KKR arsenal includes $15bn of dry powder

Despite having seen its private equity assets decline by about $7bn last year, KKR told investors its dry powder, new business lines and products have it poised for growth.

Kohlberg Kravis Roberts said it has $15.4 billion of dry powder and is increasingly targeting investments in international and emerging markets. It recently hired a senior advisor for Saudi Arabia and agreed a $1.8 billion deal in Asia.

KKR’s dry powder cuts across three regions: $6.2 billion for Europe, $6.1 billion for the US and $3.1 billion for Asia. The figures were released as part of an investor update for KKR Private Equity Investors, the firm’s Euronext-listed fund that it plans to de-list as part of the public listing of KKR’s management company. The NYSE float of the management company has been delayed until at least 31 August; the firm has consistently put off a public listing since the plan was revealed in July 2008 and economic conditions have continued to deteriorate.

Part of the reason for the firm’s mountain of dry powder is because it spent significantly less on private equity deals last year: KKR deployed $3.2 billion in private equity capital in 2008, compared to $15 billion in 2007. One thing not mentioned in the report is KKR’s ongoing fundraising efforts, which include an annex fund to support its European Fund II. It is also raising infrastructure and mezzanine funds, with respective targets of $4 billion and between $1 billion and $3 billion.

KKR collected $640 million in fee income in 2008, including $488 million in management fees and $152 million in advisory fees. The report shows carry and investment income for 2008 at negative $1.4 billion, compared to a gain of $405 million in 2007.

The firm said its private equity assets under management dropped from $42.2 billion in 2007 to $35.3 billion in 2008.

The asset value decline was driven by write-downs in many of the firm’s investments, including an about $1 billion write-down in KKR’s FirstData investment, about $800 in its AllianceBoots acquisition and a $910 million write-down in Energy Future Holdings.

Unrealised losses were offset by gains in some of the firm’s other investments like discount retailer Dollar General, which was up about $300 million; French industrial conglomerate Legrand, up about $700 million; and Avago Technologies, a supplier of parts for mobile technology that was up about $300 million.

The PEI 300 ranks KKR the fourth largest private equity firm in the world, having raised about $40 billion in the last five years.