KKR Financial to price $125 million seven-year convertibles to yield 7.25%-7.75%, up 22.5%-27.5%

By Rebecca Melvin

New York, Jan. 11 - KKR Financial Holdings LLC planned to price $125 million of seven-year convertible senior notes at par of $1,000 on Tuesday that were talked to yield 7.25% to 7.75% with an initial conversion premium of 22.5% to 27.5%, according to a market source.

The registered offering has a 15% over-allotment option to purchase up to an additional $18.75 million of notes.

Citigroup Global Markets Inc., Bank of America Merrill Lynch and J.P. Morgan Securities Inc. are acting as joint bookrunners for the offering. KKR Capital Markets LLC is acting as a co-manager of the offering.

KKR Financial intends to use substantially all of the proceeds to repurchase or repay a portion of its existing senior debt, with the remaining proceeds to be used for general corporate purposes.

On or after year three, KKR can terminate investors' conversion rights if KKR's share price exceeds 150% of the conversion price for 20 out the last 30 trading days.

Investors may convert at a preferred conversion rate, or make whole, during the notice period.

There are no puts.

San Francisco-based KKR Financial is a real-estate investment trust and specialty finance company.

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