Many frequently asked questions are listed below. If you have questions that are not answered below or elsewhere on our site, please contact us at 415.315.3620.
When did KKR Financial Holdings LLC become a public company?How does KKR Financial Holdings LLC make money?
What kind of investments does KKR Financial Holdings LLC make?
What is KKR Fixed Income's relationship to Kohlberg Kravis Roberts & Co. L.P. (KKR)?
What is share-based compensation expense and the impact of SFAS 123 ( R )?
Does KKR Financial Holdings LLC generate Unrelated Business Taxable Income ("UBTI")?
What is KKR Financial Holdings LLC's Net Asset Value?
What is KKR Financial Holdings LLC's real estate exposure today?
What impact, if enacted, would the Baucus-Grassley Bill introduced on June 14, 2007 have on KFN?
What exchange does KKR Financial Holdings LLC trade on and what is its ticker symbol?
Who is the transfer agent for KKR Financial Holdings LLC?
Does KKR Financial Holdings LLC have a dividend re-investment program or a direct stock purchase plan?
When are distributions paid?
How are KKR Financial Holdings LLC's distributions taxed?
Which analysts cover our stock?
How can I receive copies of financial materials including annual and quarterly reports?
Company Questions
When did KKR Financial Holdings LLC become a public company?
We are a Delaware limited liability company and were organized on January 17, 2007. We are the successor to KKR Financial Corp. (the "REIT Subsidiary"), a Maryland corporation. The REIT Subsidiary was originally incorporated in the State of Maryland on July 7, 2004 and elected to be treated as a real estate investment trust ("REIT") for U.S. federal income tax purposes.
The REIT Subsidiary completed its initial private placement of shares of its common stock in August 2004, and completed its initial public offering of shares of its common stock in June 2005. On June 23, 2005, we effected a reverse stock split of our common stock at a ratio of one share of common stock for every two shares of common stock then outstanding. On May 4, 2007, we completed a restructuring transaction (the "Restructuring Transaction"), pursuant to which the REIT Subsidiary became our subsidiary and each outstanding share of the REIT Subsidiary's common stock was converted into one of our common shares, which are publicly traded on the New York Stock Exchange ("NYSE") under the symbol "KFN". Although we have not elected to be treated as a REIT for U.S. federal income tax purposes, we intend to continue to operate so as to qualify as a partnership, and not as an association or publicly traded partnership taxable as a corporation, for U.S. federal income tax purposes.
For more, see history.
Back to topHow does KKR Financial Holdings LLC make money?
Our income is generated primarily from (i) net interest income and dividend income, (ii) realized and unrealized gains and losses on our derivatives that are not accounted for as hedges, (iii) realized gains and losses from the sales of investments, (iv) realized and unrealized gains and losses on securities sold, not yet purchased, and (v) fee income. For more, see Investment Strategy.
What kind of investments does KKR Financial Holdings LLC make?
KKR Financial Holdings LLC is a specialty finance company that uses leverage with the objective of generating competitive risk-adjusted returns. We invest in financial assets primarily consisting of corporate loans and securities, including senior secured and unsecured loans, mezzanine loans, high yield corporate bonds, distressed and stressed debt securities, marketable and non-marketable equity securities, and credit default and total rate of return swaps. We also make opportunistic investments in other asset classes from time to time. We invest in both cash and derivative instruments.
What is KKR Fixed Income's relationship to Kohlberg Kravis Roberts & Co. L.P. (KKR)?
KKR Financial Holdings LLC is managed by KKR Fixed Income (the "Manager") pursuant to a management agreement. Our Manager is a wholly-owned subsidiary of KKR, a leading sponsor of private equity funds and one of the oldest and most experienced private equity firms specializing in leveraged buyouts. Certain individuals associated with KKR serve on our board of directors and our Manager's investment committee. KKR Financial Holdings LLC enjoys, subject to applicable restrictions, exclusive access to the insight and relationships of KKR and co-invests in private equity investments with KKR from time to time.
What is share-based compensation expense and the impact of SFAS 123 ( R )?
We account for share-based compensation issued to members of our board of directors and our manager using the fair value methodology prescribed by SFAS No. 123®, Shared-Based Payment. Compensation cost related to restricted common stock issued to members of our board of directors is measured at its estimated fair value at the grant date, and is amortized and expensed over the vesting period on a straight-line basis. Compensation costs related to restricted common stock and common stock options issued to our Manager are initially measured at estimated fair value at the grant date, and remeasured on subsequent dates to the extent the awards are unvested. The remeasurement of unvested restricted common stock and common stock options issued to our Manager may cause earnings volatility as changes in the fair value of the unvested grants of restricted common stock are recorded in earnings.
