Summary
KKR & Co. Inc. (KKR) filed a Current Report on Form 8-K on April 14, 2020, to provide an update on its business in light of the unfolding COVID-19 pandemic, particularly concerning its financial condition and operations. The company reported approximately $2.5 billion in cash and short-term investments and an undrawn $1.0 billion revolving credit facility as of March 31, 2020, indicating sufficient liquidity. KKR is considering an opportunistic offering of debt securities to fund business investments. The filing extensively discusses the potential adverse impacts of COVID-19 on KKR's business. These include the likelihood of reduced valuations for its investments due to market declines (citing significant drops in major indices in Q1 2020), challenges in fundraising, difficulties in exiting existing investments, increased credit and liquidity risks for portfolio companies, potential defaults from borrowers and tenants, and operational risks associated with remote work and employee well-being. While KKR acknowledges that market dislocations may present opportunities, the company cannot reasonably estimate the ultimate magnitude of COVID-19's impact at this time.
Key Highlights
- 1KKR reported robust liquidity as of March 31, 2020, with approximately $2.5 billion in cash and short-term investments and an undrawn $1.0 billion corporate revolving credit facility.
- 2The company is exploring an opportunistic offering of debt securities, intending to use the proceeds for investment in its business.
- 3KKR anticipates that many of its investments will experience valuation declines from their December 31, 2019 levels due to the market impact of COVID-19.
- 4The pandemic poses significant risks to KKR's ability to market new funds, exit existing investments, and manage its portfolio companies, potentially affecting revenues and investment values.
- 5Portfolio companies, especially those in heavily impacted sectors like healthcare, travel, entertainment, hospitality, senior living, and retail, face increased credit and liquidity risks.
- 6KKR is implementing business continuity measures, including remote work, to mitigate operational disruptions and cybersecurity risks associated with COVID-19.
- 7The full magnitude of COVID-19's impact on KKR's financial performance and operations remains uncertain and cannot be reasonably estimated at this time.