U.S. Markets

Exclusive: KKR raises $4 billion to invest in coronavirus-stricken credit - sources

NEW YORK (Reuters) - KKR & Co Inc KKR.N has raised close to $4 billion from investors to snap up corporate debt at significant discounts, as the coronavirus outbreak weighs on big swathes of the corporate world, people familiar with the matter said on Thursday.

A wave of interventions from the Federal Reserve and trillions of dollars in U.S. government stimulus have allowed many companies battered by the crisis to continue to borrow. Yet several firms, particularly those whose debt is rated ‘junk’ by credit rating agencies, are struggling to stay afloat.

They have seen the value of their debt plunge, leaving them with limited or no access to capital markets. Their battered bonds represent attractive opportunities for KKR, the sources said.

KKR raised $2.8 billion for its KKR Dislocation Opportunities Fund and more than $1.1 billion through separately managed accounts investing alongside the fund, the sources said. The fund is a rebranding of KKR’s Special Situations Fund III, which the private equity firm was marketing to investors last year with a $1.5 billion target, Reuters reported at the time.

“We know this market is not a forgiving one, but as we navigate this global crisis together, we will find attractive opportunities to invest in good companies with strong fundamentals and sustainable cash flows at discounted prices,” Chris Sheldon, KKR’s head of leveraged credit, wrote in a letter to investors in April.

After it rebranded the credit investment fund for the COVID-19 era, KKR completed its fundraising in eight weeks, securing capital commitments from over 20 new institutional investors, the sources said.

KKR and its employees invested about $447 million in the new fund, which will have an 18-month investment period, the sources added.

KKR had about $67.6 billion in assets under management in its credit business as of the end of March.

Reporting by Chibuike Oguh in New York; Editing by David Gregorio