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KKR Cancels Plans For $500M Offering

10 August, 2010

Private equity firm Kohlberg Kravis Roberts & Co said on Monday it has canceled plans to sell $500 million of new common units, less than one month after it listed on the New York Stock Exchange.

KKR, one of the biggest private equity firms in the world, with investments in retailer Dollar General Corp, hospital operator HCA and media company Nielsen, had announced plans to sell the units in May.

It said at the time proceeds would be used to expand its business and for general corporate purposes.

The company did not provide a reason for the change.

In a press release announcing its second-quarter earnings on Monday, KKR said it has decided “not to proceed with the proposed public offering” of $500 million in KKR common units and had applied to withdraw the registration statement filed with the U.S. Securities and Exchange Commission.

The equity market has been volatile of late, making it hard for companies to sell new shares.

While companies have been going ahead with initial public offerings, it has been a rocky ride. NXP Semiconductors NV NXPI.O recently took a haircut on the amount it hoped to raise, while software company Intralinks Holdings Inc (IL.N) priced its shares below its expected range.

KKR’s shares have slipped from $10.50 on July 15, when they began trading publicly on the NYSE. They closed on Monday at $9.89.

Nervousness about the anticipated share offer had even been given by one analyst as a reason why KKR’s shares declined on their first day of trading in New York.

An incentive to removing an offer to sell shares is that it can also lift restrictions on what a company says to its investors and the analysts covering it.

KKR could come back at a later date and try again with such an offer, or try other means of raising money.

Rival Blackstone (BX.N) in 2009 sold about $600 million in its first corporate bond offering.

KKR said on Monday it had received an “A” rating from credit agency Fitch and an “A-” rating from Standard & Poor’s, both of which said it had a “stable outlook”.

EARNINGS LOWER, INVESTMENTS UP

KKR also said on Monday that economic net income, a measure used by private equity firms to report earnings, was $433.1 million for the quarter, compared with a pro-forma figure of $613.5 million a year ago.

While the value of KKR’s investments grew, the rate of growth in the second quarter of 2010 was lower than in the comparable period in 2009 — which was rebounding from a low in the market early that year.

KKR also gave details about how it is valuing a number of its portfolio companies.

It is valuing its investment in Biomet Inc at cost, investments in Dollar General Corp (DG.N) and HCA Inc at significantly above cost, but Energy Future Holdings and First Data are below.

Rival Blackstone said in July its economic net income or ENI for the second quarter was $205 million, up from $181 million a year earlier.

KKR said it would distribute 8 cents a unit to unitholders.

KKR has scheduled a conference call for analysts on Tuesday morning.


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KKR Cancels Plans For $500M Offering

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