KKR delays listing to next year as crisis bites

By Reed Stevenson and Paritosh Bansal

AMSTERDAM/NEW YORK (Reuters) - Kohlberg Kravis Roberts & Co KKR.UL delayed plans to go public after its Amsterdam-listed affiliate suffered big investment losses, the latest blow to the buyout firm's initial public offering plans due to the credit crisis.

KKR, whose investments include asset manager Legg Mason Inc (LM.N) and mattress maker Sealy Corp (ZZ.N), had been planning to merge with KKR Private Equity Investors LP (KPE) (KKR.AS) and list on the New York Stock Exchange by year's end. But that has been put off until next year, and KKR did not indicate when in 2009 it expected the deal to come.

KKR officials said on a conference call the delay had more to do with the deal process than market turmoil, and the firm expected the transaction to close as structured. The U.S. Securities and Exchange Commission review of the registration statement related to the deal was continuing, it said.

The delay marked the latest IPO to stall amid the global credit crisis and is another indication of problems faced by private equity firms as investments sour in the economic slowdown and a credit freeze makes new deals scarce.

It has been nearly three months since the last U.S. IPO got off the ground, and some analysts don't expect any stock flotations until sometime in 2009.

"It's inconceivable that you can do an IPO today with anything that resembles a financial product," said James Cox, a professor of corporate and securities law at Duke University.

KPE went public in Amsterdam in May 2006 in an offering of $5 billion, or $25 per share. Its shares fell 13.8 percent to $4.25 on Monday, trading at less than one-fifth of the IPO price.

"Certainly, the IPO markets are pretty sluggish at this point. That's really across the board," said Michael Kim, an analyst at Sandler O'Neill. "But on top of that, the markets have been weak, and private equity faces some kind of macro headwinds."

KKR initially signaled its plan to list in July 2007, when it filed a registration statement for an IPO. But the credit crunch hit, and the prospects of going public for any company became tough.

KKR's plan was announced shortly after rival Blackstone Group LP's (BX.N) initial stock flotation was successful. Since then, Blackstone shares are down 75 percent.

In late July, KPE and KKR, which was founded in 1976 and rose to prominence during the debt-fueled leveraged buyout craze of the 1980s, announced that they planned to merge their businesses, delist from Amsterdam's exchange and list on the New York Stock exchange.

"Subject to the satisfaction or waiver of the conditions to closing, the parties remain committed to completing the transaction," KPE said in a statement on Monday.

INVESTMENT LOSSES

KPE's net asset value, which tracks the worth of its investment portfolio, fell 22.6 percent to $18.85 per share at the end of September from $24.36 at the end of 2007, the fund said.

In that period, KPE said its investments, including the effects from currency changes, depreciated $999.5 million. Two-thirds of that occurred in the third quarter, when the global financial crisis deepened and led to several financial institution failures or buyouts.