A key measure used by management to determine the amount of cash distributions to be paid to stockholders is net income for share-based compensation expense, a non-GAAP financial measurement consisting of GAAP net income plus share-based compensation expense (a non-cash expense).
Does KKR Financial Holdings LLC generate Unrelated Business Taxable Income ("UBTI")?
An organization that is otherwise exempt from U.S. federal income tax is nonetheless subject to taxation with respect to its "unrelated business taxable income" ("UBTI"). Because we have incurred "acquisition indebtedness" with respect to certain equity and debt securities we hold (either directly or indirectly through subsidiaries that are treated as partnerships or disregarded for U.S. federal income tax purposes), a proportionate share of a holder's income from us with respect to such securities will be treated as UBTI. Accordingly, tax-exempt holders of our shares will likely recognize significant amounts of UBTI. For certain types of tax-exempt entities, the receipt of any UBTI might have extremely adverse consequences. For example, for a charitable remainder trust, the receipt of any such taxable income during a taxable year results in the taxation of all of the trust's income from all sources for such year. Tax-exempt holders of our shares are strongly urged to consult their tax advisors regarding the tax consequences of owning our shares.
During 2005 and 2006, that portion of our distribution attributable to UBTI was approximately 3.2% and 4.4%, respectively. Estimates for 2007 are not yet available.
What is KKR Financial Holdings LLC's Net Asset Value?
We do not disclose net asset value explicitly, however, we do disclose book value per share as part of our quarterly earnings release. See SEC filings, news & media section, or Supplemental Disclosure for First Quarter 2008 Earnings Call.
Stock-related Questions
What is KKR Financial Holdings LLC's real estate exposure today?
As of June 30, 2008, we substantially completed our plan to exit our residential mortgage investment operations through the sale of $5.2 billion of our residential mortgage-backed securities ("RMBS") in the third quarter of 2007 and an agreement in March 2008 with the holders of secured liquidity notes issued by our two asset-backed commercial paper conduits (the "Facilities") to terminate the Facilities. In addition, on June 30, 2008, we completed the sale of a controlling interest in our REIT subsidiary to Rock Capital 2 LLC. As of June 30, 2008, our remaining residential mortgage portfolio consisted of $315.2 million of RMBS, of which $279.6 million was rated investment grade or higher and $35.6 million was rated below investment grade. Of the $315.2 million of RMBS, $199.5 million represented interests in residential mortgage securitization trusts that were not structured as qualifying special-purpose entities ("QSPEs"). According to GAAP we are required to consolidate these trusts as we are the primary beneficial owner of these entities; therefore, we reported total assets of $3.4 billion and total liabilities of $3.2 billion for these trusts in continuing operations as of June 30, 2008.
What impact, if enacted, would the Baucus-Grassley Bill introduced on June 14, 2007 have on KFN?
The legislation introduced by U.S. Senators Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) would tax as corporations all publicly traded partnerships that directly or indirectly derive income from investment adviser or asset management services. The proposed change in the tax treatment of publicly traded partnerships is not expected to apply to KFN because it generates income primarily through the net interest income earned on its investments and gains on the disposition of such investments. KFN does not directly or indirectly derive income from investment adviser or asset management services.
A copy of the Committee on Finance news release - Baucus-Grassley Bill Addresses Publicly Traded Partnerships dated June 14, 2007, may be found at http://finance.senate.gov.
What exchange does KKR Financial Holdings LLC trade on and what is its ticker symbol?
Our stock is listed on the New York Stock Exchange under the ticker symbol "KFN".
Who is the transfer agent for KKR Financial Holdings LLC?
The transfer agent for KKR Financial Holdings LLC is American Stock Transfer & Trust Company.
Does KKR Financial Holdings LLC have a dividend re-investment program or a direct stock purchase plan?
KKR Financial Holdings LLC does not have a dividend re-investment program or a direct stock purchase plan. Stock may be purchased directly through your broker.
When are distributions paid?
We expect to make quarterly distributions to our shareholders, however, the actual amount and timing of distributions is at the discretion of our board of directors and may not be in even amounts throughout our fiscal year. For listing of distributions, see stock information.
How are KKR Financial Holdings LLC's distributions taxed?
Our distributions generally will be taxable as ordinary income to our non-exempt shareholders, although a portion of such distributions may be designated by us as long-term capital gain or may constitute a return of capital. A statement setting forth distributions paid during the preceding year and their federal income status will be posted on our website.
The distributions do not qualify for the 15% tax rate for "qualified distribution income".
KKR Financial Holdings LLC does not provide legal, accounting or tax advice. Investors are encouraged to discuss the tax treatment of distributions with a professional advisor.
Which analysts cover our stock?
For analyst information, see Analyst Coverage.
How can I receive copies of financial materials including annual and quarterly reports?
For public financial statements, go to SEC filings/ reports or call the Investor Relations department at 415-315-3620.
