KKR swings to $1.2bn loss as Europe investments suffer in the downturn

  • @MrNickClark

Kohlberg Kravis Roberts (KKR), the private equity group whose investments include Boots the chemist, suffered a $1.2bn (£730m) loss last year as the financial market slump took its toll. In an unexpected investor update made public yesterday, KKR said it swung to a full-year loss from "economic net income" of $815m in 2007.

The US buyout specialist's assets under management fell by almost 9 per cent. From controlling $53bn in 2007, the group had $48.5bn under management last year.

KKR's worst-hit portfolio was its second European fund, which closed in 2005 after raising $5.7bn and includes the stake in Alliance Boots. It has been forced to write down the fund to a total value of $2.9bn. Other investments in European Fund II include the French directories' group PagesJaunes and the German television group ProSiebenSat.1 Media.

The investment in Alliance Boots was also down to $1.4bn from $2.1bn. Of its other largest investments, the holding in the IT group First Data has been written down from $2.3bn to $1.4bn. KKR enjoyed some success, most notably its $575m investment in the French industrial conglomerate Legrand, which is now worth $1.3bn.

The group said it had $15.4bn of capital not yet invested from its three funds. About $12bn is earmarked for investment in the US and Europe, with the rest aimed at Asia. KKR said in its presentation that Asia was becoming a particular focus. Last month it secured Oriental Brewery, the South Korean group which has 43 per cent of the country's beer market, from Inbev.

The investor presentation was made ahead of the group's potential listing in the US. It plans to delist its subsidiary KKR Private Equity Investors, which floated on the Euronext stock exchange in Amsterdam three years ago. The shares have since fallen by 80 per cent.

KKR's financial performance underlined the issues dogging the industry, as deal-making has dried up because companies have been unable to source cheap debt to fund acquisitions.