KKR Posts $1.1B Investment Loss For First Half

Private equity firm Kohlberg Kravis Roberts & Co. said Tuesday it posted a total investment loss of $1.1 billion in the first half of the year, compared with a year-ago profit.

KKR, which in July set plans to become publicly traded company by buying an affiliated fund, said the rocky financial markets and difficult access to cheap credit has made it difficult to do large buyouts.

“The lack of credit has materially hindered the initiation of new, large-sized transactions for our private equity segment and, together with declines in valuations of equity and debt securities, has adversely impacted our recent operating results,” KKR said in the filing.

KKR’s total investment loss for the first half of 2008 compared with a total investment profit of $3.4 million in the first half of 2007, the filing said.

Its net loss for the first six months of 2008 totals $1.1 million, compared with a profit of $667.4 million, according to a filing with the U.S. Securities and Exchange Commission.

KKR, which has made investments investments in numerous household names such as Toys R Us, mattress maker Sealy and asset manager Legg Mason, said its fee income in the first half of the year was $135.3 million, compared with $115.4 million a year ago.

“If conditions further deteriorate, our business could be affected in different ways,” the private equity firm said.

“Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in net income relating to changes in market and economic conditions.”

Blackstone Group LP, which became the first big U.S. private equity firm to go public when it listed in June 2007, just before the credit crunch, has seen its earnings hit and its shares drop sharply from their $31 listing price. Blackstone shares closed Monday at $16.24, down $1.48, on the New York Stock Exchange.

Founded in 1976, KKR rose to prominence during the debt- fueled leverage buyout (LBO) craze of the 1980s. The firm carried out its first $1 billion LBO in 1984 and was involved in dozens of deals building up to the decade-defining 1988-1989 buyout of RJR Nabisco, which was immortalized in the best selling book “Barbarians at the Gate: The Fall of RJR Nabisco.”

(Reporting by Jessica Hall; editing by Carol Bishopric and Andre Grenon)