KKR’s securitized debt attracts $210 mn from Korea’s Lotte, Hana: report

  • 2016-11-30

South Korea’s Hana Asset Management Co. Ltd. will invest $110 million in principal-protected debt issued by Kohlberg Kravis Roberts (KKR) & Co. on Nov. 30, after Lotte Insurance Co. Ltd. has agreed to commit $100 million to the debt backed by assets the private equity firm is managing, according to local media reports.

The debt, or KKR Funding, is part of $390 million which the global private equity company aimed to raise through debt issuance this month to securitize $500 million worth of stocks and non-cash assets. It is expected to deliver an annual return of a 3~7.5%, online news outlet etoday said on Nov. 29, citing investment banking sources.

The investment by two South Korean financial firms came after MassMutual Financial Group, a U.S. life insurance company, had committed $150 million to the securitized debt. Japan’s Dai-ichi Life Insurance Company is also known to participate in the KKR Funding which carries a maturity of 10 and a half years, according to a separate report from the Maeil Business Newspaper earlier this month.

Hana Asset teamed up with six South Korean pension funds for the investment.

A principal guarantee and a scheme to share profits from the underlying assets lured insurance companies, which shunned risky assets ahead of tightened capital rules, to the private equity asset. Any losses from the investment will be made up by reinsurance companies such as Allied World Assurance Company Ltd. (AWAC) and HCC Reinsurance Company Ltd., a KKR source told Maeil.

“From the moment when KKR planned this funding, KKR contacted Lotte Insurance and signed the investment agreement last month,” the newspaper quoted the unnamed KKR source as saying.

At maturity, the Korean investors will get back the principal of the KKR Funding’s senior debt and receive 10% of profits the underlying assets may produce, the daily added.

<Edited by Yeonhee Kim>