Private equity firm Kohlberg Kravis Roberts & Co is going to list on the New York Stock Exchange(NYSE) with issue of shares to limited partners who are existing unitholders of KKR Guernsey. KKR Guernsey is currently listed on Euronext Amsterdam and will stop trading there as it shifts to NYSE.
Interestingly, KKR also lists among its firms an entity Multiflow Financial Services Pvt Ltd that is a non deposit taking NBFC in India. Although not much details is available on this firm which is based in Chennai as per its NBFC license from RBI, this could be a vehicle for KKR to get into fixed income business in India.
Besides private equity, KKR plans to build a platform which includes fixed income, real estate and infrastructure.
KKR’s issue comprises issue of over 200 million shares worth $2.2 billion of an entity that effectively owns 30% of the business of the group. The remaining 70% of the business would continue to be owned by principals who hold units of KKR Holdings.
The firm has been looking to list in the US for a few years now but had to delay its plans as the markets went into a tailspin. Its rival buyout giant Blackstone had listed three years ago and its shares are worth half of the what they were at the time of listing, when markets were at the peak.
Analysts are keeping their finger crossed on prospects of KKR post listing. For one, while PE firms themselves are in reasonable shape, the market for listing some of their privately owned assets is not in best of condition.
Besides fee-based earnings and other revenue streams, PE firms generate gains from either secondary sale of assets to another financial investor or a strategic buyer or take them public raising funds through multiple rounds of partial selloffs.
Rival firm Blackstone had informed its investors five months ago plans to take eight of its portfolio companies public, but has postponed some of them given volatile state of stock markets.
But KKR has an illustrious past. Most recently it had a successful IPO of discount retailer Dollar General Corp(where it holds about 90% stake) in November whose shares are up about 20% post listing.
Led by Henry Kravis and George Roberts, KKR had $52.2 billion in assets under management as of December ‘09. Of these private equity accounted for $38.8 billion in assets under management(AUM).
The rest was in the public market unit which comprises fixed income businesses(established in 2004) managing capital in liquid credit strategies, such as leveraged loans and high yield bonds, and less liquid credit products, such as mezzanine debt and capital solutions investments.
As of December 31, 2009, this segment had $13.4 billion of AUM, including $0.9 billion of assets managed in a publicly traded specialty finance company, $8.1 billion of assets managed in
structured finance vehicles and $4.4 billion of assets managed in other types of investment vehicles and separately managed accounts.
Notably the firm’s AUM in private equity dropped 12.87% in 2008 when markets crashed but its exposure to fixed income business rose over 21% in the same year. In 2009, when markets recovered, its private equity AUM rose 22% while fixed income business just inched up 2.3%.
Since inception, its private equity funds with at least 36 months of investment activity has generated a cumulative gross IRR of 25.8%, compared to the 11.5% gross IRR achieved by the S&P 500 Index over the same period.
KKR lists among its private investments in India Bharti Infratel (in which it invested in 2008) besides technology firm Aricent which is headquartered in US.