Business Context and Reporting Period
This Form 8-K filing by KKR & Co. Inc. reports on events occurring on June 27, 2019. The filing details the entry into a new material definitive agreement by KKR Capital Markets Holdings L.P. and certain subsidiaries (the "Borrowers") to secure financing for their capital markets business operations.
Key Financial Metrics and Debt Structure
- New Credit Facility: A 364-day revolving credit agreement with a capacity of up to $750 million.
- Lender: Mizuho Bank, Ltd., acting as administrative agent.
- Expiration Date: June 26, 2020.
- Interest Rates:
- Eurocurrency loans: LIBOR plus a margin of 1.25% to 2.50%.
- ABR loans: Base rate plus a margin of 0.25% to 1.50%.
- Facility Fee: 0.20% payable on the entire facility amount.
- Collateral: Obligations are secured by certain assets of the Borrowers, including a pledge of equity interests in certain subsidiaries.
- Recourse: Liabilities are non-recourse to other parts of KKR & Co. Inc.
Material Changes Versus Prior Period
The new agreement replaces a prior 364-day revolving credit agreement dated June 28, 2018, which expired on June 27, 2019. The new facility increases the available revolving borrowings from the previous $500 million to $750 million. A portion of the proceeds from the new agreement was utilized to repay outstanding borrowings under the expired prior agreement. The new facility ranks pari passu with the existing $500 million credit facility provided by Mizuho Bank for KKR's capital markets business.
Guidance, Risks, and Covenants
The agreement includes customary representations, warranties, events of default, and affirmative and negative covenants. A specific financial covenant requires the Borrowers to maintain a maximum debt-to-equity ratio. Borrowings under this agreement are restricted solely to facilitating the settlement of debt transactions syndicated by KKR's capital markets business. The filing does not provide specific guidance on future revenue, profit, or cash flow projections, as this is a transactional report rather than an earnings release.
Key Facts for Investor Verification
- Verify the utilization rate of the new $750 million facility versus the prior $500 million facility.
- Confirm the specific debt-to-equity ratio covenant threshold required for the Borrowers.
- Monitor the impact of the 0.20% facility fee on the cost of capital for the capital markets segment.
- Ensure that the non-recourse nature of the debt remains intact and does not expose the parent company to additional liability.