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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Kkr Financial Holdings Llc | NYSE:KFN | NYSE | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 11.54 | 0.00 | 01:00:00 |
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Delaware
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11-3801844
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
|
|
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555 California Street, 50
th
Floor
San Francisco, CA
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94104
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
x
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Page
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September 30, 2016
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December 31, 2015
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||||
Assets
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Cash and cash equivalents
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$
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677,184
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|
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$
|
320,122
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Restricted cash and cash equivalents
|
384,559
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|
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487,374
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Securities, at estimated fair value
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213,191
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417,519
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||
Loans, at estimated fair value
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3,755,783
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5,188,610
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||
Equity investments, at estimated fair value
|
213,068
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262,946
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Oil and gas properties, net
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111,631
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|
114,868
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Interests in joint ventures and partnerships, at estimated fair value
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779,027
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888,408
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Derivative assets
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32,899
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40,852
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Interest and principal receivable
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16,672
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|
22,196
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Receivable for investments sold
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135,346
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19,930
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Other assets
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11,231
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25,570
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Total assets
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$
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6,330,591
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$
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7,788,395
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Liabilities
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|||
Collateralized loan obligation secured notes, at estimated fair value
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$
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3,456,988
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$
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4,843,746
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Collateralized loan obligation junior secured notes to affiliates, at estimated fair value
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60,919
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—
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||
Senior notes
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411,836
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413,006
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Junior subordinated notes
|
249,730
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248,498
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Payable for investments purchased
|
361,523
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220,085
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||
Accounts payable, accrued expenses and other liabilities
|
33,625
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|
43,667
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||
Accrued interest payable
|
18,715
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|
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20,619
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||
Related party payable
|
3,528
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3,892
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Derivative liabilities
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52,324
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43,892
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Total liabilities
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4,649,188
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5,837,405
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Equity
|
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Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both September 30, 2016 and December 31, 2015
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—
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—
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||
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both September 30, 2016 and December 31, 2015
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—
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—
|
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||
Paid-in-capital
|
2,764,061
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|
2,764,061
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||
Accumulated deficit
|
(1,148,413
|
)
|
|
(895,950
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)
|
||
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity
|
1,615,648
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|
1,868,111
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Noncontrolling interests
|
65,755
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|
|
82,879
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||
Total equity
|
1,681,403
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|
|
1,950,990
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|
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Total liabilities and equity
|
$
|
6,330,591
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$
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7,788,395
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For the three months ended September 30, 2016
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For the three months ended September 30, 2015
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For the nine months ended September 30, 2016
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For the nine months ended September 30, 2015
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||||||||
Revenues
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|||||||
Loan interest income
|
$
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51,000
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$
|
62,743
|
|
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$
|
175,434
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|
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$
|
210,203
|
|
Securities interest income
|
3,795
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|
|
15,297
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15,751
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|
47,146
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||||
Oil and gas revenue
|
2,387
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|
|
3,876
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|
8,285
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|
|
13,055
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|
||||
Other
|
13,835
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7,193
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30,014
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22,182
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|
||||
Total revenues
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71,017
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89,109
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|
229,484
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292,586
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||||
Investment costs and expenses
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|||||||
Interest expense
|
119,039
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|
47,422
|
|
|
224,346
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|
|
161,589
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|
||||
Interest expense to affiliates
|
5,437
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|
|
—
|
|
|
6,446
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|
|
—
|
|
||||
Oil and gas production costs
|
247
|
|
|
248
|
|
|
702
|
|
|
498
|
|
||||
Oil and gas depreciation, depletion and amortization
|
914
|
|
|
1,404
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|
3,238
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|
|
4,409
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|
||||
Other
|
4,956
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|
1,278
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|
6,912
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|
|
3,959
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|
||||
Total investment costs and expenses
|
130,593
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|
50,352
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|
241,644
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|
170,455
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|
||||
Other income (loss)
|
|
|
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|
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|
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|||||||
Net realized and unrealized gain (loss) on investments
|
74,436
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|
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(232,549
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)
|
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(33,085
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)
|
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(219,058
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)
|
||||
Net realized and unrealized gain (loss) on derivatives and foreign exchange
|
(168
|
)
|
|
(10,304
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)
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(13,564
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)
|
|
(3,545
|
)
|
||||
Net realized and unrealized gain (loss) on debt
|
131,712
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|
54,860
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|
67,737
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(33,933
|
)
|
||||
Net realized and unrealized gain (loss) on debt to affiliates
|
2,706
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|
|
—
|
|
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(278
|
)
|
|
—
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|
||||
Other income (loss)
|
4,680
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|
|
2,544
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|
|
7,620
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|
|
9,958
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|
||||
Total other income (loss)
|
213,366
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(185,449
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)
|
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28,430
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|
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(246,578
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)
|
||||
Other expenses
|
|
|
|
|
|
|
|
|
|||||||
Related party management compensation
|
8,100
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|
|
9,449
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|
|
22,143
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|
|
29,486
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|
