How KKR Has Been Deploying and Redeploying Capital

Inside KKR's Latest Valuation Improvement: Gauging the Future

(Continued from Prior Part)

Record high dry powder

KKR & Company’s (KKR) deployment activities saw a strong rise of 51% to $3 billion in 4Q15 and a total of $11 billion over the year, investing across segments like credit and infrastructure. On top of that, KKR ended 2015 with a record level of dry powder at $29.4 billion, and it has $2.5 billion in committed capital expected to be closed in first half of 2016 across a diversified set of strategies and regions.

These numbers give further opportunities to the company for capital deployment in its new funds in Europe and China at cheaper valuations. In 2015, the company raised $20 billion in new funds, with $4.1 billion in Q415. This quarter alone, KKR completed $2 billion in fundraising for the North American Oil and Gas Fund.

In 2015, KKR monetized $2.1 billion in assets and deployed $2.7 billion, primarily increasing its share of Level 1 publically traded securities. In 4Q15, major realizations included the following:

• sold a stake in J.M. Smucker Company (SJM)

• sold Lake Region Medical to Greatbatch (GB)

• sold school memorabilia supplier Jostens to Jarden (JAH)

Favorable debt ratio

KKR’s debt-to-equity ratio also improved in 4Q15. The company’s total debt obligations and preferred share obligations stood at $3.3 billion as of December 31, 2015, compared to $3.4 billion as of September 30, 2015. Its debt obligations included KKR Financial Holdings’ debt obligations of $657.3 million, and 7.4% of Series A preferred shares worth $373.8 million. The company had $1.3 billion in cash and short-term investments.

As of December 31, 2015, KKR has an undrawn $1 billion in revolving credit facility. In addition, it has an undrawn $500 million in revolving credit facility for use in its capital markets business. Its debt-to-equity ratio rose to 0.30x in 4Q15 compared to 0.22x in the one year previously.

Leverage positions

KKR’s balance sheet and leverage position have remained moderate. The company is using debt financing to fund some of its acquisitions in order to take advantage of lower interest rates. KKR’s peers posted the following debt-to-asset ratios:

• The Carlyle Group (CG) posted a 48% debt-to-asset ratio.

• Blackstone Group (BX) posted a 28% debt-to-asset ratio.

• Apollo Global Management (APO) posted a 65% debt-to-asset ratio.

In comparison, KKR’s total debt-to-asset ratio stood at 16.5%, the lowest among its alternative investment peers, which form part of the iShares US Financials ETF (IYF).

Now let’s look at KKR’s share repurchase programs.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - KKR Expects to Post Losses in 1Q16 on Lower Portfolio Valuation

• Part 2 - How KKR’s Private Markets Portfolio Are Performing in 1Q16

• Part 3 - What’s in Store for KKR’s Public Markets Segment