Earnings season: Q1 results

KKR doubles capital deployment

KKR’s private credit arm reported a sharp uptick in capital invested during the first quarter of 2017. The firm still holds a substantial amount of dry powder and is in the market for its third direct lending fund.

The alternative asset manager deployed $893.6 million of private debt over the three months ending 31 March, more than double the $418.3 million it put to work in the first quarter of 2016. Among the first quarter deals was leading a financing of more than $3 billion for Liberty Media’s $4.4 billion acquisition of Formula One. Notably, market conditions in the early part of 2017 were much more favourable than the opening period of 2016, when the year began with weeks of volatile markets.

Uncalled capital held by KKR’s credit arm at the end of the first quarter stood at $6.15 billion, a small portion of the $41.22 billion of dry powder held across all the firm’s strategies. At the end of last year, the credit arm had $6.31 billion of dry powder.

Guggenheim direct lending hits $1.4bn

Guggenheim Investments’ direct lending business invested more than $1.4 billion over the first quarter of the year. “This quarter in particular, the range of things that we did – first lien, second lien and preferred equity deals with everything from $14 million to over $100 million in EBITDA – shows that we are doing what we say we do, which is everything,” said Joe McCurdy, head of originations in the direct lending team.

The largest deal the firm closed last quarter was a $200 million anchor order on a $530 million senior stretch loan to support the refinancing of a physician software provider in February. Other standout deals included a $176 million anchor order on a first lien loan and a second lien loan to support the leveraged buyout of an automotive insurance software company in March and a $125 million investment to another software company in January.
Guggenheim’s total deal volume in 2016 surpassed $4.7 billion, compared with $3.8 billion in 2015.

Oaktree optimistic about distressed debt

Oaktree Capital Management’s distressed debt investments accounted for the lion’s share of the firm’s realisations in the first quarter, executives said on a call.

With the firm distributing a total of $2.6 billion in earnings across its closed-ended funds, distressed debt accounted for roughly $1.73 billion. “We expect distressed debt will continue its favourable realisations over the next nine months,” Bruce Karsh, co-chairman and chief investment officer, said.

 The firm’s largest distressed debt fund, Oaktree Opportunities Fund Xb, raked in $500 million in capital commitments over the quarter, ending the three-month period with $8.9 billion in commitments, according to the earnings results. Karsh said the investment period for Fund Xb would probably start sometime in 2018, with the firm expecting a relatively low market default rate of 2 percent for the overall debt market this year.