KKR sells some of CLO 2009-1 investments, pays down all senior debt

By Angela McDaniels

Tacoma, Wash., July 28 - KKR Financial Holdings LLC sold some of its investments financed in KKR Financial CLO 2009-1, Ltd. in order to generate proceeds to repay the entire amount of senior notes outstanding, according to a company news release.

The amount of notes outstanding was approximately $561 million as of March 31.

The company said it took this action in response to both the strong improvements in the credit market and increases in loan prices during the second quarter of 2009.

KKR Financial focused the sales on assets that had the highest prices relative to par.

The remaining outstanding senior notes of CLO 2009-1 were retired on Friday.

Prior to the retirement of the senior debt, an affiliate of the company held a 20% interest in the subordinated notes issued by CLO 2009-1. As part of the deleveraging of CLO 2009-1, the subordinated notes in CLO 2009-1 held by the company's affiliate were retired in exchange for a 20% interest in each of CLO 2009-1's assets that remained following the deleveraging.

KKR Financial now holds the residual assets of CLO 2009-1, which consists of approximately $317 million par amount of corporate debt investments with an estimated fair market value of $242 million and approximately $15 million of cash and receivables.

The company said it believes that these assets currently generate approximately $11 million of annualized cash interest income that would have otherwise been used to amortize and pay interest on the senior notes issued by CLO 2009-1, which had a coupon of Libor plus 425 basis points.

The deleveraging transaction is one of several steps taken by the company with respect to four of its collateralized loan obligation transactions that management believes will have a positive impact on KKR Financial's liquidity outlook, according to the release.

KKR Financial is a specialty finance company based in San Francisco.

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