EX-99.1 2 a12-10379_1ex99d1.htm EX-99.1

Exhibit 99.1

 

KKR Financial Holdings LLC Announces First Quarter 2012 Financial Results and

a Quarterly Distribution of $0.18 per Common Share

 

SAN FRANCISCO, CA, April 25, 2012—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