XML 34 R18.htm IDEA: XBRL DOCUMENT

DEBT OBLIGATIONS

9 Months Ended

Sep. 30, 2020

KKR enters into credit agreements and issues debt for its general operating and investment purposes.

KKR consolidates and reports debt obligations of KKR Financial Holdings LLC ("KFN"), which are non-recourse to KKR beyond the assets of KFN.

Certain of KKR's consolidated investment funds borrow to meet financing needs of their operating and investing activities. Fund financing facilities have been established for the benefit of certain investment funds. When an investment fund borrows from the facility in which it participates, the proceeds from the borrowings are limited for their intended use by the borrowing investment fund. KKR's obligations with respect to these financing arrangements are generally limited to KKR's pro rata equity interest in such investment funds.

In certain other cases, KKR has majority-owned consolidated investment vehicles and other entities that make investments and purchase other assets with borrowings that are collateralized only by the investments and assets they own.

In addition, consolidated CFE vehicles issue debt securities to third-party investors which are collateralized by assets held by the CFE vehicle. Debt securities issued by CFEs are supported solely by the assets held at the CFEs and are not collateralized by assets of any other KKR entity. CFEs also may have warehouse facilities with banks to provide liquidity to the CFE. The CFE's debt obligations are non-recourse to KKR beyond the assets of the CFE.

KKR's borrowings consisted of the following:



	September 30, 2020							December 31, 2019
	Financing Available		Borrowing Outstanding		Fair Value			Financing Available		Borrowing Outstanding		Fair Value
Revolving Credit Facilities:
Corporate Credit Agreement	$	1,000,000	$	—	$	—		$	1,000,000	$	—	$	—
KCM Credit Agreement	455,014		—		—			444,904		—		—
KCM 364-Day Revolving Credit Agreement	750,000		—		—			750,000		—		—
Notes Issued:
KKR Issued 0.509% Notes Due 2023 ⁽¹⁾	—		236,006		236,769		⁽¹⁴⁾	—		228,280		228,026		⁽¹⁴⁾
KKR Issued 0.764% Notes Due 2025 ⁽²⁾	—		46,840		47,635		⁽¹⁴⁾	—		45,255		45,856		⁽¹⁴⁾
KKR Issued 1.625% Notes Due 2029 ⁽³⁾	—		752,541		809,005		⁽¹⁵⁾	—		718,478		758,903		⁽¹⁵⁾
KKR Issued 3.750% Notes Due 2029 ⁽⁴⁾	—		741,967		863,460		⁽¹⁴⁾	—		493,962		533,505		⁽¹⁴⁾
KKR Issued 1.595% Notes Due 2038 ⁽⁵⁾	—		96,462		102,638		⁽¹⁴⁾	—		93,325		98,524		⁽¹⁴⁾
KKR Issued 5.500% Notes Due 2043 ⁽⁶⁾	—		492,429		636,235		⁽¹⁴⁾	—		492,175		613,415		⁽¹⁴⁾
KKR Issued 5.125% Notes Due 2044 ⁽⁷⁾	—		991,380		1,249,730		⁽¹⁴⁾	—		991,106		1,186,670		⁽¹⁴⁾
KKR Issued 3.625% Notes Due 2050 ⁽⁸⁾	—		492,056		516,180		⁽¹⁴⁾	—		—		—
KKR Issued 3.500% Notes Due 2050 ⁽⁹⁾	—		735,036		760,508		⁽¹⁴⁾	—		—		—
KFN Issued 5.500% Notes Due 2032 ⁽¹⁰⁾	—		494,419		496,028			—		494,054		504,807
KFN Issued 5.200% Notes Due 2033 ⁽¹¹⁾	—		118,502		115,802			—		118,411		117,834
KFN Issued 5.400% Notes Due 2033 ⁽¹²⁾	—		68,843		68,774			—		68,774		70,059
KFN Issued Junior Subordinated Notes ⁽¹³⁾	—		234,472		156,740			—		233,473		185,485
	2,205,014		5,500,953		6,059,504			2,194,904		3,977,293		4,343,084

Other Debt Obligations	5,715,560		25,950,688		25,943,788			3,865,495		23,035,991		23,035,991

	$	7,920,574	$	31,451,641	$	32,003,292		$	6,060,399	$	27,013,284	$	27,379,075


(1)	¥25 billion (or $237.5 million) aggregate principal amount of 0.509% senior notes of KKR due 2023. Borrowing outstanding is presented net of unamortized debt issuance costs of $0.7 million and $1.0 million as of September 30, 2020 and December 31, 2019, respectively. These senior notes are denominated in Japanese Yen ("JPY").


