KKR Financial suspends dividend for Q3(2)

KKR's publicly listed debt affiliate made $49m in third quarter profits but will suspend its dividend to preserve liquidity.

KKR Financial, a publicly listed affiliate of Kohlberg Kravis Roberts that invests in debt, has suspended its dividend despite turning a profit in the third quarter.

The company said it earned $49 million in the third quarter after reporting a loss of $262 million in the same quarter last year, but noted it was taking several steps to “enhance its flexibility in dealing with the current level of unprecedented market volatility”. The steps include suspending its quarterly dividend payment for the third quarter, and entering a $300 million senior secured revolving credit facility.

The loan is being provided by Bank of America and Citicorp North America, and the proceeds of the financing will be used to retire the company’s existing revolver due in June, which has $368 million of outstanding borrowing.

“The new facility extends the company’s revolving credit maturity and provides for less restrictive financial covenants that will enhance the company’s flexibility to make appropriate portfolio management decisions on behalf of its shareholders,” KKR Financial said.

The publicly listed company also has arranged a $100 million loan on standby from its external manager, KKR Financial Advisors and the manager’s parent, KKR.

KKR earlier this month said it would delay until next year the de-listing and acquisition of Euronext-listed KKR Private Equity Investors and subsequent publicly listing of the combined entities on the New York Stock Exchange.

Several firms have suspended dividends to preserve liquidity and free up capital to seize on investment opportunities in the downturned markets. American Capital, the publicly traded US firm that suffered $698 million in third quarter write-downs, said earlier this week it would stop paying quarterly dividends until its board determines otherwise.

Conversus Capital, a publicly listed fund of funds, also said it would stop paying dividends to take advantage of the exploding secondary market.