KKR Financial Holdings LLC (KFN or the Company) introduces results for the fourth quarter and year ended 31 December 2008.
KFN reported a net loss of $1.2 billion, or ($7.85) per diluted common share for the quarter ended 31 December 2008, as compared to net income of $59.9 million, or $0.52 per diluted common share for the quarter ended 31 December 2007.
In response to the continued deteriorating economic environment, the Company took several actions during the quarter related to its investment portfolio. During the quarter, the Company recorded a provision for loan losses of $471.5 million, which net of charge-offs of $25.7 million, increased the Company’s allowance for loan losses to $480.8 million as of 31 December 2008, from $35.0 million at 30 September 2008.
During the quarter, the Company also recorded an impairment charge totaling $454.3 million for its securities available-for-sale portfolio which consists primarily of high yield debt securities. Of this amount, $216.5 million relates to the Company’s investments in the senior and subordinated bonds of one issuer that were sold subsequent to year end.
KFN’s quarterly results also reflect losses totaling $156.3 million on sales of assets during the quarter and a write-down totaling $137.3 million of certain corporate loans that the Company designated as held for sale.
Of the $156.3 million of realized losses on sales of assets during the quarter, $137.5 million relates to assets that were held in the Company’s market value collateralized loan obligation (“CLO”) transaction, Wayzata Funding LLC (“Wayzata”).
The Company’s results for the quarter also include approximately $72.9 million of realized and unrealized losses on derivative transactions which are primarily attributable to approximately $100.0 million in losses on total rate of return swaps that are used to finance certain investments in loans and for which the aggregate losses were partially offset by gains on credit default swaps where the Company purchased protection on both single name and index bond positions and foreign exchange forward contracts.
KFN reported a net loss of $1.1 billion, or ($7.68) per diluted common share, for the year ended 31 December 2008, as compared to a net loss for the year ended 31 December 2007 of $100.2 million, or ($1.11) per diluted common share.
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