(2)	¥5.0 billion (or $47.5 million) aggregate principal amount of 0.764% senior notes of KKR due 2025. Borrowing outstanding is presented net of unamortized debt issuance costs of $0.5 million and $0.6 million as of September 30, 2020 and December 31, 2019, respectively. These senior notes are denominated in JPY.


(3)	€650 million (or $760.5 million) aggregate principal amount of 1.625% senior notes of KKR due 2029. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $5.3 million and $6.3 million as of September 30, 2020 and December 31, 2019, respectively. These senior notes are denominated in euro.


(4)	$750 million aggregate principal amount of 3.750% senior notes of KKR due 2029. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $5.9 million and $4.7 million as of September 30, 2020 and December 31, 2019, respectively.


(5)	¥10.3 billion (or $97.9 million) aggregate principal amount of 1.595% senior notes of KKR due 2038. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.1 million and $1.1 million as of September 30, 2020 and December 31, 2019, respectively. These senior notes are denominated in JPY.


(6)	$500 million aggregate principal amount of 5.500% senior notes of KKR due 2043. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $3.3 million and $3.4 million as of September 30, 2020 and December 31, 2019, respectively.


(7)	$1.0 billion aggregate principal amount of 5.125% senior notes of KKR due 2044. Borrowing outstanding is presented net of (i) unamortized note discount (net of premium) and (ii) unamortized debt issuance costs of $7.4 million and $7.7 million as of September 30, 2020 and December 31, 2019, respectively.


(8)	$500 million aggregate principal amount of 3.625% senior notes of KKR due 2050. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $5.4 million as of September 30, 2020.


(9)	$750 million aggregate principal amount of 3.500% senior notes of KKR due 2050. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $8.2 million as of September 30, 2020.

(10)

KKR consolidates KFN and thus reports KFN's outstanding $500.0 million aggregate principal amount of 5.500% senior notes due 2032. Borrowing outstanding is presented net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $3.8 million and $4.0 million as of September 30, 2020 and December 31, 2019, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(11)

KKR consolidates KFN and thus reports KFN's outstanding $120.0 million aggregate principal amount of 5.200% senior notes due 2033. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.5 million and $1.6 million as of September 30, 2020 and December 31, 2019, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(12)

KKR consolidates KFN and thus reports KFN's outstanding $70.0 million aggregate principal amount of 5.400% senior notes due 2033. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.2 million and $1.2 million as of September 30, 2020 and December 31, 2019, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(13)

KKR consolidates KFN and thus reports KFN's outstanding $258.5 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 2.7% and 4.4% and the weighted average years to maturity is 16.0 years and 16.8 years as of September 30, 2020 and December 31, 2019, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.


(14)	The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.


(15)	The notes are classified as Level I within the fair value hierarchy and fair value is determined by quoted prices in active markets since the debt is publicly listed.

Revolving Credit Facilities

KCM Credit Agreement

On March 20, 2020, KKR Capital Markets Holdings L.P. and certain other capital market subsidiaries (collectively, the “KCM Borrowers”) of KKR & Co. Inc. entered into a third amended and restated 5-year revolving credit agreement (the “KCM Credit Agreement”) with a major financial institution, as administrative agent, and the lenders party thereto. The KCM Credit Agreement provides for revolving borrowings of up to $500 million with a $500 million sublimit for letters of credit, expires on March 20, 2025 and ranks pari passu with the existing $750 million 364-day revolving credit facility provided by them for KKR’s capital markets business. The prior second amended and restated 5-year revolving credit agreement, dated as of March 30, 2016, between the KCM Borrowers, the administrative agent, and the lenders party thereto, was terminated according to its terms on March 20, 2020 and replaced by the KCM Credit Agreement.

If a borrowing is made on the KCM Credit Agreement, the interest rate will vary depending on the type of drawdown requested. If the loan is a Eurocurrency loan, it will be based on LIBOR plus the applicable margin which ranges initially between 1.75% and 3.00%, depending on the amount and nature of the loan. If the loan is an ABR Loan, it will be based on the prime rate plus the applicable margin which ranges initially between 0.75% and 2.00% depending on the amount and nature of the loan. Borrowings under this facility may only be used for KKR’s capital markets business, and its only obligors are entities involved in KKR’s capital markets business, and its liabilities are non-recourse to other parts of KKR.

