presented by: donald homsher. founders of kk&r founded kk&r in 1976 with $120,000 jerome...

Presented by:

Donald Homsher

Founders of KK&R

Founded KK&R in 1976 with $120,000

Jerome Kohlberg and cousins Henry Kravis and George R. Roberts

1987 Jerome Kohlberg resigned

Jerome Kohlberg

KK&R The Corporation

They are a leading global alternative asset manager

Specialize in large complex buyouts

52 Billon AUM

Offices in NYC, Menlo Park, SF, Houston, Washington DC, London, Paris, Hong Kong, Tokyo, Beijing, Mumbai, Dubai, Sydney

Basis of KK&R

KK&R Earnings

Capital Markets

Asset Management

Private Equity

Basic Structure KK&R Holding

Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

KK&RPrivate Equity

KAMAsset

Management

KFNFinancial Holdings

History of KK&R

Early Years

• Pioneers of LBOs

1980s

• Media Interest in LBOs

• Safeway 1986• RJR Nabisco

New Millennium

• Improve operation to create value

• Debt investments

• Financial Holdings LLC

• 30% Public Arm KKR & Co. (Guernsey) L.P.

Explain LBO

80% Debt 20% Equity

Predictable cash flows and potential growth

The acquiring firm makes adjustments to acquired company.

The Split-Up, Whole Firm

KK&R Accomplishments

.

Basic Structure KK&R Holding

Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

KK&RPrivate Equity

KAMAsset

Management

KFNFinancial Holdings

KCM- Capital Markets

Primary Function Raising capital for KK&R funds and portfolio

companies

Secondary Function Providing capital markets advice

Structuring new investment products

Placing, arranging, or underwriting equity and debt transactions

KCM-Capital Markets Sample Deals

SunGard - Underwriter for $500 million senior secured term loan and $500 million senior notes offering

Oncor - Underwriter for $1.5 billion senior secured notes offering (Investment Grade issuer)

Northgate Information Solutions - Placement agent for mezzanine financing

Rockwood Holdings - Underwriter for $350 million follow-on equity offering

Basic Structure KK&R Holding

Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

KK&RPrivate Equity

KAMAsset

Management

KFNFinancial Holdings

Explain J Curve

10%

KK&R Private Equity

Global leader of Private Equity

Last three decades have sponsored 14 private equity funds with a told capital commitments of $59.3 billion

Post investment they management over the long term to revitalize the business.

KK&R employees/managers invested $1.9 billion

Private Equity Allocation

Active Private Equity Funds

Basic Structure KK&R Holding

Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

Private EquityKAMAsset

Management

KFNFinancial Holdings

KAM-Asset Management

Is KKR investment approach focused on fundamental, long-term value investing

Advantages.

Quality of Deals. KAM access investment opportunities through KKR private equity professionals

Capital Markets Intelligence. Through KKR Capital Markets KAM has market leadership in developing unique, flexible, long-term financing for its credit portfolios.

Pricing Power. Ability to raise capital with the help of KKR Capital Markets.

Basic Structure KK&R Holding

Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

KK&RPrivate Equity

KAMAsset

Management

KFNFinancial Holdings

KFN Portfolio Investment Portfolio Composition

Corporate Loans--- 86% Total Corporate Bonds--- 10% Total99% Dept Instruments

Asset Management KFN

KKR Financial is externally managed by KKR Financial Advisors.

Real estate investment trust in July 2004, KKR Financial converted in May 2007 and now invests primarily in corporate loans and other securities.

Base fee of 1.75% incentive fees of 25% of profits earned above a certain hurdle rate.

Deferred 50% of the base management fee for 2009.

KFN will opportunistically invest in equity securities to boost its returns.

2008 loan loss provisions $25 million end 2008 $428 million. Continue in 2009 with an additional $177 million in losses.

For 2007, $2.16 per share, or approximately 80% of its net income. Effective in the fourth quarter of 2008, KFN eliminated its dividend. We do not expect a dividend to be paid in 2009.

S&P Review of KFN

Basic Structure KK&R Holding Company

KK&R

KKR & Co. (Guernsey)

L.P.

KCMCapital Markets

KK&RPrivate Equity

KAMAsset

Management

KFNFinancial Holdings

Represents 30% KK&R

KKR V.S. Euronext Amsterdam

YTD Comparison

KKR = 325% Gain

Euronnext = 20% Gain

3 Year Comparison

KKR = 60% Loss

Euronnext = 27% Loss