KKR & Co. Inc., a global investment firm, has entered into a significant credit agreement, enhancing its financial flexibility. On July 3, 2024, KKR, through its indirect subsidiaries KKR Group Partnership L.P. and Kohlberg Kravis Roberts & Co. L.P., secured a Third Amended and Restated Credit Agreement with a consortium of lenders led by HSBC (LON:HSBA) Bank USA, National Association.
This new Corporate Credit Agreement replaces the previous arrangement from August 4, 2021, and provides a senior unsecured multicurrency revolving credit facility amounting to $2.75 billion. Additionally, KKR holds an option to increase the facility by up to $750 million, contingent on certain conditions, including lender approval, potentially raising the total to $3.5 billion.
The facility, which matures on July 3, 2029, offers the flexibility for early repayment, termination, or reduction of commitments without incurring penalties. Interest rates for U.S. dollar borrowings are tied to term SOFR or an alternate base rate, with margins influenced by KKR’s corporate ratings.
KKR has committed to a facility fee on total commitments, also determined by a corporate ratings-based grid. The agreement stipulates a maximum leverage ratio of 4.0x covenant EBITDA, excluding specific subsidiary debts, and mandates maintaining at least $150 billion in fee-paying assets under management.
The credit facility includes standard affirmative and certain restrictive covenants, such as limitations on the pledging of subsidiary stock. It also outlines customary events of default, which could lead to the acceleration of outstanding loans and termination of commitments.
This financial maneuver is part of KKR's strategic initiatives to bolster its capital structure and support its ongoing corporate activities. The information disclosed is based on a press release statement from KKR & Co. Inc., as filed with the SEC.
In other recent news, KKR & Co. has seen a flurry of activity, with Jefferies raising its price target on the company's shares to $126.00, despite a slight decrease in the second quarter 2024 distributable earnings per share estimate and a reduction in the forecast for fee-related earnings. This is largely due to an expected increase in deal volume in the second half of 2024, including gains from the recently closed Telecom Italia (BIT:TLIT) deal.
In the realm of mergers and acquisitions, KKR, alongside Francisco Partners, is in the final stages of bidding to acquire education software company, Instructure, while also securing Discover Financial's student loan portfolio valued at $10 billion in collaboration with Carlyle. The firm has also acquired $2.1 billion worth of assets from Quarterra Multifamily in a significant real estate move.
Analysts from Jefferies remain optimistic about KKR's future, expecting a significant increase in monetization as deal volumes are projected to rise in the latter half of the year. They anticipate a lower management fee revenue and adjusted capital markets revenue due to subdued middle-market deal activity.
In fundraising efforts, KKR is targeting $20 billion for its new private equity fund, North America Fund XIV. The firm has also acquired Superstruct Entertainment, a group with over 80 music festivals across Europe and Australia, from Providence Equity Partners. These recent developments highlight KKR's active role in various sectors, including education technology, financial services, real estate, fundraising, and live entertainment.
InvestingPro Insights
KKR & Co. Inc. has demonstrated a robust financial performance with a significant increase in revenue over the last twelve months as of Q1 2024, showcasing a 323.59% growth. The firm's market capitalization stands at a solid $97.07 billion, reflecting investor confidence in its business model and market position. With a P/E ratio of 24.04, KKR appears to be valued in line with its earnings growth, which is further underscored by a low PEG ratio of 0.02, indicating potential undervaluation relative to its earnings growth rate.
Investors might also take interest in KKR's dividend reliability, as the firm has raised its dividend for 4 consecutive years, and maintained payments for 15 consecutive years, a testament to its commitment to shareholder returns. Moreover, KKR's stock has experienced a large price uptick over the last six months, with a six-month price total return of 28.54%, and a staggering one-year price total return of 93.04%, highlighting its strong market performance.
For those looking to delve deeper into KKR's financial health and future prospects, additional InvestingPro Tips reveal that despite analysts anticipating a sales decline in the current year, the company is predicted to remain profitable.
With 12 more InvestingPro Tips available, including detailed earnings revisions and industry comparisons, investors can gain a comprehensive understanding of KKR's position in the capital markets industry. To access these insights, consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.
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