As of September 30, 2020, no amounts were outstanding under the KCM Credit Agreement; however various letters of credit were outstanding in the amount of $45.0 million, which reduce the overall borrowing capacity of the KCM Credit Agreement. On November 3, 2020, the KCM Credit Agreement was amended to increase the total borrowing capacity to $750 million.

The KCM Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including a financial covenant providing for a maximum debt to equity ratio for the KCM Borrowers. The KCM Borrowers’ obligations under the KCM Credit Agreement are secured by certain assets of the KCM Borrowers, including a pledge of equity interests of certain subsidiaries of the KCM Borrowers.

KCM Short-Term Credit Agreement

On April 10, 2020, the KCM Borrowers entered into a 364-day revolving credit agreement (the "KCM Short-Term Credit Agreement”) with a major financial institution, as administrative agent, and the lenders party thereto. The KCM Short-Term Credit Agreement provides for revolving borrowings of up to $750 million, expires on April 9, 2021, and ranks pari passu with the existing KCM Credit Agreement provided by them for KKR's capital markets business. The prior 364-day revolving credit agreement, dated as of June 27, 2019, between the KCM Borrowers and a major financial institution, as administrative agent, and the lenders party thereto, was terminated according to its terms on April 10, 2020 and replaced by the KCM Revolver Agreement.

If a borrowing is made under the KCM Short-Term Credit Agreement, the interest rate will vary depending on the type of drawdown requested. If the borrowing is a Eurocurrency loan, it will be based on a LIBOR rate plus an applicable margin ranging between 1.50% and 2.75%, depending on the duration of the loan. If the borrowing is an ABR loan, it will be based on a base rate plus an applicable margin ranging between 0.50% and 1.75%, depending on the duration of the loan. Borrowings under the KCM Short-Term Credit Agreement may only be used to facilitate the settlement of debt transactions syndicated by KKR's capital markets business. Obligations under the KCM Short-Term Credit Agreement are limited to the KCM Borrowers, which are solely entities involved in KKR's capital markets business, and liabilities under the KCM Short-Term Credit Agreement are non-recourse to other parts of KKR.

The KCM Short-Term Credit Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including a financial covenant providing for a maximum debt to equity ratio for the KCM Borrowers. The KCM Borrowers' obligations under the KCM Short-Term Credit Agreement are secured by certain assets of the KCM Borrowers, including a pledge of equity interests of certain subsidiaries of the KCM Borrowers.

Notes Issuance

KKR Issued 3.625% Senior Notes Due 2050

On February 25, 2020, KKR Group Finance Co. VII LLC, an indirect subsidiary of KKR & Co. Inc., issued $500 million aggregate principal amount of its 3.625% Senior Notes due 2050 (the "3.625% 2050 Senior Notes"). The 3.625% 2050 Senior Notes are guaranteed by KKR & Co. Inc. and KKR Group Partnership.

The 3.625% 2050 Senior Notes bear interest at a rate of 3.625% per annum and will mature on February 25, 2050, unless earlier redeemed. Interest on the 3.625% 2050 Senior Notes accrues from February 25, 2020 and is payable semi-annually in arrears on February 25 and August 25 of each year, commencing on August 25, 2020 and ending on the applicable maturity date. The 3.625% 2050 Senior Notes are unsecured and unsubordinated obligations of the issuer. The 3.625% 2050 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by each of the guarantors. The guarantees are unsecured and unsubordinated obligations of the guarantors.

The indenture, as supplemented by the first supplemental indenture, related to the 3.625% 2050 Senior Notes includes covenants, including limitations on the issuer's and the guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding 3.625% 2050 Senior Notes may declare the 3.625% 2050 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 3.625% 2050 Senior Notes and any accrued and unpaid interest on the 3.625% 2050 Senior Notes automatically become due and payable. Prior to August 25, 2049, the issuer may redeem the 3.625% 2050 Senior Notes at its option, in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the 3.625% 2050 Senior Notes. On or after August 25, 2049, the issuer may redeem the 3.625% 2050 Senior Notes at its option, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 3.625% 2050 Senior Notes to be redeemed, together with interest accrued and unpaid to, but excluding, the date of redemption. If a change of control repurchase event occurs, the 3.625% 2050 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the 3.625% 2050

Senior Notes repurchased plus any accrued and unpaid interest on the 3.625% 2050 Senior Notes repurchased to, but not including, the date of repurchase.

