense to affiliates


12,859


12,096


Provision for loan losses


46,498


11,661


Net investment income


37,862


79,452


Other income:






Net realized and unrealized gain on investments


63,588


39,184


Net realized and unrealized gain on derivatives and foreign exchange


9,149


6,067


Net realized and unrealized gain (loss) on residential mortgage-backed securities, at estimated fair value


3,047


(738)


Net loss on restructuring and extinguishment of debt


(445)



Other income


3,592


1,923


Total other income


78,931


46,436


Non-investment expenses:






Related party management compensation


18,113


21,201


General, administrative and directors expenses


12,804


8,171


Professional services


1,896


1,432


Total non-investment expenses


32,813


30,804


Income before income tax (benefit) expense


83,980


95,084


Income tax (benefit) expense


(4,068)


1,317


Net income


$

88,048


$

93,767








Net income per common share:






Basic


$

0.49


$

0.53


Diluted


$

0.48


$

0.51








Weighted-average number of common shares outstanding:






Basic


177,775


177,075


Diluted


182,247


181,292




Schedule II
KKR Financial Holdings LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Amounts in thousands, except share information)

 


March 31,
2012


December 31,
2011

Assets




Cash and cash equivalents

$526,846


$392,154

Restricted cash and cash equivalents

823,950


399,620

Securities

865,759


922,603

Corporate loans, net (includes $297,708 and $317,332 loans held for sale
   as of March 31, 2012 and December 31, 2011, respectively)

5,972,943


6,443,399

Equity investments, at estimated fair value ($15,528 and $12,222 pledged as
collateral as of March 31, 2012 and December 31, 2011, respectively)

203,642


189,845

Derivative assets

31,109


28,463

Interest and principal receivable

38,336


62,124

Other assets

309,605


209,020

Total assets

$8,772,190


$8,647,228

Liabilities




Collateralized loan obligation secured debt

$5,496,488


$5,540,037

Collateralized loan obligation junior secured notes to affiliates

347,855


365,848

Credit facilities

66,800


38,300

Convertible senior notes

277,091


299,830

Senior notes

362,109


250,676

Junior subordinated notes

283,517


283,517

Accounts payable, accrued expenses and other liabilities

35,325


24,680

Accrued interest payable

20,659


25,536

Accrued interest payable to affiliates

7,102


6,561

Related party payable

16,827


11,078

Derivative liabilities

108,164


125,333

Total liabilities

7,021,937


6,971,396

Shareholders' Equity




Preferred shares, no par value, 50,000,000 shares authorized and none issued and outstanding at March 31, 2012 and December 31, 2011


Common shares, no par value, 500,000,000 shares authorized, and 178,393,521 and 178,145,482 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively


Paid-in-capital

2,759,996


2,759,478

Accumulated other comprehensive loss

(3,380)


(35,619)

Accumulated deficit

(1,006,363)


(1,048,027)

Total shareholders' equity

1,750,253


1,675,832

Total liabilities and shareholders' equity

$8,772,190


$8,647,228


Investor Relations Contact:                                                            
Angela Yang
415-315-6567     
investor-relations@kkr.com

Media Contact:
Kristi Huller
212-750-8300
media@kkr.com

 

SOURCE KKR Financial Holdings LLC



RELATED LINKS
http://www.kkrkfn.com

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