||||
General, administrative and directors' expenses
|
8,047
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|
|
1,779
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|
|
25,238
|
|
|
9,265
|
|
||||
Professional services
|
994
|
|
|
319
|
|
|
3,016
|
|
|
2,233
|
|
||||
Total other expenses
|
17,141
|
|
|
11,547
|
|
|
50,397
|
|
|
40,984
|
|
||||
Income (loss) before income taxes
|
136,649
|
|
|
(158,239
|
)
|
|
(34,127
|
)
|
|
(165,431
|
)
|
||||
Income tax expense (benefit)
|
340
|
|
|
94
|
|
|
213
|
|
|
1,170
|
|
||||
Net income (loss)
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Net income (loss) attributable to noncontrolling interests
|
1,492
|
|
|
(6,676
|
)
|
|
(15,324
|
)
|
|
(15,452
|
)
|
||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
134,817
|
|
|
(151,657
|
)
|
|
(19,016
|
)
|
|
(151,149
|
)
|
||||
Preferred share distributions
|
6,891
|
|
|
6,891
|
|
|
20,673
|
|
|
20,673
|
|
||||
Net income (loss) available to common shares
|
$
|
127,926
|
|
|
$
|
(158,548
|
)
|
|
$
|
(39,689
|
)
|
|
$
|
(171,822
|
)
|
|
For the three months ended September 30, 2016
|
|
For the three months ended September 30, 2015
|
|
For the nine months ended September 30, 2016
|
|
For the nine months ended September 30, 2015
|
||||||||
Net income (loss)
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
||||||
Unrealized gains (losses) on securities available-for-sale
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Unrealized gains (losses) on cash flow hedges
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total other comprehensive income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Comprehensive income (loss)
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Less: Comprehensive income (loss) attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
|
KKR Financial Holdings LLC and Subsidiaries
|
|
|
|
|
||||||||||||||||||||
|
Preferred Shares
|
|
Common Shares
|
|
Accumulated
Deficit
|
|
Noncontrolling interests
|
|
Total
Equity
|
||||||||||||||||
|
Shares
|
|
Paid-In
Capital
|
|
Shares
|
|
Paid-In
Capital
|
|
|
|
|||||||||||||||
Balance at January 1, 2016
|
14,950,000
|
|
|
$
|
378,983
|
|
|
100
|
|
|
$
|
2,385,078
|
|
|
$
|
(895,950
|
)
|
|
$
|
82,879
|
|
|
$
|
1,950,990
|
|
Capital contributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,049
|
|
|
5,049
|
|
|||||
Capital distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,849
|
)
|
|
(6,849
|
)
|
|||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,016
|
)
|
|
(15,324
|
)
|
|
(34,340
|
)
|
|||||
Distributions declared on preferred shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,673
|
)
|
|
—
|
|
|
(20,673
|
)
|
|||||
Distributions to Parent
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(212,774
|
)
|
|
—
|
|
|
(212,774
|
)
|
|||||
As of September 30, 2016
|
14,950,000
|
|
|
$
|
378,983
|
|
|
100
|
|
|
$
|
2,385,078
|
|
|
$
|
(1,148,413
|
)
|
|
$
|
65,755
|
|
|
$
|
1,681,403
|
|
|
For the nine months ended September 30, 2016
|
|
For the nine months ended September 30, 2015
|
||||
Cash flows from operating activities
|
|
|
|
|
|||
Net income (loss)
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|||
Net realized and unrealized (gain) loss on derivatives and foreign exchange
|
13,564
|
|
|
3,545
|
|
||
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests
|
(15,324
|
)
|
|
(15,452
|
)
|
||
Net realized and unrealized (gain) loss on investments
|
48,409
|
|
|
234,510
|
|
||
Depreciation and net amortization
|
40,799
|
|
|
22,915
|
|
||
Net realized and unrealized (gain) loss on debt
|
(67,737
|
)
|
|
33,933
|
|
||
Net realized and unrealized (gain) loss on debt to affiliates
|
278
|
|
|
—
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Interest receivable
|
5,554
|
|
|
24,170
|
|
||
Other assets
|
(11,481
|
)
|
|
(32,759
|
)
|
||
Related party payable
|
(364
|
)
|
|
(612
|
)
|
||
Accounts payable, accrued expenses and other liabilities
|
(10,048
|
)
|
|
28,235
|
|
||
Accrued interest payable
|
(1,904
|
)
|
|
3,034
|
|
||
Net cash provided by (used in) operating activities
|
(32,594
|
)
|
|
134,918
|
|
||
Cash flows from investing activities
|
|
|
|
|
|||
Principal payments from corporate loans
|
1,068,822
|
|
|
1,160,687
|
|
||
Principal payments from securities
|
31,118
|
|
|
11,841
|
|
||
Proceeds from sales of corporate loans
|
1,860,854
|
|
|
1,142,796
|
|
||
Proceeds from sales of securities
|
116,259
|
|
|
152,707
|
|
||
Proceeds from equity and other investments
|
122,800
|
|
|
48,915
|
|
||
Purchases of corporate loans
|
(1,418,194
|
)
|
|
(1,391,722
|
)
|
||
Purchases of securities
|
(5,068
|
)
|
|
(9,387
|
)
|
||
Purchases of equity and other investments
|
(61,852
|
)
|
|
(56,171
|
)
|
||
Net change in proceeds, purchases and settlements of derivatives
|
5,562
|
|
|
21,643
|
|
||
Net change in restricted cash and cash equivalents
|
102,815
|
|
|
99,124
|
|
||
Net cash provided by (used in) investing activities
|
1,823,116
|
|
|
1,180,433
|
|
||
Cash flows from financing activities
|
|
|
|
|
|||
Issuance of collateralized loan obligation secured notes
|
745,156
|
|
|
595,056
|
|
||
Retirement of collateralized loan obligation secured notes
|
(2,075,332
|
)
|
|
(1,445,941
|
)
|
||
Proceeds from collateralized loan obligation warehouse facility
|
62,479
|
|
|
216,063
|
|
||
Repayment of collateralized loan obligation warehouse facility
|
(62,479
|
)
|
|
(190,000
|
)
|
||
Distributions on common shares
|
(80,811
|
)
|
|
(141,566
|
)
|
||
Distributions on preferred shares
|
(20,673
|
)
|
|
(20,673
|
)
|
||
Capital distributions to noncontrolling interests
|
(6,849
|
)
|
|
(2,728
|
)
|
||
Capital contributions from noncontrolling interests
|
5,049
|
|
|
3,964
|
|
||
Other capitalized costs
|
—
|
|
|
(3,652
|
)
|
||
Net cash provided by (used in) financing activities
|
(1,433,460
|
)
|
|
(989,477
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
357,062
|
|
|
325,874
|
|
||
Cash and cash equivalents at beginning of period
|
320,122
|
|
|
163,405
|
|
||
Cash and cash equivalents at end of period
|
$
|
677,184
|
|
|
$
|
489,279
|
|
Supplemental cash flow information
|
|
|
|
|
|||
Cash paid for interest
|
$
|
195,441
|
|
|
$
|
123,224
|
|
Net cash paid (refunded) for income taxes
|
$
|
56
|
|
|
$
|
(1,988
|
)
|
Non-cash investing and financing activities
|
|
|
|
|
|||
Assets distributed to Parent
|
$
|
(131,963
|
)
|
|
$
|
—
|
|
Redemption of CLO 2007-A subordinated notes
|
$
|
(15,587
|
)
|
|
$
|
—
|
|
Preferred share distributions declared, not yet paid
|
$
|
6,891
|
|
|
$
|
6,891
|
|
|
September 30, 2016
|
|
December 31, 2015
|
|
||||||||||||||||||||
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
||||||||||||
Securities, at estimated fair value
|
$
|
370,923
|
|
|
$
|
307,887
|
|
|
$
|
213,191
|
|
|
$
|
520,135
|
|
|
$
|
474,201
|
|
|
$
|
417,519
|
|
|
Total
|
$
|
370,923
|
|
|
$
|
307,887
|
|
|
$
|
213,191
|
|
|
$
|
520,135
|
|
|
$
|
474,201
|
|
|
$
|
417,519
|
|
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Net realized gains (losses)
|
$
|
724
|
|
|
$
|
(3,227
|
)
|
|
$
|
4,910
|
|
|
$
|
(9,127
|
)
|
Net (increase) decrease in unrealized losses
|
(4,176
|
)
|
|
(15,523
|
)
|
|
(39,272
|
)
|
|
(20,598
|
)
|
||||
Net realized and unrealized gains (losses)
|
$
|
(3,452
|
)
|
|
$
|
(18,750
|
)
|
|
$
|
(34,362
|
)
|
|
$
|
(29,725
|
)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Pledged as collateral for collateralized loan obligation secured debt
|
$
|
25,040
|
|
|
$
|
170,365
|
|
Total
|
$
|
25,040
|
|
|
$
|
170,365
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||||||
Corporate loans, at estimated fair value
|
$
|
3,890,239
|
|
|
$
|
3,872,205
|
|
|
$
|
3,755,783
|
|
|
$
|
5,722,646
|
|
|
$
|
5,619,815
|
|
|
$
|
5,188,610
|
|
Total
|
$
|
3,890,239
|
|
|
$
|
3,872,205
|
|
|
$
|
3,755,783
|
|
|
$
|
5,722,646
|
|
|
$
|
5,619,815
|
|
|
$
|
5,188,610
|
|
|
Three Months Ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Net realized gains (losses)
|
$
|
(18,720
|
)
|
|
$
|
(546
|
)
|
|
$
|
(229,672
|
)
|
|
$
|
(22,807
|
)
|
Net (increase) decrease in unrealized losses
|
64,646
|
|
|
(147,107
|
)
|
|
300,072
|
|
|
(92,283
|
)
|
||||
Net realized and unrealized gains (losses)
|
$
|
45,926
|
|
|
$
|
(147,653
|
)
|
|
$
|
70,400
|
|
|
$
|
(115,090
|
)
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Pledged as collateral for collateralized loan obligation secured debt
|
$
|
3,573,587
|
|
|
$
|
4,917,123
|
|
Total
|
$
|
3,573,587
|
|
|
$
|
4,917,123
|
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
|||||||||||||||||||||||||
|
Equity Investments
|
|
Interests in Joint Ventures and Partnerships(1)
|
|
Equity Investments
|
|
Interests in Joint Ventures and Partnerships(1)
|
|
Equity Investments
|
|
Interests in Joint Ventures and Partnerships (1)
|
|
Equity Investments
|
|
Interests in Joint Ventures and Partnerships (1)
|
|
||||||||||||||||
Net realized gains (losses)
|
$
|
—
|
|
|
$
|
(4,566
|
)
|
|
$
|
1,549
|
|
|
$
|
9,176
|
|
|
$
|
(3,771
|
)
|
|
$
|
3,008
|
|
|
$
|
2,915
|
|
|
$
|
9,176
|
|
|
Net (increase) decrease in unrealized losses
|
(5,402
|
)
|
|
41,930
|
|
|
(14,245
|
)
|
|
(62,630
|
)
|
|
(21,851
|
)
|
|
(46,509
|
)
|
|
(6,872
|
)
|
|
(80,103
|
)
|
|
||||||||
Net realized and unrealized gains (losses)
|
$
|
(5,402
|
)
|
|
$
|
37,364
|
|
|
$
|
(12,696
|
)
|
|
$
|
(53,454
|
)
|
|
$
|
(25,622
|
)
|
|
$
|
(43,501
|
)
|
|
$
|
(3,957
|
)
|
|
$
|
(70,927
|
)
|
|
|
|
|
|
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
|
||||||||||||||||||||
|
Credit
|
|
Natural Resources
|
|
Other
|
|
Credit
|
|
Natural Resources
|
|
Other
|
|
||||||||||||
Revenues(1)
|
$
|
71,714
|
|
|
$
|
86,942
|
|
|
$
|
71,808
|
|
|
$
|
65,250
|
|
|
$
|
231,248
|
|
|
$
|
36,099
|
|
|
Expenses(1)
|
$
|
46,060
|
|
|
$
|
126,414
|
|
|
$
|
23,725
|
|
|
$
|
40,424
|
|
|
$
|
237,275
|
|
|
$
|
39,019
|
|
|
Net income (loss)
|
$
|
(6,644
|
)
|
|
$
|
(52,786
|
)
|
|
$
|
48,084
|
|
|
$
|
(25,056
|
)
|
|
$
|
32,892
|
|
|
$
|
(2,921
|
)
|
|
|
|
|
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||
Pledged as collateral for collateralized loan obligation secured debt
|
$
|
42,210
|
|
|
$
|
82,430
|
|
Total
|
$
|
42,210
|
|
|
$
|
82,430
|
|
|
Par
|
|
Carrying
Value(1)
|
|
Weighted
Average
Borrowing
Rate
|
|
Weighted
Average
Remaining
Maturity
(in days)
|
|
Collateral(2)
|
|||||||
CLO 2007-1 subordinated notes(3)(4)
|
$
|
134,468
|
|
|
$
|
21,155
|
|
|
62.74
|
%
|
|
1688
|
|
$
|
75,945
|
|
CLO 2012-1 secured notes
|
367,500
|
|
|
376,667
|
|
|
2.90
|
|
|
2998
|
|
380,108
|
|
|||
CLO 2012-1 subordinated notes(3)
|
18,000
|
|
|
10,226
|
|
|
14.71
|
|
|
2998
|
|
18,618
|
|
|||
CLO 2013-1 secured notes
|
458,500
|
|
|
470,021
|
|
|
2.40
|
|
|
3210
|
|
488,310
|
|
|||
CLO 2013-2 secured notes
|
339,250
|
|
|
343,686
|
|
|
2.72
|
|
|
3402
|
|
367,020
|
|
|||
CLO 9 secured notes
|
463,749
|
|
|
470,905
|
|
|
2.69
|
|
|
3667
|
|
460,882
|
|
|||
CLO 9 subordinated notes(3)
|
15,000
|
|
|
9,512
|
|
|
15.52
|
|
|
3667
|
|
14,907
|
|
|||
CLO 9 subordinated notes to affiliates(3)
|
25,572
|
|
|
16,217
|
|
|
8.09
|
|
|
3667
|
|
25,414
|
|
|||
CLO 10 secured notes
|
368,000
|
|
|
378,010
|
|
|
3.07
|
|
|
3363
|
|
362,465
|
|
|||
CLO 10 subordinated notes to affiliates(3)
|
29,948
|
|
|
15,472
|
|
|
9.51
|
|
|
3363
|
|
29,498
|
|
|||
CLO 11 secured notes
|
507,750
|
|
|
510,576
|
|
|
2.74
|
|
|
3849
|
|
504,497
|
|
|||
CLO 11 subordinated notes(3)
|
28,250
|
|
|
21,709
|
|
|
17.74
|
|
|
3849
|
|
28,069
|
|
|||
CLO 11 subordinated notes to affiliates(3)
|
19,362
|
|
|
14,879
|
|
|
9.45
|
|
|
3849
|
|
19,238
|
|
|||
CLO 13 secured notes
|
375,000
|
|
|
385,329
|
|
|
3.03
|
|
|
4125
|
|
375,414
|
|
|||
CLO 13 subordinated notes(3)
|
4,000
|
|
|
2,653
|
|
|
24.01
|
|
|
4125
|
|
4,004
|
|
|||
CLO 13 subordinated notes to affiliates(3)
|
21,636
|
|
|
14,351
|
|
|
18.01
|
|
|
4125
|
|
21,660
|
|
|||
CLO 2016-1 secured notes
|
66,665
|
|
|
64,808
|
|
|
2.29
|
|
|
615
|
|
69,304
|
|
|||
CLO 2016-1 subordinated notes(3)
|
9,971
|
|
|
10,097
|
|
|
—
|
|
|
615
|
|
10,366
|
|
|||
CLO 15 secured notes
|
370,500
|
|
|
370,803
|
|
|
3.06
|
|
|
4401
|
|
372,942
|
|
|||
CLO 15 subordinated notes(3)
|
12,100
|
|
|
10,831
|
|
|
—
|
|
|
4401
|
|
12,180
|
|
|||
Total collateralized loan obligation secured debt
|
3,635,221
|
|
|
3,517,907
|
|
|
|
|
|
|
|
3,640,841
|
|
|||
8.375% Senior notes(5)
|
258,750
|
|
|
288,728
|
|
|
8.38
|
|
|
9177
|
|
—
|
|
|||
7.500% Senior notes
|
115,043
|
|
|
123,108
|
|
|
7.50
|
|
|
9302
|
|
—
|
|
|||
Junior subordinated notes
|
283,517
|
|
|
249,730
|
|
|
4.01
|
|
|
7310
|
|
—
|
|
|||
Total borrowings
|
$
|
4,292,531
|
|
|
$
|
4,179,473
|
|
|
|
|
|
|
|
$
|
3,640,841
|
|
|
|
|
|
|
(1)
|
Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.
|
(2)
|
Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.
|
(3)
|
Subordinated notes to unaffiliated and affiliated parties do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.
|
(4)
|
As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full.
|
(5)
|
On October 25, 2016, the Company announced its intention to redeem all of its outstanding
8.375%
Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion.
