Fitch gives KKR Financial long-term IDR of BBB

Fitch Ratings said it assigned an initial long-term issuer default rating of BBB to KKR Financial Holdings LLC. The outlook is stable.

The ratings of KKR Financial are supported by its inherent linkage and strong relationship with the parent of its investment manager, KKR & Co. LP (IDR of A by Fitch), which has demonstrated implicit and explicit support of the company in recent years.

Other factors supporting KKR Financial's rating include its experienced management team, the reduction of balance sheet risk in recent years with the removal of mark-to-market financing, relatively low leverage, improved credit trends and operating consistency, solid liquidity, and a demonstrated ability to access the equity markets for growth capital, the agency said.

Rating constraints include the largely secured funding profile, with a heavy reliance on CLO funding historically, the presence of some issuer concentrations within the corporate debt portfolio, a lack of revenue diversity, the capital markets impact on leverage given the requirement to fair value the loan portfolio on a quarterly basis, and intense competition in the space in which the company invests, Fitch added.

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