UPDATE 1-KKR Financial cuts div, gets more time on debt

* Enters into $300 million senior secured credit facility

* Will not pay third-quarter dividend

* Says net income $49 million

* Says exploring strategic alternatives (Adds conference call details,paragraphs 2, 6-8, 12-13, byline)

By Megan Davies

NEW YORK, Nov 10 (Reuters) - KKR Financial Holdings LLC (KFN.N), a publicly traded debt fund managed by private equity firm Kohlberg Kravis Roberts & Co, said on Monday it will not pay a third-quarter dividend, and arranged for more time to pay off its borrowings.

The company also said on a conference call it was exploring various strategic alternatives, including a change in corporate structure, a conversion to a bank and the acquisition of a depositorary.

It also reported third-quarter net income of $49 million, or 33 cents a share, compared with a year-ago loss of $261.5 million, or $2.98 per diluted share.

KKR Financial said it entered into a $300 million senior secured revolving credit facility that matures in November 2010. Proceeds from this, together with existing liquidity, will be used to retire an existing revolving credit facility due June 2009, which currently has $368.3 million in borrowings outstanding.

It has also arranged a $100 million standby unsecured revolving credit facility that matures in December 2010, which can be used if needed in bridging the difference between the $368.3 million and the $300 million.

"In today's environment obtaining any financing is actually a remarkable achievement," co-founder Saturnino Fanlo said on a conference call to analysts. "We're very pleased we were able to execute these transactions, albeit at a significantly higher cost than financing transactions we were able to execute prior to the current financial crisis in the market."

The company does not expect to borrow against the $100 million standby credit line initially as it has sufficient liquidity to bridge the gap between its previous and new borrowing facilities, Fanlo said. He said the standby facility was an "insurance policy".

The company said the move gives it increased flexibility in terms of the decisions it makes managing its portfolio.

DIVIDEND CUT

KKR Financial said it will not pay a dividend for the third quarter of 2008 so it can retain capital.

"The company's decision to suspend its dividend to shareholders stems from the unprecedented level of illiquidity in the global financial markets and the company's determination that maintaining maximum flexibility through retaining capital is prudent given the current environment," it said in a statement.