|
|
Par
|
|
Carrying
Value(1)
|
|
Weighted
Average
Borrowing
Rate
|
|
Weighted
Average
Remaining
Maturity
(in days)
|
|
Collateral(2)
|
|||||||
CLO 2007-1 secured notes
|
$
|
1,544,032
|
|
|
$
|
1,630,293
|
|
|
2.10
|
%
|
|
1962
|
|
$
|
1,732,855
|
|
CLO 2007-1 subordinated notes(3)
|
134,468
|
|
|
74,954
|
|
|
11.66
|
|
|
1962
|
|
150,912
|
|
|||
CLO 2007-A subordinated notes(3)
|
15,096
|
|
|
17,060
|
|
|
14.49
|
|
|
654
|
|
48,856
|
|
|||
CLO 2011-1 senior debt
|
249,301
|
|
|
249,301
|
|
|
1.67
|
|
|
1689
|
|
310,498
|
|
|||
CLO 2012-1 secured notes
|
367,500
|
|
|
365,383
|
|
|
2.59
|
|
|
3272
|
|
361,684
|
|
|||
CLO 2012-1 subordinated notes(3)
|
18,000
|
|
|
10,845
|
|
|
15.82
|
|
|
3272
|
|
17,715
|
|
|||
CLO 2013-1 secured notes
|
458,500
|
|
|
450,280
|
|
|
2.05
|
|
|
3484
|
|
479,391
|
|
|||
CLO 2013-2 secured notes
|
339,250
|
|
|
334,187
|
|
|
2.52
|
|
|
3676
|
|
347,989
|
|
|||
CLO 9 secured notes
|
463,750
|
|
|
454,103
|
|
|
2.33
|
|
|
3941
|
|
463,574
|
|
|||
CLO 9 subordinated notes(3)
|
15,000
|
|
|
9,972
|
|
|
15.92
|
|
|
3941
|
|
14,994
|
|
|||
CLO 10 secured notes
|
368,000
|
|
|
363,977
|
|
|
2.75
|
|
|
3637
|
|
384,991
|
|
|||
CLO 11 secured notes
|
507,750
|
|
|
491,699
|
|
|
2.38
|
|
|
4123
|
|
501,286
|
|
|||
CLO 11 subordinated notes(3)
|
28,250
|
|
|
23,306
|
|
|
5.28
|
|
|
4123
|
|
27,890
|
|
|||
CLO 13 secured notes
|
370,000
|
|
|
364,986
|
|
|
2.84
|
|
|
4399
|
|
323,781
|
|
|||
CLO 13 subordinated notes(3)
|
4,000
|
|
|
3,400
|
|
|
—
|
|
|
4399
|
|
3,500
|
|
|||
Total collateralized loan obligation secured debt
|
4,882,897
|
|
|
4,843,746
|
|
|
|
|
|
|
5,169,916
|
|
||||
8.375% Senior notes
|
258,750
|
|
|
289,660
|
|
|
8.38
|
|
|
9451
|
|
—
|
|
|||
7.500% Senior notes
|
115,043
|
|
|
123,346
|
|
|
7.50
|
|
|
9576
|
|
—
|
|
|||
Junior subordinated notes
|
283,517
|
|
|
248,498
|
|
|
5.43
|
|
|
7584
|
|
—
|
|
|||
Total borrowings
|
$
|
5,540,207
|
|
|
$
|
5,505,250
|
|
|
|
|
|
|
|
$
|
5,169,916
|
|
|
|
|
|
|
(1)
|
Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.
|
(2)
|
Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.
|
(3)
|
Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.
|
|
As of September 30, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Notional
|
|
Estimated
Fair Value
|
|
Notional
|
|
Estimated
Fair Value
|
||||||||
Free-Standing Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
$
|
125,000
|
|
|
$
|
(47,907
|
)
|
|
$
|
297,667
|
|
|
$
|
(41,743
|
)
|
Foreign exchange forward contracts and options
|
(297,947
|
)
|
|
24,642
|
|
|
(375,524
|
)
|
|
38,608
|
|
||||
Common stock warrants
|
—
|
|
|
1,613
|
|
|
—
|
|
|
—
|
|
||||
Options
|
—
|
|
|
2,227
|
|
|
—
|
|
|
95
|
|
||||
Total
|
|
|
|
$
|
(19,425
|
)
|
|
|
|
|
$
|
(3,040
|
)
|
|
Three Months Ended September 30, 2016
|
|
Three Months Ended September 30, 2015
|
||||||||||||||||||||
|
Realized
gains
(losses)
|
|
Unrealized
gains
(losses)
|
|
Total
|
|
Realized
gains
(losses)
|
|
Unrealized
gains
(losses)
|
|
Total
|
||||||||||||
Interest rate swaps
|
$
|
(9,316
|
)
|
|
$
|
10,340
|
|
|
$
|
1,024
|
|
|
$
|
—
|
|
|
$
|
(8,489
|
)
|
|
$
|
(8,489
|
)
|
Foreign exchange forward contracts and options(1)
|
(1,523
|
)
|
|
723
|
|
|
(800
|
)
|
|
12,872
|
|
|
(11,848
|
)
|
|
1,024
|
|
||||||
Common stock warrants
|
—
|
|
|
(507
|
)
|
|
(507
|
)
|
|
—
|
|
|
(411
|
)
|
|
(411
|
)
|
||||||
Options
|
—
|
|
|
115
|
|
|
115
|
|
|
—
|
|
|
(2,428
|
)
|
|
(2,428
|
)
|
||||||
Net realized and unrealized gains (losses)
|
$
|
(10,839
|
)
|
|
$
|
10,671
|
|
|
$
|
(168
|
)
|
|
$
|
12,872
|
|
|
$
|
(23,176
|
)
|
|
$
|
(10,304
|
)
|
|
|
|
|
|
(1)
|
Net of foreign exchange remeasurement gain or loss on foreign denominated assets.
|
|
Nine Months Ended September 30, 2016
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||||||||
|
Realized
gains
(losses)
|
|
Unrealized
gains
(losses)
|
|
Total
|
|
Realized
gains
(losses)
|
|
Unrealized
gains
(losses)
|
|
Total
|
||||||||||||
Interest rate swaps
|
$
|
(9,316
|
)
|
|
$
|
(7,325
|
)
|
|
$
|
(16,641
|
)
|
|
$
|
(5,297
|
)
|
|
$
|
5,924
|
|
|
$
|
627
|
|
Foreign exchange forward contracts and options(1)
|
16,089
|
|
|
(14,614
|
)
|
|
1,475
|
|
|
27,107
|
|
|
(24,571
|
)
|
|
2,536
|
|
||||||
Common stock warrants
|
142
|
|
|
(672
|
)
|
|
(530
|
)
|
|
—
|
|
|
(2,412
|
)
|
|
(2,412
|
)
|
||||||
Total rate of return swaps
|
—
|
|
|
—
|
|
|
—
|
|
|
304
|
|
|
130
|
|
|
434
|
|
||||||
Options
|
—
|
|
|
2,132
|
|
|
2,132
|
|
|
—
|
|
|
(4,730
|
)
|
|
(4,730
|
)
|
||||||
Net realized and unrealized gains (losses)
|
$
|
6,915
|
|
|
$
|
(20,479
|
)
|
|
$
|
(13,564
|
)
|
|
$
|
22,114
|
|
|
$
|
(25,659
|
)
|
|
$
|
(3,545
|
)
|
|
|
|
|
|
(1)
|
Net of foreign exchange remeasurement gain or loss on foreign denominated assets.
|
|
|
||||||||||||||||||
|
As of September 30, 2016
|
|
Fair Value Hierarchy
|
||||||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash, restricted cash, and cash equivalents
|
$
|
1,061,743
|
|
|
$
|
1,061,743
|
|
|
$
|
1,061,743
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Senior notes
|
411,836
|
|
|
382,579
|
|
|
382,579
|
|
|
—
|
|
|
—
|
|
|||||
Junior subordinated notes
|
249,730
|
|
|
188,933
|
|
|
—
|
|
|
—
|
|
|
188,933
|
|
|
|
||||||||||||||||||
|
As of December 31, 2015
|
|
Fair Value Hierarchy
|
||||||||||||||||
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash, restricted cash, and cash equivalents
|
$
|
807,496
|
|
|
$
|
807,496
|
|
|
$
|
807,496
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Senior notes
|
413,006
|
|
|
394,390
|
|
|
394,390
|
|
|
—
|
|
|
—
|
|
|||||
Junior subordinated notes
|
248,498
|
|
|
216,757
|
|
|
—
|
|
|
—
|
|
|
216,757
|
|
|
|
||||||||||||||
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Balance as of
September 30, 2016 |
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities
|
$
|
—
|
|
|
$
|
25,040
|
|
|
$
|
144,837
|
|
|
$
|
169,877
|
|
Residential mortgage-backed securities
|
—
|
|
|
—
|
|
|
43,314
|
|
|
43,314
|
|
||||
Total securities
|
—
|
|
|
25,040
|
|
|
188,151
|
|
|
213,191
|
|
||||
Loans
|
—
|
|
|
3,562,107
|
|
|
193,676
|
|
|
3,755,783
|
|
||||
Equity investments, at estimated fair value
|
40,455
|
|
|
49,065
|
|
|
123,548
|
|
|
213,068
|
|
||||
Interests in joint ventures and partnerships, at estimated fair value
|
—
|
|
|
—
|
|
|
779,027
|
|
|
779,027
|
|
||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|||||
Foreign exchange forward contracts and options
|
—
|
|
|
27,552
|
|
|
1,507
|
|
|
29,059
|
|
||||
Warrants
|
—
|
|
|
—
|
|
|
1,613
|
|
|
1,613
|
|
||||
Options
|
—
|
|
|
—
|
|
|
2,227
|
|
|
2,227
|
|
||||
Total derivatives
|
—
|
|
|
27,552
|
|
|
5,347
|
|
|
32,899
|
|
||||
Total
|
$
|
40,455
|
|
|
$
|
3,663,764
|
|
|
$
|
1,289,749
|
|
|
$
|
4,993,968
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateralized loan obligation secured notes
|
$
|
—
|
|
|
$
|
3,456,988
|
|
|
$
|
—
|
|
|
$
|
3,456,988
|
|
Collateralized loan obligation secured notes to affiliates
|
—
|
|
|
60,919
|
|
|
—
|
|
|
60,919
|
|
||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|||||
Interest rate swaps
|
—
|
|
|
47,907
|
|
|
—
|
|
|
47,907
|
|
||||
Foreign exchange forward contracts and options
|
—
|
|
|
3,887
|
|
|
530
|
|
|
4,417
|
|
||||
Total derivatives
|
—
|
|
|
51,794
|
|
|
530
|
|
|
52,324
|
|
||||
Total
|
$
|
—
|
|
|
$
|
3,569,701
|
|
|
$
|
530
|
|
|
$
|
3,570,231
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
|
|
Significant
Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
Balance as of
December 31,
2015
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Securities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate debt securities
|
$