KKR Issued additional 3.750% Senior Notes Due 2029

On April 21, 2020, KKR Group Finance Co. VI LLC, an indirect subsidiary of KKR & Co. Inc., issued an additional $250 million aggregate principal amount of its 3.750% Senior Notes due 2029 (the "New 3.750% Senior Notes"). The New 3.750% Senior Notes are guaranteed by KKR & Co. Inc. and KKR Group Partnership. The New 3.750% Senior Notes constitute an issuance of additional notes under the indenture governing the notes. The New 3.750% Senior Notes have substantially the same terms as, and are treated as a single series with, the existing $500 million aggregate principal amount of 3.750% Senior Notes issued on July 1, 2019.

KKR Issued 3.500% Senior Notes Due 2050

On August 25, 2020, KKR Group Finance Co. VIII LLC, an indirect subsidiary of KKR & Co. Inc., issued $750 million aggregate principal amount of its 3.500% Senior Notes due 2050 (the "3.500% 2050 Senior Notes"). The 3.500% 2050 Senior Notes are guaranteed by KKR & Co. Inc. and KKR Group Partnership.

The 3.500% 2050 Senior Notes bear interest at a rate of 3.500% per annum and will mature on August 25, 2050, unless earlier redeemed. Interest on the 3.500% 2050 Senior Notes accrues from August 25, 2020 and is payable semi-annually in arrears on February 25 and August 25 of each year, commencing on February 25, 2021 and ending on the applicable maturity date. The 3.500% 2050 Senior Notes are unsecured and unsubordinated obligations of the issuer. The 3.500% 2050 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by each of the guarantors. The guarantees are unsecured and unsubordinated obligations of the guarantors.

The indenture includes covenants, including limitations on the issuer’s and the guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or merge, consolidate or sell, transfer or convey all or substantially all of their assets. The indenture also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding 3.500% 2050 Senior Notes may declare the 3.500% 2050 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 3.500% 2050 Senior Notes and any accrued and unpaid interest on the 3.500% 2050 Senior Notes automatically become due and payable. Prior to February 25, 2050, the issuer may redeem the 3.500% 2050 Senior Notes at its option, in whole or in part, at any time and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the 3.500% 2050 Senior Notes. On or after February 25, 2050, the issuer may redeem the 3.500% 2050 Senior Notes at its option, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the 3.500% 2050 Senior Notes to be redeemed, together with interest accrued and unpaid to, but excluding, the date of redemption. If a change of control repurchase event occurs, the 3.500% 2050 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the 3.500% 2050 Senior Notes repurchased plus any accrued and unpaid interest on the 3.500% 2050 Senior Notes repurchased to, but not including, the date of repurchase.

If KKR's acquisition of Global Atlantic has not closed on or prior to May 7, 2021 (or any later date as extended pursuant to the merger agreement relating to the acquisition), or if such merger agreement is terminated or KKR determines in its reasonable judgment that the acquisition will not occur (each such event, a "Special Mandatory Redemption Event"), the issuer will be required to redeem all of the outstanding 3.500% 2050 Senior Notes on the 20th day (or if such day is not a business day, the first business day thereafter) after the occurrence of a Special Mandatory Redemption Event at a special mandatory redemption price equal to 101% of the aggregate principal amount of the 3.500% 2050 Senior Notes, plus accrued and unpaid interest thereon, if any, to, but excluding, the special mandatory redemption date.

Other Debt Obligations

As of September 30, 2020, other debt obligations consisted of the following:



	Financing Available		Borrowing Outstanding		Fair Value		Weighted Average Interest Rate	Weighted Average Remaining Maturity in Years
Financing Facilities of Consolidated Funds and Other	$	5,715,560	$	9,670,941	$	9,664,041	2.8%	3.8
Debt Obligations of Consolidated CLOs	—		16,279,747		16,279,747		⁽¹⁾	10.4
	$	5,715,560	$	25,950,688	$	25,943,788

(1)

The senior notes of the consolidated CLOs had a weighted average interest rate of 1.9%. The subordinated notes of the consolidated CLOs do not have contractual interest rates but instead receive a pro rata amount of the net distributions from the excess cash flows of the respective CLO vehicle. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the period, if any.

Debt obligations of consolidated CFEs are collateralized by assets held by each respective CFE vehicle and assets of one CFE vehicle may not be used to satisfy the liabilities of another. As of September 30, 2020, the fair value of the consolidated CFE assets was $17.9 billion. This collateral consisted of Cash and Cash Equivalents Held at Consolidated Entities, Investments, and Other Assets.

Debt Covenants

Borrowings of KKR contain various debt covenants. These covenants do not, in management's opinion, materially restrict KKR's operating business or investment strategies as of September 30, 2020. KKR is in compliance with its debt covenants in all material respects as of September 30, 2020.