KKR in $1.2bn loss as investments dive

KOHLBERG Kravis Roberts (KKR), the US private equity giant founded by &ldquo;buyout king&rdquo; Henry Kravis, yesterday reported a $1.2bn (&pound;729m) loss for last year, blaming the effects of the economic downturn on its investments.<br /><br />In its annual update to investors, the New York-based group said total annual fee income fell 27 per cent to $640m (&pound;388m) in 2008. This was accompanied by a dip in total assets under management to $48.5bn (&pound;29.4bn) from $53.2bn at the end of 2007.<br /><br />The group reported further pain on its second European fund, which has made investments in UK pharmacy chain Alliance Boots among others. It revealed write-downs on the $5.8bn European Fund II&rsquo;s assets worth almost half their original values. A staggering $2.8bn (&pound;1.7bn) was written off. <br /><br />KKR is currently approaching investors to raise $569m (&pound;345m) for an emergency annex fund to support European Fund II. <br /><br />The group said overall it now holds $15.4bn (&pound;9.34bn) of uninvested capital across its three geographic fund areas &ndash; Europe the US and Asia. <br /><br />The loss for last year compares to a pre-tax economic net income &ndash; a measure which excludes certain taxes and charges &ndash; of $815m (&pound;495m) reported 2007.<br /><br />KKR pointed out yesterday its averaged adjusted pre-tax economic net annual income in 2004 to 2007 was $926m (&pound;561.6m). <br /><br />The private equity industry has been struggling with numerous problems, including the absence of leverage for new deals, troubled portfolio companies and investors hurt by equity market falls.<br /><br />KKR has also been affected by its announcement that it would go public, made in July 2008 &ndash; just before markets plunged.