|
—
|
|
|
$
|
172,912
|
|
|
$
|
194,986
|
|
|
$
|
367,898
|
|
Residential mortgage-backed securities
|
—
|
|
|
—
|
|
|
49,621
|
|
|
49,621
|
|
||||
Total securities
|
—
|
|
|
172,912
|
|
|
244,607
|
|
|
417,519
|
|
||||
Loans
|
—
|
|
|
4,889,876
|
|
|
298,734
|
|
|
5,188,610
|
|
||||
Equity investments, at estimated fair value
|
40,765
|
|
|
75,533
|
|
|
146,648
|
|
|
262,946
|
|
||||
Interests in joint ventures and partnerships, at estimated fair value
|
—
|
|
|
—
|
|
|
888,408
|
|
|
888,408
|
|
||||
Derivatives:
|
|
|
|
|
|
|
|
|
|
0
|
|
||||
Foreign exchange forward contracts and options
|
—
|
|
|
37,120
|
|
|
3,637
|
|
|
40,757
|
|
||||
Options
|
—
|
|
|
—
|
|
|
95
|
|
|
95
|
|
||||
Total derivatives
|
—
|
|
|
37,120
|
|
|
3,732
|
|
|
40,852
|
|
||||
Total
|
$
|
40,765
|
|
|
$
|
5,175,441
|
|
|
$
|
1,582,129
|
|
|
$
|
6,798,335
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collateralized loan obligation secured notes
|
$
|
—
|
|
|
$
|
4,843,746
|
|
|
$
|
—
|
|
|
$
|
4,843,746
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps
|
—
|
|
|
41,743
|
|
|
—
|
|
|
41,743
|
|
||||
Foreign exchange forward contracts and options
|
—
|
|
|
1,399
|
|
|
750
|
|
|
2,149
|
|
||||
Total derivatives
|
—
|
|
|
43,142
|
|
|
750
|
|
|
43,892
|
|
||||
Total
|
$
|
—
|
|
|
$
|
4,886,888
|
|
|
$
|
750
|
|
|
$
|
4,887,638
|
|
|
Assets
|
||||||||||||||||||||||||||||||
|
Corporate
Debt
Securities
|
|
Residential
Mortgage-
Backed
Securities
|
|
Corporate
Loans
|
|
Equity
Investments,
at Estimated
Fair Value
|
|
Interests in
Joint
Ventures and
Partnerships
|
|
Foreign Exchange Options, Net
|
|
Warrants
|
|
Options
|
||||||||||||||||
Beginning balance as of July 1, 2016
|
$
|
149,372
|
|
|
$
|
45,800
|
|
|
$
|
200,841
|
|
|
$
|
123,374
|
|
|
$
|
758,321
|
|
|
$
|
1,652
|
|
|
$
|
2,120
|
|
|
$
|
2,112
|
|
Total gains or losses (for the period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Included in earnings(1)
|
(4,505
|
)
|
|
919
|
|
|
1,884
|
|
|
174
|
|
|
36,668
|
|
|
(675
|
)
|
|
(507
|
)
|
|
115
|
|
||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Purchases
|
—
|
|
|
—
|
|
|
3,979
|
|
|
—
|
|
|
1,574
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Sales
|
—
|
|
|
—
|
|
|
(13,264
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
(30
|
)
|
|
(3,405
|
)
|
|
236
|
|
|
—
|
|
|
(17,536
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Ending balance as of September 30, 2016
|
$
|
144,837
|
|
|
$
|
43,314
|
|
|
$
|
193,676
|
|
|
$
|
123,548
|
|
|
$
|
779,027
|
|
|
$
|
977
|
|
|
$
|
1,613
|
|
|
$
|
2,227
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)
|
$
|
(4,505
|
)
|
|
$
|
919
|
|
|
$
|
1,883
|
|
|
$
|
174
|
|
|
$
|
36,669
|
|
|
$
|
(675
|
)
|
|
$
|
(507
|
)
|
|
$
|
115
|
|
|
|
|
|
|
(1)
|
Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.
|
|
Assets
|
||||||||||||||||||||||||||||||
|
Corporate
Debt
Securities
|
|
Residential Mortgage-Backed Securities
|
|
Corporate
Loans
|
|
Equity
Investments,
at Estimated
Fair Value
|
|
Interests in
Joint
Ventures and
Partnerships
|
|
Foreign Exchange Options, Net
|
|
Warrants
|
|
Options
|
||||||||||||||||
Beginning balance as of January 1, 2016
|
$
|
194,986
|
|
|
$
|
49,621
|
|
|
$
|
298,734
|
|
|
$
|
146,648
|
|
|
$
|
888,408
|
|
|
$
|
2,887
|
|
|
$
|
—
|
|
|
$
|
95
|
|
Total gains or losses (for the period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Included in earnings(1)
|
(50,054
|
)
|
|
1,999
|
|
|
(49,886
|
)
|
|
(25,287
|
)
|
|
(43,080
|
)
|
|
(1,910
|
)
|
|
(672
|
)
|
|
2,132
|
|
||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Purchases
|
—
|
|
|
—
|
|
|
7,282
|
|
|
—
|
|
|
61,397
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Sales
|
—
|
|
|
—
|
|
|
(39,949
|
)
|
|
(5,130
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
(95
|
)
|
|
(8,306
|
)
|
|
(22,505
|
)
|
|
7,317
|
|
|
(127,698
|
)
|
|
—
|
|
|
2,285
|
|
|
—
|
|
||||||||
Ending balance as of September 30, 2016
|
$
|
144,837
|
|
|
$
|
43,314
|
|
|
$
|
193,676
|
|
|
$
|
123,548
|
|
|
$
|
779,027
|
|
|
$
|
977
|
|
|
$
|
1,613
|
|
|
$
|
2,227
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)
|
$
|
(50,054
|
)
|
|
$
|
1,999
|
|
|
$
|
(49,886
|
)
|
|
$
|
(25,287
|
)
|
|
$
|
(43,080
|
)
|
|
$
|
(1,910
|
)
|
|
$
|
(672
|
)
|
|
$
|
2,132
|
|
|
|
|
|
|
(1)
|
Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.
|
|
Assets
|
||||||||||||||||||||||||||
|
Corporate
Debt
Securities
|
|
Residential
Mortgage-
Backed
Securities
|
|
Corporate
Loans
|
|
Equity
Investments,
at Estimated
Fair Value
|
|
Interests in
Joint
Ventures and
Partnerships
|
|
Warrants
|
|
Options
|
||||||||||||||
Beginning balance as of July 1, 2015
|
$
|
225,891
|
|
|
$
|
52,389
|
|
|
$
|
341,047
|
|
|
$
|
166,879
|
|
|
$
|
739,597
|
|
|
$
|
411
|
|
|
$
|
2,910
|
|
Total gains or losses (for the period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Included in earnings(1)
|
(11,727
|
)
|
|
2,454
|
|
|
(6,882
|
)
|
|
(8,453
|
)
|
|
(63,887
|
)
|
|
(411
|
)
|
|
(2,429
|
)
|
|||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Transfers out of Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Purchases
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,767
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
(9,086
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
3,038
|
|
|
(4,704
|
)
|
|
(2,539
|
)
|
|
451
|
|
|
(23,822
|
)
|
|
—
|
|
|
—
|
|
|||||||
Ending balance as of September 30, 2015
|
$
|
208,116
|
|
|
$
|
50,139
|
|
|
$
|
331,626
|
|
|
$
|
158,877
|
|
|
$
|
655,655
|
|
|
$
|
—
|
|
|
$
|
481
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)
|
$
|
(11,727
|
)
|
|
$
|
581
|
|
|
$
|
(6,882
|
)
|
|
$
|
(8,453
|
)
|
|
$
|
(63,887
|
)
|
|
$
|
(411
|
)
|
|
$
|
(2,429
|
)
|
|
|
|
|
|
(1)
|
Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.
|
|
Assets
|
|
Liabilities
|
||||||||||||||||||||||||||||
|
Corporate
Debt
Securities
|
|
Residential
Mortgage-
Backed
Securities
|
|
Corporate
Loans
|
|
Equity
Investments,
at Estimated
Fair Value
|
|
Interests in
Joint
Ventures and
Partnerships
|
|
Warrants
|
|
Options
|
|
Collateralized
Loan
Obligation
Secured Notes
|
||||||||||||||||
Beginning balance as of January 1, 2015
|
$
|
317,034
|
|
|
$
|
55,184
|
|
|
$
|
347,077
|
|
|
$
|
81,719
|
|
|
$
|
718,772
|
|
|
$
|
—
|
|
|
$
|
5,212
|
|
|
$
|
5,501,099
|
|
Total gains or losses (for the period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Included in earnings(1)
|
(23,486
|
)
|
|
5,469
|
|
|
(64,930
|
)
|
|
(29,567
|
)
|
|
(84,045
|
)
|
|
(2,412
|
)
|
|
(4,731
|
)
|
|
—
|
|
||||||||
Transfers into Level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Transfers out of Level 3(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,501,099
|
)
|
||||||||
Purchases
|
—
|
|
|
—
|
|
|
12,307
|
|
|
—
|
|
|
53,133
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Sales
|
(89,665
|
)
|
|
—
|
|
|
(25,511
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Settlements
|
4,233
|
|
|
(10,514
|
)
|
|
62,683
|
|
|
106,725
|
|
|
(32,205
|
)
|
|
2,412
|
|
|
—
|
|
|
—
|
|
||||||||
Ending balance as of September 30, 2015
|
$
|
208,116
|
|
|
$
|
50,139
|
|
|
$
|
331,626
|
|
|
$
|
158,877
|
|
|
$
|
655,655
|
|
|
$
|
—
|
|
|
$
|
481
|
|
|
$
|
—
|
|
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)
|
$
|
(26,145
|
)
|
|
$
|
758
|
|
|
$
|
(64,043
|
)
|
|
$
|
(28,871
|
)
|
|
$
|
(84,045
|
)
|
|
$
|
(2,412
|
)
|
|
$
|
(4,731
|
)
|
|
$
|
—
|
|
|
|
|
|
|
(1)
|
Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.
|
(2)
|
CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of September 30, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statements for further discussion.
