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April 24, 2014 4:52 pm
KKR’s first-quarter earnings beat Wall Street estimates as the New York-based private equity group listed portfolio companies on the public markets and sold down stakes in companies it had already floated.
Santander Consumer USA, a provider of auto loans to subprime buyers part-owned by KKR, raised $1.8bn from its initial public offering in January. KKR also sold down stakes in NXP Semiconductor and Nielsen, the media information group. Distributions to shareholders of $0.43 per share and economic net income of $0.82 per share exceeded the estimates of the 15 analysts covering KKR who expected $0.32 in distributions and $0.51 in ENI.
KKR’s shares rose 1.4 per cent to $23.96 in morning trading in New York. Distributable earnings, a metric preferred by private equity groups that is an equivalent to cash earnings, rose from $291m in the first quarter of 2013 to $447m.
But economic net income – which takes into account realised and unrealised gains and also excludes expenses associated with stock market listings – fell from $648m to $630m, a drop KKR attributed to a small rise in the public equity markets compared with the first quarter last year.
The S&P rose 1.3 per cent in the first quarter, hampering KKR’s ability to mark up the value of its portfolio companies.
At KKR’s capital markets business, fee-related earnings rose 340 per cent to $44.5m, as a result of transactions including arranging acquisition financing for third parties including Southwire and Payless.
Assets under management rose to $102.3bn, an $8bn increase from the end of December.
KKR in December agreed to buy KKR Financial (KFN) in an all-share deal that valued the NYSE-listed corporate debt investor at $2.6bn.
KFN’s portfolio consists largely of debt securities used to finance buyouts KKR and its competitors completed during the peak deal years.
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