KKR Financial Holdings
reached an agreement with the holders of some of its short-term paper to turn over the collateral backing the notes, a deal that will terminate the securities without a default.
The secured liquidity notes were issued by two asset-backed conduits sponsored by KKR Financial's REIT subsidiary.
All of the triple-A-rated residential mortgage-backed securities funding the secured liquidity notes have been returned to the noteholders. About $3.5 billion of the notes and related mortgage-backed securities will be removed from KKR Financial's balance sheet.
The company, an affiliate of Kohlberg Kravis Roberts, also signed a definitive agreement to sell a controlling interest in its REIT unit to Rock Capital 2 LLC, an arrangement that should be completed in the second quarter. Terms of the transaction weren't disclosed.
KKR Financial will take a charge of $5.5 million, which the company believes "is an appropriate amount to resolve both the refinancing issues relating to the secured liquidity notes issued by the REIT's two asset-backed conduits and complete the exit of our mortgage-related business."
Separately, KKR Financial is proposing a public offering of 20 million common shares. Net proceeds from the offering will be used for general corporate purposes. Shares of KKR Financial were falling 8.7% to $11.56.
This article was written by a staff member of TheStreet.com.