|
|
Balance as
of September 30,
2016
|
|
Valuation
Techniques(1)
|
|
Unobservable
Inputs(2)
|
|
Weighted
Average(3)
|
|
Range
|
|
Impact to
Valuation
from an
Increase in
Input(4)
|
|||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
$
|
144,837
|
|
|
Yield analysis
|
|
Yield
|
|
13%
|
|
5% - 15%
|
|
Decrease
|
|
|
|
|
|
|
|
Net leverage
|
|
10x
|
|
9x-10x
|
|
Decrease
|
|
|
|
|
|
|
|
EBITDA multiple
|
|
8x
|
|
7x - 9x
|
|
Increase
|
|
||
|
|
|
|
|
Discount margin
|
|
1500
|
|
1500bps
|
|
Decrease
|
|
||
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
9x
|
|
9x
|
|
Increase
|
|
||
Residential mortgage – backed securities
|
$
|
43,314
|
|
|
Discounted cash flows
|
|
Probability of default
|
|
2%
|
|
0% - 3%
|
|
Decrease
|
|
|
|
|
|
|
|
Loss severity
|
|
43%
|
|
35% - 50%
|
|
Decrease
|
|
|
|
|
|
|
|
|
Constant prepayment rate
|
|
18%
|
|
12% - 23%
|
|
(5
|
)
|
|
Corporate loans(6)
|
$
|
193,676
|
|
|
Yield Analysis
|
|
Yield
|
|
15%
|
|
3% -28%
|
|
Decrease
|
|
|
|
|
|
|
|
Net leverage
|
|
10x
|
|
3x - 36x
|
|
Decrease
|
|
|
|
|
|
|
|
|
EBITDA multiple
|
|
9x
|
|
7x - 13x
|
|
Increase
|
|
|
Equity investments, at estimated fair value(7)
|
$
|
123,548
|
|
|
Inputs to both market comparables and discounted cash flow
|
|
Illiquidity discount
|
|
11%
|
|
0% - 15%
|
|
Decrease
|
|
|
|
|
|
|
Weight ascribed to market comparables
|
|
27%
|
|
0% - 100%
|
|
(8
|
)
|
||
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
73%
|
|
0% - 100%
|
|
(9
|
)
|
|
|
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
9x
|
|
0x - 15x
|
|
Increase
|
|
|
|
|
|
|
|
|
Forward EBITDA multiple
|
|
7x
|
|
3x - 13x
|
|
Increase
|
|
|
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
9%
|
|
6% - 14%
|
|
Decrease
|
|
|
|
|
|
|
|
|
LTM EBITDA exit multiple
|
|
8x
|
|
1x - 9x
|
|
Increase
|
|
|
Interests in joint ventures and partnerships(11)
|
$
|
779,027
|
|
|
Inputs to market comparables, discounted cash flow and yield analysis
|
|
Weight ascribed to market comparables
|
|
21%
|
|
0% - 100%
|
|
(8
|
)
|
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
72%
|
|
0% - 100%
|
|
(9
|
)
|
|
|
|
|
|
|
Weight ascribed to yield analysis
|
|
7%
|
|
0% - 100%
|
|
(10
|
)
|
||
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
5x
|
|
1x- 9x
|
|
Increase
|
|
||
|
|
|
|
|
Forward EBITDA multiple
|
|
8x
|
|
8x
|
|
Increase
|
|
||
|
|
|
|
|
Capitalization Rate
|
|
7%
|
|
6% - 12%
|
|
Decrease
|
|
||
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
10%
|
|
6% - 24%
|
|
Decrease
|
|
|
|
|
|
|
|
Average price per BOE(12)
|
|
$20.45
|
|
$17.44-$23.46
|
|
Increase
|
|
||
|
|
|
Yield analysis
|
|
Yield
|
|
14%
|
|
14%
|
|
Decrease
|
|
||
|
|
|
|
|
Net leverage
|
|
1x
|
|
1x
|
|
Decrease
|
|
||
|
|
|
|
|
EBITDA multiple
|
|
7x
|
|
7x
|
|
Increase
|
|
||
Foreign exchange options, net
|
$
|
977
|
|
|
Option pricing model
|
|
Forward and spot rates
|
|
11,635
|
|
6 - 13,500
|
|
(13
|
)
|
Options(14)
|
$
|
2,227
|
|
|
Inputs to both market comparables and discounted cash flow
|
|
Illiquidity discount
|
|
10%
|
|
10%
|
|
Decrease
|
|
|
|
|
|
|
|
Weight ascribed to market comparables
|
|
50%
|
|
50%
|
|
(8
|
)
|
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
50%
|
|
50%
|
|
(9
|
)
|
||
|
,
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
8x
|
|
8x
|
|
Increase
|
|
|
|
|
|
|
|
Forward EBITDA multiple
|
|
7x
|
|
7x
|
|
Increase
|
|
||
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
15%
|
|
15%
|
|
Decrease
|
|
|
|
|
|
|
|
|
LTM EBITDA exit multiple
|
|
6x
|
|
6x
|
|
Increase
|
|
|
|
|
|
|
(1)
|
For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from
0
-
100%
. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a
100%
weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.
|
(2)
|
In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.
|
(3)
|
Weighted average amounts are based on the estimated fair values.
|
(4)
|
Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
|
(5)
|
The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.
|
(6)
|
Inputs exclude a single loan totaling
$2.0 million
, which had a yield, net leverage and EBITDA multiple of
513%
,
35.6
x and
11.2
x, respectively.
|
(7)
|
When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum
5%
discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the
5%
minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value,
$6.1 million
was valued solely using a market comparables technique and
$44.2 million
was valued solely using a discounted cash flow technique.
|
(8)
|
The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach.
|
(9)
|
The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach.
|
(10)
|
The directional change from an increase in the weight ascribed to the yield analysis approach would increase the fair value of the Level 3 investments if the yield analysis approach results in a higher valuation than the market comparables or discounted cash flow approach. The opposite would be true if the yield analysis approach results in a lower valuation than the market comparables or discounted cash flow approach.
|
(11)
|
Inputs exclude
$346.3 million
of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships,
$165.3 million
was valued solely using a discounted cash flow technique, while
$7.8 million
was valued solely using a market comparables technique and
$24.1 million
was valued solely using a yield analysis.
|
(12)
|
Natural resources assets with an estimated fair value of
$120.4 million
as of September 30, 2016 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately
23%
liquids and
77%
natural gas.
|
(13)
|
Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.
|
(14)
|
The total options were valued using
50%
a discount cash flow technique and
50%
a market comparables technique.
|
|
Balance as of
December 31, 2015 |
|
Valuation
Techniques(1)
|
|
Unobservable
Inputs(2)
|
|
Weighted
Average(3)
|
|
Range
|
|
Impact to
Valuation
from an
Increase in
Input(4)
|
|||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities
|
$
|
194,986
|
|
|
Yield analysis
|
|
Yield
|
|
23%
|
|
6% - 31%
|
|
Decrease
|
|
|
|
|
|
|
|
Net leverage
|
|
10x
|
|
10x-12x
|
|
Decrease
|
|
|
|
|
|
|
|
EBITDA multiple
|
|
7x
|
|
7x - 10x
|
|
Increase
|
|
||
|
|
|
|
|
Discount margin
|
|
750
|
|
750bps
|
|
Decrease
|
|
||
Residential mortgage – backed securities
|
$
|
49,621
|
|
|
Discounted cash flows
|
|
Probability of default
|
|
1%
|
|
0% - 3%
|
|
Decrease
|
|
|
|
|
|
|
|
Loss severity
|
|
40%
|
|
35% - 45%
|
|
Decrease
|
|
|
|
|
|
|
|
|
Constant prepayment rate
|
|
15%
|
|
12% - 18%
|
|
(5
|
)
|
|
Corporate loans
|
$
|
298,734
|
|
|
Yield Analysis
|
|
Yield
|
|
11%
|
|
3% - 18%
|
|
Decrease
|
|
|
|
|
|
|
|
Net leverage
|
|
7x
|
|
1x - 19x
|
|
Decrease
|
|
|
|
|
|
|
|
|
EBITDA multiple
|
|
9x
|
|
6x - 15x
|
|
Increase
|
|
|
Equity investments, at estimated fair value(6)
|
$
|
146,648
|
|
|
Inputs to market comparables, discounted cash flow and broker quotes
|
|
Illiquidity discount
|
|
11%
|
|
0% - 15%
|
|
Decrease
|
|
|
|
|
|
|
Weight ascribed to market comparables
|
|
52%
|
|
0% - 100%
|
|
(7
|
)
|
||
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
42%
|
|
0% - 100%
|
|
(8
|
)
|
|
|
|
|
|
|
Weight ascribed to broker quotes
|
|
6%
|
|
0% - 100%
|
|
(9
|
)
|
||
|
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
8x
|
|
4x - 13x
|
|
Increase
|
|
|
|
|
|
|
|
|
Forward EBITDA multiple
|
|
8x
|
|
3x - 11x
|
|
Increase
|
|
|
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
9%
|
|
7% - 14%
|
|
Decrease
|
|
|
|
|
|
|
|
|
LTM EBITDA exit multiple
|
|
8x
|
|
0x - 9x
|
|
Increase
|
|
|
|
|
|
Broker quotes
|
|
Offered quotes
|
|
4
|
|
0 - 5
|
|
Increase
|
|
||
Interests in joint ventures and partnerships(10)
|
$
|
888,408
|
|
|
Inputs to both market comparables and discounted cash flow
|
|
Weight ascribed to market comparables
|
|
43%
|
|
0% - 100%
|
|
(7
|
)
|
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
57%
|
|
0% - 100%
|
|
(8
|
)
|
|
|
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
5x
|
|
1x - 9x
|
|
Decrease
|
|
|
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
8%
|
|
6% - 20%
|
|
Decrease
|
|
|
|
|
|
|
|
Average price per BOE(11)
|
|
$20.61
|
|
$14.33 - $23.22
|
|
Increase
|
|
||
|
|
|
Yield analysis
|
|
Yield
|
|
16%
|
|
16%
|
|
Decrease
|
|
||
|
|
|
|
|
Net leverage
|
|
2x
|
|
2x
|
|
Decrease
|
|
||
|
|
|
|
|
EBITDA multiple
|
|
8x
|
|
8x
|
|
Increase
|
|
||
Foreign exchange options, net
|
$
|
2,887
|
|
|
Option pricing model
|
|
Forward and spot rates
|
|
11,500
|
|
6 -14,000
|
|
(12
|
)
|
Options(13)
|
$
|
95
|
|
|
Inputs to both market comparables and discounted cash flow
|
|
Illiquidity discount
|
|
10%
|
|
10%
|
|
Decrease
|
|
|
|
|
|
|
|
Weight ascribed to market comparables
|
|
50%
|
|
50%
|
|
(7
|
)
|
|
|
|
|
|
|
Weight ascribed to discounted cash flows
|
|
50%
|
|
50%
|
|
(8
|
)
|
||
|
,
|
|
|
Market comparables
|
|
LTM EBITDA multiple
|
|
9x
|
|
9x
|
|
Increase
|
|
|
|
|
|
|
|
Forward EBITDA multiple
|
|
8x
|
|
8x
|
|
Increase
|
|
||
|
|
|
|
Discounted cash flows
|
|
Weighted average cost of capital
|
|
14%
|
|
14%
|
|
Decrease
|
|
|
|
|
|
|
|
|
LTM EBITDA exit multiple
|
|
8x
|
|
8x
|
|
Increase
|
|
|
|
|
|
|
(1)
|
For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from
0
-
100%
. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a
100%
weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.
|
(2)
|
In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.
|
(3)
|
Weighted average amounts are based on the estimated fair values.
|
(4)
|
Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
|
(5)
|
The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.
|
(6)
|
When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum
5%
discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the
5%
minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value,
$6.4 million
was valued solely using broker quotes, while
$11.3 million
was valued solely using a market comparables technique.
|
(7)
|
The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable.
|
(8)
|
The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable.
|
(9)
|
The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable.
|
(10)
|
Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships,
$164.4 million
was valued solely using a discounted cash flow technique, while
$98.9 million
was valued solely using a market comparables technique and
$17.5 million
was valued solely using a yield analysis.
|
(11)
|
Natural resources assets with an estimated fair value of
$114.1 million
as of December 31, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately
25%
liquids and
75%
natural gas.
|
(12)
|
Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.
|
(13)
|
The total options were valued using
50%
a discount cash flow technique and
50%
a market comparables technique.
