Business Context and Reporting Period
This Form 8-K filing by KKR & Co. L.P. reports on events occurring on June 28, 2018. 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 Agreement Terms
- Facility Amount: Up to $750 million in revolving borrowings.
- Term: 364 days, expiring on June 27, 2019.
- Interest Rates:
- Eurocurrency loans: LIBOR plus 1.25% to 2.50%.
- ABR loans: Base rate plus 0.25% to 1.50%.
- Facility Fee: 0.20% payable on the entire facility amount.
- Collateral: Secured by certain assets of the Borrowers, including a pledge of equity interests of certain subsidiaries.
- Recourse: Liabilities are non-recourse to other parts of KKR; obligations are limited to the Borrowers.
Material Changes Versus Prior Period
The new agreement replaces a prior 364-day revolving credit agreement dated June 29, 2017, which expired on June 28, 2018. The new facility increases the available revolving credit from the previous $500 million to $750 million. The new facility ranks pari passu with the existing $500 million credit facility provided by Mizuho Bank, Ltd. 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 are restricted to facilitating the settlement of debt transactions syndicated by KKR's capital markets business. The filing does not provide specific guidance on future earnings or broader company outlook beyond this specific financing arrangement.
Investor Verification Checklist
- Verify the utilization status of the new $750 million facility versus the prior $500 million facility.
- Confirm the current debt-to-equity ratio of the Borrowers to ensure compliance with the new financial covenant.
- Review the specific assets pledged as collateral for the facility.
- Monitor the interest rate environment (LIBOR and Base Rate) to assess the cost of borrowing under the new margins.