KKR Financial (KFN) set plans to raise $500 million by selling stock, just a week after the company stunned investors by delaying repayment on $5.3 billion of asset-backed commercial paper.

The affiliate of giant private equity firm Kohlberg Kravis Roberts said Monday that it will raise $230 million by selling 16 million shares to investors Farallon Capital Management, Fir Tree Partners, JGE Capital Management, Marsico Capital Management, Morgan Stanley, Oak Hill Advisors and Sageview Capital. The company also seeks to raise an added $270 million through a rights offering under which current shareholders will have the option to buy a new share at $14.40 apiece for every five shares they hold. Kohlberg Kravis agreed to buy $100 million worth of stock should the rights offering fail to be fully subscribed.

The news comes on the heels of last Wednesday's announcement that KKR Financial was among the rising number of companies having trouble raising money in the commercial paper market. Shares of KKR Financial dropped 31% last Wednesday after the company said it's talking with investors in its asset-backed secured liquidity note facilities "regarding various alternatives to resolve potential funding disruptions resulting from the current market environment."

Shares in big mortgage players such as

Countrywide

( CFC) and

Thornburg

( TMA) swooned last week as credit markets continued to freeze up in the wake of the subprime mortgage fiasco in the U.S.

KKR Financial said at the time that it had taken a $40 million loss selling $5.1 billion worth of mortgage loans and was looking at a $200 million loss on some notes backing its remaining mortgage investments.

Shares rose 9% early Monday, rising $1.35 to $15.75.