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Base management fees, net
|
$
|
2,005
|
|
|
$
|
2,633
|
|
|
$
|
3,593
|
|
|
$
|
8,096
|
|
CLO management fees
|
6,095
|
|
|
6,816
|
|
|
18,550
|
|
|
21,390
|
|
||||
Incentive fees
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total related party management compensation
|
$
|
8,100
|
|
|
$
|
9,449
|
|
|
$
|
22,143
|
|
|
$
|
29,486
|
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Base management fees, gross
|
$
|
5,527
|
|
|
$
|
7,702
|
|
|
$
|
16,312
|
|
|
$
|
24,029
|
|
CLO management fees credit(1)
|
(3,522
|
)
|
|
(5,069
|
)
|
|
(12,719
|
)
|
|
(15,933
|
)
|
||||
Total base management fees, net
|
$
|
2,005
|
|
|
$
|
2,633
|
|
|
$
|
3,593
|
|
|
$
|
8,096
|
|
|
|
|
|
|
(1)
|
See “CLO Management Fees” for further discussion.
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Charged and retained CLO management fees(1)
|
$
|
2,573
|
|
|
$
|
1,747
|
|
|
$
|
5,831
|
|
|
$
|
5,457
|
|
CLO management fees credit
|
3,522
|
|
|
5,069
|
|
|
12,719
|
|
|
15,933
|
|
||||
Total CLO management fees
|
$
|
6,095
|
|
|
$
|
6,816
|
|
|
$
|
18,550
|
|
|
$
|
21,390
|
|
|
|
|
|
|
(1)
|
Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO.
|
|
Nine months ended September 30, 2016
|
|
||
Loans
|
$
|
45,225
|
|
|
Equity investments, at estimated fair value
|
26,098
|
|
|
|
CLO subordinated notes
|
60,640
|
|
|
|
Total distributions to Parent
|
$
|
131,963
|
|
|
|
Three months ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
Credit
|
|
Natural Resources
|
|
Other
|
|
Reconciling Items(1)
|
|
Total Consolidated
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
Total revenues
|
$
|
65,416
|
|
|
$
|
79,698
|
|
|
$
|
2,387
|
|
|
$
|
3,876
|
|
|
$
|
3,214
|
|
|
$
|
5,535
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71,017
|
|
|
$
|
89,109
|
|
Total investment costs and expenses
|
128,549
|
|
|
47,948
|
|
|
1,594
|
|
|
2,016
|
|
|
450
|
|
|
388
|
|
|
—
|
|
|
—
|
|
|
130,593
|
|
|
50,352
|
|
||||||||||
Total other income (loss)
|
192,435
|
|
|
(149,952
|
)
|
|
21,974
|
|
|
(36,236
|
)
|
|
(1,043
|
)
|
|
739
|
|
|
—
|
|
|
—
|
|
|
213,366
|
|
|
(185,449
|
)
|
||||||||||
Total other expenses
|
16,815
|
|
|
11,285
|
|
|
192
|
|
|
114
|
|
|
134
|
|
|
99
|
|
|
—
|
|
|
49
|
|
|
17,141
|
|
|
11,547
|
|
||||||||||
Income tax expense (benefit)
|
126
|
|
|
64
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
340
|
|
|
94
|
|
||||||||||
Net income (loss)
|
$
|
112,361
|
|
|
$
|
(129,551
|
)
|
|
$
|
22,575
|
|
|
$
|
(34,490
|
)
|
|
$
|
1,373
|
|
|
$
|
5,757
|
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
Net income (loss) attributable to noncontrolling interests
|
1,492
|
|
|
(2,727
|
)
|
|
—
|
|
|
(3,949
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,492
|
|
|
(6,676
|
)
|
||||||||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
$
|
110,869
|
|
|
$
|
(126,824
|
)
|
|
$
|
22,575
|
|
|
$
|
(30,541
|
)
|
|
$
|
1,373
|
|
|
$
|
5,757
|
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
134,817
|
|
|
$
|
(151,657
|
)
|
|
|
|
|
|
(1)
|
Consists of insurance and directors’ expenses which are not allocated to individual segments.
|
|
Nine months ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
Credit
|
|
Natural Resources
|
|
Other
|
|
Reconciling Items(1)
|
|
Total Consolidated
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
Total revenues
|
$
|
208,716
|
|
|
$
|
265,176
|
|
|
$
|
8,285
|
|
|
$
|
13,055
|
|
|
$
|
12,483
|
|
|
$
|
14,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
229,484
|
|
|
$
|
292,586
|
|
Total investment costs and expenses
|
235,198
|
|
|
163,246
|
|
|
5,102
|
|
|
6,062
|
|
|
1,344
|
|
|
1,147
|
|
|
—
|
|
|
—
|
|
|
241,644
|
|
|
170,455
|
|
||||||||||
Total other income (loss)
|
37,245
|
|
|
(216,786
|
)
|
|
3,366
|
|
|
(50,337
|
)
|
|
(12,181
|
)
|
|
20,545
|
|
|
—
|
|
|
—
|
|
|
28,430
|
|
|
(246,578
|
)
|
||||||||||
Total other expenses
|
49,665
|
|
|
39,702
|
|
|
449
|
|
|
800
|
|
|
283
|
|
|
333
|
|
|
—
|
|
|
149
|
|
|
50,397
|
|
|
40,984
|
|
||||||||||
Income tax expense (benefit)
|
122
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|
1,044
|
|
|
—
|
|
|
—
|
|
|
213
|
|
|
1,170
|
|
||||||||||
Net income (loss)
|
$
|
(39,024
|
)
|
|
$
|
(154,684
|
)
|
|
$
|
6,100
|
|
|
$
|
(44,144
|
)
|
|
$
|
(1,416
|
)
|
|
$
|
32,376
|
|
|
$
|
—
|
|
|
$
|
(149
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Net income (loss) attributable to noncontrolling interests
|
(10,167
|
)
|
|
(8,403
|
)
|
|
(5,157
|
)
|
|
(7,049
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,324
|
)
|
|
(15,452
|
)
|
||||||||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
$
|
(28,857
|
)
|
|
$
|
(146,281
|
)
|
|
$
|
11,257
|
|
|
$
|
(37,095
|
)
|
|
$
|
(1,416
|
)
|
|
$
|
32,376
|
|
|
$
|
—
|
|
|
$
|
(149
|
)
|
|
$
|
(19,016
|
)
|
|
$
|
(151,149
|
)
|
|
|
|
|
|
(1)
|
Consists of insurance and directors’ expenses which are not allocated to individual segments.
|
|
Credit
|
|
Natural Resources
|
|
Other
|
|
Reconciling Items
|
|
Total Consolidated(1)
|
||||||||||||||||||||||||||||||
As of
|
September 30, 2016
|
|
December 31,
2015
|
|
September 30, 2016
|
|
December 31,
2015
|
|
September 30, 2016
|
|
December 31,
2015
|
|
September 30, 2016
|
|
December 31,
2015
|
|
September 30, 2016
|
|
December 31,
2015
|
||||||||||||||||||||
Total assets
|
$
|
5,874,168
|
|
|
$
|
7,303,305
|
|
|
$
|
233,925
|
|
|
$
|
230,815
|
|
|
$
|
222,498
|
|
|
$
|
254,275
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,330,591
|
|
|
$
|
7,788,395
|
|
|
|
|
|
|
(1)
|
Total consolidated assets as of
September 30, 2016
included
$65.8 million
of noncontrolling interests, of which
$37.5 million
was related to the Credit segment and
$28.3 million
was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included
$82.9 million
of noncontrolling interests, of which
$50.3 million
was related to the Credit segment and
$32.6 million
was related to the Natural Resources segment.
|
|
Three months ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
Credit
|
|
Natural Resources
|
|
Commercial Real Estate
|
|
Reconciling Items(1)
|
|
Total Consolidated
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
Total revenues
|
$
|
65,416
|
|
|
$
|
79,698
|
|
|
$
|
2,387
|
|
|
$
|
3,876
|
|
|
$
|
3,214
|
|
|
$
|
5,535
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
71,017
|
|
|
$
|
89,109
|
|
Total investment costs and expenses
|
128,549
|
|
|
47,948
|
|
|
1,594
|
|
|
2,016
|
|
|
450
|
|
|
388
|
|
|
—
|
|
|
—
|
|
|
130,593
|
|
|
50,352
|
|
||||||||||
Total other income (loss)
|
192,435
|
|
|
(149,952
|
)
|
|
21,974
|
|
|
(36,236
|
)
|
|
(1,043
|
)
|
|
739
|
|
|
—
|
|
|
—
|
|
|
213,366
|
|
|
(185,449
|
)
|
||||||||||
Total other expenses
|
16,815
|
|
|
11,285
|
|
|
192
|
|
|
114
|
|
|
134
|
|
|
99
|
|
|
—
|
|
|
49
|
|
|
17,141
|
|
|
11,547
|
|
||||||||||
Income tax expense (benefit)
|
126
|
|
|
64
|
|
|
—
|
|
|
—
|
|
|
214
|
|
|
30
|
|
|
—
|
|
|
—
|
|
|
340
|
|
|
94
|
|
||||||||||
Net income (loss)
|
$
|
112,361
|
|
|
$
|
(129,551
|
)
|
|
$
|
22,575
|
|
|
$
|
(34,490
|
)
|
|
$
|
1,373
|
|
|
$
|
5,757
|
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
136,309
|
|
|
$
|
(158,333
|
)
|
Net income (loss) attributable to noncontrolling interests
|
1,492
|
|
|
(2,727
|
)
|
|
—
|
|
|
(3,949
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,492
|
|
|
(6,676
|
)
|
||||||||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
$
|
110,869
|
|
|
$
|
(126,824
|
)
|
|
$
|
22,575
|
|
|
$
|
(30,541
|
)
|
|
$
|
1,373
|
|
|
$
|
5,757
|
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
134,817
|
|
|
$
|
(151,657
|
)
|
|
|
|
|
|
|
Nine months ended September 30,
|
||||||||||||||||||||||||||||||||||||||
|
Credit
|
|
Natural Resources
|
|
Commercial Real Estate
|
|
Reconciling Items(1)
|
|
Total Consolidated
|
||||||||||||||||||||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||||||||||||||
Total revenues
|
$
|
208,716
|
|
|
$
|
265,176
|
|
|
$
|
8,285
|
|
|
$
|
13,055
|
|
|
$
|
12,483
|
|
|
$
|
14,355
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
229,484
|
|
|
$
|
292,586
|
|
Total investment costs and expenses
|
235,198
|
|
|
163,246
|
|
|
5,102
|
|
|
6,062
|
|
|
1,344
|
|
|
1,147
|
|
|
—
|
|
|
—
|
|
|
241,644
|
|
|
170,455
|
|
||||||||||
Total other income (loss)
|
37,245
|
|
|
(216,786
|
)
|
|
3,366
|
|
|
(50,337
|
)
|
|
(12,181
|
)
|
|
20,545
|
|
|
—
|
|
|
—
|
|
|
28,430
|
|
|
(246,578
|
)
|
||||||||||
Total other expenses
|
49,665
|
|
|
39,702
|
|
|
449
|
|
|
800
|
|
|
283
|
|
|
333
|
|
|
—
|
|
|
149
|
|
|
50,397
|
|
|
40,984
|
|
||||||||||
Income tax expense (benefit)
|
122
|
|
|
126
|
|
|
—
|
|
|
—
|
|
|
91
|
|
|
1,044
|
|
|
—
|
|
|
—
|
|
|
213
|
|
|
1,170
|
|
||||||||||
Net income (loss)
|
$
|
(39,024
|
)
|
|
$
|
(154,684
|
)
|
|
$
|
6,100
|
|
|
$
|
(44,144
|
)
|
|
$
|
(1,416
|
)
|
|
$
|
32,376
|
|
|
$
|
—
|
|
|
$
|
(149
|
)
|
|
$
|
(34,340
|
)
|
|
$
|
(166,601
|
)
|
Net income (loss) attributable to noncontrolling interests
|
(10,167
|
)
|
|
(8,403
|
)
|
|
(5,157
|
)
|
|
(7,049
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15,324
|
)
|
|
(15,452
|
)
|
||||||||||
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries
|
$
|
(28,857
|
)
|
|
$
|
(146,281
|
)
|
|
$
|
11,257
|
|
|
$
|
(37,095
|
)
|
|
$
|
(1,416
|
)
|
|
$
|
32,376
|
|
|
$
|
—
|
|
|
$
|
(149
|
)
|
|
$
|
(19,016
|
)
|
|
$
|
(151,149
|
)
|
|
|
|
|
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Base management fees, gross
|
$
|
5,527
|
|
|
$
|
7,702
|
|
|
$
|
16,312
|
|
|
$
|
24,029
|
|
CLO management fees credit(1)
|
(3,522
|
)
|
|
(5,069
|
)
|
|
(12,719
|
)
|
|
(15,933
|
)
|
||||
Total base management fees, net
|
$
|
2,005
|
|
|
$
|
2,633
|
|
|
$
|
3,593
|
|
|
$
|
8,096
|
|
|
|
|
|
|
(1)
|
See “CLO Management Fees” for further discussion.
