KKR Financial Corp. has begun borrowing on a warehouse facility for its second collateralized loan obligation that it expects will be approximately $1 billion. The specialty finance company, which is managed and advised by KKR Financial Advisors, an affiliate of Kohlberg Kravis Roberts & Co., had bought $222.2 million of loans by the end of March, according to a Securities and Exchange Commission filing. JPMorgan is the counterparty to the warehouse line and is expected to serve as manager, lead placement agent and sole bookrunner for the CLO.
The firm completed a $1 billion debut vehicle called KKR Financial CLO 2005-1 in March (LMW, 3/4). Morgan Stanley led that fund, which issued $773 million of par notes, while KKR Financial retained $227 million of sub notes.
The filing states that the company formed CLO 2005-2 earlier this year and expects to close the deal during the third quarter. The firm also formed KKR Financial CDO 2005-1, Ltd. to purchase and securitize commercial real estate loans and debt securities. Deutsche Bank is providing a $300 million warehouse line for this CDO.
On June 9, KKR filed to raise $839 million in an official public offering and will use some of the proceeds to back its growth in the leveraged loan and high-yield space. The specialty finance company was created to invest across multiple asset classes, principally residential mortgage loans and mortgage-backed securities; corporate loans and debt securities; commercial real estate loans and debt securities; and asset-backed securities.
The management team includes David Netjes, partner, and Saturnino Fanlo, the former treasurer of Wells Fargo & Co., and manager of the firm's investment portfolio. The company is structured as a Real Estate Investment Trust. A KKR spokeswoman declined comment, as the firm is in a quiet period.
