Private equity firm Kohlberg Kravis Roberts & Co KKR posted a substantial loss in 2008 as the global economic downturn took its toll on the firm’s investments.
KKR lost US$1.19bn before taxes last year, compared with pre-tax economic net income of about US$815m in 2007, according to a presentation by the private equity firm on Sunday.
“Economic net income” generally excludes the impact of income taxes, noncash charges related to vesting of equity-based compensation and amortization of intangible assets.
KKR said its averaged adjusted pretax economic net income from 2004-07 was US$926m.
The private equity industry has been struggling with numerous problems — absence of leverage for new deals, troubled portfolio companies and investors hurt by equity market falls.
KKR, co-founded by “buyout king” Henry Kravis, has the added problem of having announced plans to take itself public just prior to the markets plunging.
KKR said total annual fee income fell 27% to US$640m in 2008. Total assets under management dipped to US$48.5bn from US$53.2bn.
The New York firm said it has US$15.4bn of uninvested capital across its three geographic funds: Europe, US and Asia.
KKR released the information to provide investors with an update on its financial condition as it continues to consider buying out its Amsterdam-listed fund, KKR Private Equity Investors LP. The deal would be key to KKR’s plans for a US stock listing.
KKR’s plans to become a publicly traded company hinge on the deal to buy the KPE fund. If that transaction is scrapped, the listing would be thrown into question.
KKR announced the complicated transaction in July 2008, saying it would buy KPE, delist it from Euronext and launch the combined new company on the New York Stock Exchange under the stock symbol “KKR.” KKR had previously considered a more conventional initial public offering.
Reporting by Michael Erman; Additional reporting by Michael Flaherty in Hong Kong. Editing by Anshuman Daga