|
|
Three months ended September 30, 2016
|
|
Three months ended September 30, 2015
|
|
Nine months ended September 30, 2016
|
|
Nine months ended September 30, 2015
|
||||||||
Charged and retained CLO management fees(1)
|
$
|
2,573
|
|
|
$
|
1,747
|
|
|
$
|
5,831
|
|
|
$
|
5,457
|
|
CLO management fees credit
|
3,522
|
|
|
5,069
|
|
|
12,719
|
|
|
15,933
|
|
||||
Total CLO management fees
|
$
|
6,095
|
|
|
$
|
6,816
|
|
|
$
|
18,550
|
|
|
$
|
21,390
|
|
|
|
|
|
|
(1)
|
Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by us based on our ownership percentage in the CLO.
|
|
For the three months ended
September 30, 2016
|
|
For the three months ended
September 30, 2015
|
|
For the nine
months ended
September 30, 2016
|
|
For the nine months ended
September 30, 2015
|
||||||||
Revenues
|
|
|
|
|
|
|
|
||||||||
Corporate loans and securities interest income
|
$
|
51,920
|
|
|
$
|
74,956
|
|
|
$
|
185,203
|
|
|
$
|
249,601
|
|
Residential mortgage-backed securities interest income
|
860
|
|
|
965
|
|
|
2,466
|
|
|
2,824
|
|
||||
Net discount accretion
|
2,017
|
|
|
2,119
|
|
|
3,517
|
|
|
4,924
|
|
||||
Dividend income
|
10,243
|
|
|
1,545
|
|
|
16,551
|
|
|
7,603
|
|
||||
Other
|
376
|
|
|
113
|
|
|
979
|
|
|
224
|
|
||||
Total revenues
|
65,416
|
|
|
79,698
|
|
|
208,716
|
|
|
265,176
|
|
||||
Investment costs and expenses
|
|
|
|
|
|
|
|
||||||||
Interest expense:
|
|
|
|
|
|
|
|
||||||||
Collateralized loan obligation secured notes
|
106,268
|
|
|
32,468
|
|
|
183,207
|
|
|
115,741
|
|
||||
Collateralized loan obligation junior secured notes to affiliates
|
5,437
|
|
|
—
|
|
|
6,446
|
|
|
—
|
|
||||
Credit facilities
|
367
|
|
|
—
|
|
|
367
|
|
|
—
|
|
||||
Senior notes
|
6,586
|
|
|
6,725
|
|
|
19,931
|
|
|
20,157
|
|
||||
Junior subordinated notes
|
3,162
|
|
|
4,002
|
|
|
10,885
|
|
|
11,930
|
|
||||
Interest rate swaps
|
1,773
|
|
|
3,478
|
|
|
7,452
|
|
|
11,473
|
|
||||
Total interest expense
|
123,593
|
|
|
46,673
|
|
|
228,288
|
|
|
159,301
|
|
||||
Other
|
4,956
|
|
|
1,275
|
|
|
6,910
|
|
|
3,945
|
|
||||
Total investment costs and expenses
|
128,549
|
|
|
47,948
|
|
|
235,198
|
|
|
163,246
|
|
||||
Other income (loss)
|
|
|
|
|
|
|
|
||||||||
Realized and unrealized gain (loss) on derivatives and foreign exchange:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap
|
1,024
|
|
|
(8,489
|
)
|
|
(16,641
|
)
|
|
627
|
|
||||
Total rate of return swaps
|
—
|
|
|
—
|
|
|
—
|
|
|
434
|
|
||||
Common stock warrants
|
(507
|
)
|
|
(411
|
)
|
|
(530
|
)
|
|
(2,412
|
)
|
||||
Foreign exchange(1)
|
(604
|
)
|
|
1,225
|
|
|
1,809
|
|
|
2,059
|
|
||||
Options
|
115
|
|
|
(2,428
|
)
|
|
2,132
|
|
|
(4,730
|
)
|
||||
Total realized and unrealized gain (loss) on derivatives and foreign exchange
|
28
|
|
|
(10,103
|
)
|
|
(13,230
|
)
|
|
(4,022
|
)
|
||||
Net realized and unrealized gain (loss) on investments
|
53,309
|
|
|
(197,253
|
)
|
|
(24,604
|
)
|
|
(188,789
|
)
|
||||
Net realized and unrealized gain (loss) on debt
|
131,712
|
|
|
54,860
|
|
|
67,737
|
|
|
(33,933
|
)
|
||||
Net realized and unrealized gain (loss) on debt to affiliates
|
2,706
|
|
|
—
|
|
|
(278
|
)
|
|
—
|
|
||||
Other income
|
4,680
|
|
|
2,544
|
|
|
7,620
|
|
|
9,958
|
|
||||
Total other income (loss)
|
192,435
|
|
|
(149,952
|
)
|
|
37,245
|
|
|
(216,786
|
)
|
||||
Other expenses
|
|
|
|
|
|
|
|
||||||||
Related party management compensation:
|
|
|
|
|
|
|
|
||||||||
Base management fees
|
1,838
|
|
|
2,461
|
|
|
3,316
|
|
|
7,565
|
|
||||
CLO management fees
|
6,095
|
|
|
6,816
|
|
|
18,550
|
|
|
21,390
|
|
||||
Total related party management compensation
|
7,933
|
|
|
9,277
|
|
|
21,866
|
|
|
28,955
|
|
||||
Professional services
|
912
|
|
|
299
|
|
|
2,790
|
|
|
2,086
|
|
||||
Other general and administrative
|
7,970
|
|
|
1,709
|
|
|
25,009
|
|
|
8,661
|
|
||||
Total other expenses
|
16,815
|
|
|
11,285
|
|
|
49,665
|
|
|
39,702
|
|
||||
Income (loss) before income taxes
|
112,487
|
|
|
(129,487
|
)
|
|
(38,902
|
)
|
|
(154,558
|
)
|
||||
Income tax expense (benefit)
|
126
|
|
|
64
|
|
|
122
|
|
|
126
|
|
||||
Net income (loss)
|
$
|
112,361
|
|
|
$
|
(129,551
|
)
|
|
$
|
(39,024
|
)
|
|
$
|
(154,684
|
)
|
|
|
|
|
|
(1)
|
Includes foreign exchange contracts and foreign exchange remeasurement gain or loss.
