Business Context and Reporting Period
This Form 8-K Current Report was filed by KKR & Co. L.P. on March 17, 2016. The filing documents the completion of an underwritten public offering of preferred units and the associated amendments to the company's governing partnership and limited liability company agreements.
Key Financial Metrics and Capital Structure
- Issuance: 13,800,000 6.75% Series A Preferred Units were issued.
- Over-Allotment: The issuance includes 1,800,000 units purchased by underwriters to cover over-allotments.
- Dividend Rate: 6.75% per annum, payable quarterly.
- First Payment Date: June 15, 2016.
- Dividend Type: Non-cumulative.
- Redemption Price: $25.00 per unit (standard); $25.25 per unit (Change of Control prior to June 15, 2021).
The filing text does not provide specific values for revenue, profit, cash flow, operating margins, total debt, or liquidity ratios, as this report focuses on a capital transaction rather than periodic financial performance.
Material Changes and Governance
On March 17, 2016, the Partnership amended its Amended and Restated Limited Partnership Agreement to establish the rights, preferences, and powers of the Series A Preferred Units. Concurrently, KKR Management LLC amended its LLC Agreement, and the limited partnership agreements of KKR Management Holdings L.P., KKR Fund Holdings L.P., and KKR International Holdings L.P. were amended to create preferred units with economic terms mirroring the Series A Preferred Units.
A material restriction was introduced: unless distributions are declared and paid (or set apart) on the Series A Preferred Units for the current quarter, the Partnership cannot declare or pay distributions on any Junior Units, nor can it repurchase any Junior Units during that period.
Outlook, Risks, and Unusual Items
- Redemption Rights: The Partnership may redeem the units at its option on or after June 15, 2021. Holders have no right to require redemption.
- Change of Control: If a Change of Control Event occurs prior to June 15, 2021, the Partnership may redeem the units within 60 days at $25.25 per unit. If the Partnership fails to redeem within 31 days of such an event, the distribution rate increases by 5.00% (to 11.75%) beginning on the 31st day following the event.
- Legal Opinions: The filing includes legal opinions from Simpson Thacher & Bartlett LLP regarding the validity of the issuance and certain tax matters.
Investor Verification Checklist
- Verify the total capital raised by multiplying the 13,800,000 units by the $25.00 liquidation preference.
- Review the "Second Amended and Restated Limited Partnership Agreement" (Exhibit 3.1) for detailed definitions of "Junior Units" and "Change of Control Event."
- Confirm the impact of the new non-cumulative dividend requirement on the company's ability to pay common distributions in future quarters.
- Assess the potential dilution or seniority impact of the new preferred units relative to existing capital structure.