KKR Financial Unloads Loans, Warns of Potential for Big Loss [WSJ]
By MIKE BARRIS
August 15, 2007 10:32 a.m.
KKR Financial Holdings LLC [KFN] said it sold about $5.1 billion of residential-mortgage loans at a loss as part of its restructuring and hinted at possible liquidity trouble amid the credit market turmoil.
In morning trading, KKR Financial shares skidded $2.93, or 19%, to $12.40. At one point the stock fell as low as $9.39.
KKR Financial said Wednesday it has an aggregate net equity investment of about $200 million.
Citing the "unprecedented disruption in the residential mortgage and global commercial paper markets," KKR Financial said it has started talking with investors in its asset-backed secured liquidity note facilities regarding "various alternatives to resolve potential funding disruptions resulting from the current market environment." If those strategies fail, KKR Financial warned it might need to record a charge of up to $200 million.
KKR Financial's sale of the mortgage loans to an unnamed buyer will prompt a loss of about $40 million.
In January, the San Francisco company, a publicly traded affiliate of buyout giant Kohlberg Kravis Roberts & Co., said it would divest itself of its residential mortgage portfolio as it converted from a real-estate investment trust to a limited liability company.
As a REIT, at least 75% of its gross income had to be generated by real estate assets; for the company, that consisted of its investments in residential mortgage assets, it said.
After the sale, KKR Financial owns about $5.8 billion of mortgage loans, mainly in the form of residential-mortgage-backed securities.
The company said it "no longer intends to invest in residential real estate assets." |
