How KKR uses credit facilities

Following KKR’s quarterly earnings call on Thursday, chief financial officer Bill Janetschek answered questions on how the private equity giant uses credit facilities.

“When you think about the administrative ease by having a subscription facility in each one of the funds, we’ve been doing that for the past few years,” Janetschek said. “It’s again more for administrative ease as opposed to anything else.”

“Typically on average, we have a facility, we draw on a facility and it usually gets paid down every six months,” he added.

There are points of contention surrounding subscription credit facilities. KKR’s drawdown period is longer than the typical 90 days and the firm does report returns with and without leverage, which LPs want, Janetschek added.

“As we report to our LPs, we report the IRR because of us having the ability you use that subscription line, but we also report a return as if we didn’t use the subscription line, so we actually have these transparency reports where again we report both for those numbers.”

In an audience poll conducted at Private Equity International’s CFOs and COOs Forum at the start of this year, 42 percent said the average length of loans drawn on their credit line was around three months, and a quarter said they were averaging more than six months.

In a separate poll, 31 percent replied they had “generally extended” the duration of the loans over the course of the last year.