Kohlberg Kravis Roberts (KKR) has offered $500 million in 30-year bonds through an indirect subsidiary.
The offering allows the private equity firm to reduce interest on $500 million of debt sold in January 2013, Bloomberg reported.
The 30-year senior unsecured notes were issued at 5.125 percent and were upsized from $300 million, as a result of investor demand. Investors may have been attracted to the 1.8 percent premium paid over similar-maturity Treasuries, according to Bloomberg, though that represents a fall from the equivalent 2.45 percentage points paid over the benchmark last year.
The notes were offered to institutional buyers in the US via an indirect subsidiary, KKR Group Finance Co. III, the firm announced in a statement on Wednesday. KKR said it intends to use the proceeds for general corporate purposes and that the notes would be guaranteed by the group and its subsidiaries, KKR Management Holdings and KKR Fund Holdings
KKR had not responded to a request seeking comment on the amount or pricing at press time.
The notes are rated ‘A’ by Standard & Poor's (S&P), which assumed the amount would be no more than $500 million.
S&P said: “Initially, we expect the proceeds to add to KKR's liquidity ($2.1 billion as of March 31, 2014) where it will earn minimal return. Over time, we expect management will use proceeds for acquisitions and investments.”
S&P also rates KKR at ‘A’ and said that pro forma debt issuance at the firm, gross debt to fee-related EBITDA, was about 2x.
“We believe earnings will remain strong throughout 2014 as fee-related EBITDA should show healthy growth as a result of KKR's recent acquisitions of KKR Financial and Avoca Capital, as well as strong fundraising in 2013 (which should be fully reflected in 2014 results),” S&P said.
The agency noted negative factors which could affect the firm’s rating included “portfolio risk resulting from the structuring [of] investments in its traditional leveraged buyout funds so that they are highly leveraged. The heavy debt burdens placed on fund investments render them more vulnerable to poor performance in a bad economy.”
“The significant influence of the founding principals–Henry Kravis and George Roberts–cuts both ways. They have a track record of running KKR as a stable, profitable business, though they also pose key-man risk,” the agency added.