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KKR listing creates $2bn LP

The recently listed KKR Private Equity Investors vehicle creates an immediate pool of nearly $2bn for KKR’s 2006 Fund – a major boost to the firm’s ongoing fundraising effort.

When KKR Private Equity Investors went public on the Euronext Amsterdam exchange yesterday, it created a flexible pool of nearly $5 billion (€3.9 billion), with about $2 billion of that earmarked for its giant new private equity fund.

According to a private equity advisor who has seen the prospectus for the new publicly traded vehicle, KKR Private Equity Investors, an affiliate of New York private equity firm Kohlberg Kravis Roberts, will commit 40 percent of its proceeds to the 2006 Fund, which is currently in fundraising mode. At just under $5 billion in capital raised in the IPO, this means a nearly $2 billion commitment to the new KKR private partnership.

KKR recently asked one of its long-time limited partners, the Washington State Investment Board, for a $3 billion commitment to its 2006 Fund. Washington has instead committed an initial $1.5 billion, which is still among the largest LP commitments ever.

KKR has not set a target for the 2006 Fund, although most industry observers expect the vehicle to draw in excess of $10 billion. Separately, The Blackstone Group and Texas Pacific Group are each in the market with fundraisings that many market participants expect to hit or exceed $15 billion each.

The KKR listed vehicle will also acquire an LP interest in KKR’s second European fund, and acquire a 2.5 percent direct stake in Capmark Financial Group, the renamed GMAC Commercial Holding deal from KKR’s Millennium Fund.

KKR will invest undrawn capital from the listed vehicle in various fixed-income securities and money market instruments, according to the prospectus.

According to the private equity advisor source, the KKR IPO may generate roughly $272 million in fees for the investment banks and law firms that worked on the deal, based on an analysis of the prospectus’ stated expense ratio. Goldman Sachs, Citigroup and Morgan Stanley led the deal as joint coordinators and book runners.