|
|
For the three months ended
September 30, 2016
|
|
For the three months ended
September 30, 2015
|
||||||||||||||||||||
|
Unrealized
gains
(losses)
|
|
Realized
gains
(losses)
|
|
Total
|
|
Unrealized
gains
(losses)
|
|
Realized
gains
(losses)
|
|
Total
|
||||||||||||
Corporate loans
|
$
|
64,646
|
|
|
$
|
(18,720
|
)
|
|
$
|
45,926
|
|
|
$
|
(147,107
|
)
|
|
$
|
(546
|
)
|
|
$
|
(147,653
|
)
|
Corporate debt securities
|
(4,010
|
)
|
|
(66
|
)
|
|
(4,076
|
)
|
|
(16,094
|
)
|
|
(2,402
|
)
|
|
(18,496
|
)
|
||||||
RMBS
|
(166
|
)
|
|
790
|
|
|
624
|
|
|
572
|
|
|
(824
|
)
|
|
(252
|
)
|
||||||
Equity investments, at estimated fair value
|
(5,402
|
)
|
|
—
|
|
|
(5,402
|
)
|
|
(14,245
|
)
|
|
1,549
|
|
|
(12,696
|
)
|
||||||
Interests in joint ventures and partnerships, at estimated fair value and other
|
20,803
|
|
|
(4,566
|
)
|
|
16,237
|
|
|
(19,632
|
)
|
|
1,476
|
|
|
(18,156
|
)
|
||||||
Total
|
$
|
75,871
|
|
|
$
|
(22,562
|
)
|
|
$
|
53,309
|
|
|
$
|
(196,506
|
)
|
|
$
|
(747
|
)
|
|
$
|
(197,253
|
)
|
|
For the nine months ended
September 30, 2016
|
|
For the nine months ended
September 30, 2015
|
||||||||||||||||||||
|
Unrealized
gains
(losses)
|
|
Realized
gains
(losses)
|
|
Total
|
|
Unrealized
gains
(losses)
|
|
Realized
gains
(losses)
|
|
Total
|
||||||||||||
Corporate loans
|
$
|
300,072
|
|
|
$
|
(229,672
|
)
|
|
$
|
70,400
|
|
|
$
|
(92,283
|
)
|
|
$
|
(22,807
|
)
|
|
$
|
(115,090
|
)
|
Corporate debt securities
|
(39,177
|
)
|
|
3,191
|
|
|
(35,986
|
)
|
|
(21,370
|
)
|
|
(7,133
|
)
|
|
(28,503
|
)
|
||||||
RMBS
|
(95
|
)
|
|
1,719
|
|
|
1,624
|
|
|
773
|
|
|
(1,994
|
)
|
|
(1,221
|
)
|
||||||
Equity investments, at estimated fair value
|
(21,851
|
)
|
|
(3,771
|
)
|
|
(25,622
|
)
|
|
(6,872
|
)
|
|
2,915
|
|
|
(3,957
|
)
|
||||||
Interests in joint ventures and partnerships, at estimated fair value and other
|
(40,020
|
)
|
|
5,000
|
|
|
(35,020
|
)
|
|
(42,182
|
)
|
|
2,164
|
|
|
(40,018
|
)
|
||||||
Total
|
$
|
198,929
|
|
|
$
|
(223,533
|
)
|
|
$
|
(24,604
|
)
|
|
$
|
(161,934
|
)
|
|
$
|
(26,855
|
)
|
|
$
|
(188,789
|
)
|
|
For the three months ended
September 30, 2016 |
|
For the three months ended
September 30, 2015 |
|
For the nine
months ended September 30, 2016 |
|
For the nine months ended
September 30, 2015 |
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
||||||
Oil and gas revenue:
|
|
|
|
|
|
|
|
|
|
||||||
Natural gas sales
|
$
|
308
|
|
|
$
|
437
|
|
|
$
|
931
|
|
|
$
|
1,289
|
|
Oil sales
|
2,168
|
|
|
3,225
|
|
|
7,226
|
|
|
10,409
|
|
||||
Natural gas liquids sales
|
(89
|
)
|
|
214
|
|
|
128
|
|
|
1,357
|
|
||||
Total revenues
|
2,387
|
|
|
3,876
|
|
|
8,285
|
|
|
13,055
|
|
||||
Investment costs and expenses
|
|
|
|
|
|
|
|
||||||||
Oil and gas production costs:
|
|
|
|
|
|
|
|
||||||||
Severance and ad valorem taxes
|
247
|
|
|
248
|
|
|
702
|
|
|
498
|
|
||||
Total oil and gas production costs
|
247
|
|
|
248
|
|
|
702
|
|
|
498
|
|
||||
Oil and gas depreciation, depletion and amortization
|
914
|
|
|
1,404
|
|
|
3,238
|
|
|
4,409
|
|
||||
Interest expense:
|
|
|
|
|
|
|
|
||||||||
Senior notes
|
293
|
|
|
228
|
|
|
755
|
|
|
725
|
|
||||
Junior subordinated notes
|
140
|
|
|
136
|
|
|
407
|
|
|
430
|
|
||||
Total interest expense
|
433
|
|
|
364
|
|
|
1,162
|
|
|
1,155
|
|
||||
Total investment costs and expenses
|
1,594
|
|
|
2,016
|
|
|
5,102
|
|
|
6,062
|
|
||||
Other income (loss)
|
|
|
|
|
|
|
|
||||||||
Net realized and unrealized gain (loss) on investments
|
21,974
|
|
|
(36,236
|
)
|
|
3,366
|
|
|
(50,337
|
)
|
||||
Total other income (loss)
|
21,974
|
|
|
(36,236
|
)
|
|
3,366
|
|
|
(50,337
|
)
|
||||
Other expenses
|
|
|
|
|
|
|
|
||||||||
Related party management compensation:
|
|
|
|
|
|
|
|
||||||||
Base management fees
|
82
|
|
|
84
|
|
|
132
|
|
|
271
|
|
||||
Total related party management compensation
|
82
|
|
|
84
|
|
|
132
|
|
|
271
|
|
||||
Professional services
|
40
|
|
|
9
|
|
|
105
|
|
|
74
|
|
||||
Other general and administrative
|
70
|
|
|
21
|
|
|
212
|
|
|
455
|
|
||||
Total other expenses
|
192
|
|
|
114
|
|
|
449
|
|
|
800
|
|
||||
Income (loss) before income taxes
|
22,575
|
|
|
(34,490
|
)
|
|
6,100
|
|
|
(44,144
|
)
|
||||
Income tax expense (benefit)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net income (loss)
|
$
|
22,575
|
|
|
$
|
(34,490
|
)
|
|
$
|
6,100
|
|
|
$
|
(44,144
|
)
|
|
For the three months ended
September 30, 2016 |
|
For the three months ended
September 30, 2015 |
|
For the nine
months ended September 30, 2016 |
|
For the nine months ended
September 30, 2015 |
||||||||
Revenues
|
|
|
|
|
|
|
|
|
|||||||
Dividend income
|
$
|
3,214
|
|
|
$
|
5,535
|
|
|
$
|
12,483
|
|
|
$
|
14,355
|
|
Total revenues
|
3,214
|
|
|
5,535
|
|
|
12,483
|
|
|
14,355
|
|
||||
Investment costs and expenses
|
|
|
|
|
|
|
|
|
|||||||
Interest expense:
|
|
|
|
|
|
|
|
|
|||||||
Senior notes
|
304
|
|
|
241
|
|
|
870
|
|
|
712
|
|
||||
Junior subordinated notes
|
146
|
|
|
144
|
|
|
471
|
|
|
422
|
|
||||
Total interest expense
|
450
|
|
|
385
|
|
|
1,341
|
|
|
1,134
|
|
||||
Other
|
—
|
|
|
3
|
|
|
3
|
|
|
13
|
|
||||
Total investment costs and expenses
|
450
|
|
|
388
|
|
|
1,344
|
|
|
1,147
|
|
||||
Other income (loss)
|
|
|
|
|
|
|
|
|
|||||||
Net realized and unrealized gain (loss) on derivatives and foreign exchange:
|
|
|
|
|
|
|
|
|
|||||||
Foreign exchange(1)
|
(196
|
)
|
|
(201
|
)
|
|
(334
|
)
|
|
477
|
|
||||
Total realized and unrealized gain (loss) on derivatives and foreign exchange
|
(196
|
)
|
|
(201
|
)
|
|
(334
|
)
|
|
477
|
|
||||
Net realized and unrealized gain (loss) on investments
|
(847
|
)
|
|
940
|
|
|
(11,847
|
)
|
|
20,068
|
|
||||
Total other income (loss)
|
(1,043
|
)
|
|
739
|
|
|
(12,181
|
)
|
|
20,545
|
|
||||
Other expenses
|
|
|
|
|
|
|
|
||||||||
Related party management compensation:
|
|
|
|
|
|
|
|
||||||||
Base management fees
|
85
|
|
|
88
|
|
|
145
|
|
|
260
|
|
||||
Total related party management compensation
|
85
|
|
|
88
|
|
|
145
|
|
|
260
|
|
||||
Professional services
|
42
|
|
|
11
|
|
|
121
|
|
|
73
|
|
||||
Other general and administrative
|
7
|
|
|
—
|
|
|
17
|
|
|
—
|
|
||||
Total other expenses
|
134
|
|
|
99
|
|
|
283
|
|
|
333
|
|
||||
Income before income taxes
|
1,587
|
|
|
5,787
|
|
|
(1,325
|
)
|
|
33,420
|
|
||||
Income tax expense (benefit)
|
214
|
|
|
30
|
|
|
91
|
|
|
1,044
|
|
||||
Net income (loss)
|
$
|
1,373
|
|
|
$
|
5,757
|
|
|
$
|
(1,416
|
)
|
|
$
|
32,376
|
|
|
|
|
|
|
(1)
|
Includes foreign exchange contracts and foreign exchange remeasurement gain or loss.
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||||||
Senior secured
|
$
|
3,688,372
|
|
|
$
|
3,671,757
|
|
|
$
|
3,585,415
|
|
|
$
|
5,513,949
|
|
|
$
|
5,401,562
|
|
|
$
|
4,997,394
|
|
Second lien
|
96,464
|
|
|
95,230
|
|
|
85,679
|
|
|
83,492
|
|
|
81,453
|
|
|
78,267
|
|
||||||
Subordinated
|
105,403
|
|
|
105,218
|
|
|
84,689
|
|
|
125,205
|
|
|
136,800
|
|
|
112,949
|
|
||||||
Total
|
$
|
3,890,239
|
|
|
$
|
3,872,205
|
|
|
$
|
3,755,783
|
|
|
$
|
5,722,646
|
|
|
$
|
5,619,815
|
|
|
$
|
5,188,610
|
|
|
September 30, 2016
|
|
December 31, 2015
|
||||||||||||||||||||
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
|
Par
|
|
Amortized
Cost
|
|
Estimated
Fair Value
|
||||||||||||
Senior secured
|
$
|
155,078
|
|
|
$
|
128,989
|
|
|
$
|
49,995
|
|
|
$
|
178,396
|
|
|
$
|
166,313
|
|
|
$
|
110,406
|
|
Senior unsecured
|
25,280
|
|
|
28,880
|
|
|
29,079
|
|
|
137,634
|
|
|
137,949
|
|
|
142,990
|
|
||||||
Subordinated
|
128,158
|
|
|
109,288
|
|
|
90,803
|
|
|
131,720
|
|
|
122,997
|
|
|
114,502
|
|
||||||
Total
|
$
|
308,516
|
|
|
$
|
267,157
|
|
|
$
|
169,877
|
|
|
$
|
447,750
|
|
|
$
|
427,259
|
|
|
$
|
367,898
|
|
|
|
As of September 30, 2016
|
|
As of December 31, 2015
|
|
||||
Oil and gas properties, net
|
|
$
|
111,631
|
|
|
$
|
114,868
|
|
|
Interests in joint ventures and partnerships(1)
|
|
120,372
|
|
|
114,136
|
|
|
||
Total
|
|
$
|
232,003
|
|
|
$
|
229,004
|
|
|
(1)
|
Includes $28.3 million and $32.6 million of noncontrolling interests as of
September 30, 2016
and December 31, 2015, respectively. Refer to “Interests in Joint Ventures and Partnerships Holdings” below for further discussion around the aggregate balance of our interests in joint ventures and partnerships.
|
|
|
For the three months ended September 30, 2016
|
|
For the three months ended September 30, 2015
|
|
For the nine months ended September 30, 2016
|
|
For the nine months ended September 30, 2015
|
||||||||
Beginning balance
|
|
$
|
218,306
|
|
|
$
|
292,330
|
|
|
$
|
262,946
|
|
|
$
|
181,378
|
|
Additions
|
|
—
|
|
|
1,503
|
|
|
10,039
|
|
|
109,578
|
|
||||
Dispositions and paydowns
|
|
—
|
|
|
(167
|
)
|
|
(38,727
|
)
|
|
(3,342
|
)
|
||||
Unrealized gains (losses)
|
|
(5,403
|
)
|
|
(14,246
|
)
|
|
(21,852
|
)
|
|
(6,873
|
)
|
||||
Other(1)
|
|
165
|
|
|
(74
|
)
|
|
662
|
|
|
(1,395
|
)
|
||||
Ending balance
|
|
$
|
213,068
|
|
|
$
|
279,346
|
|
|
$
|
213,068
|
|
|
$
|
279,346
|
|
Declaration Date
|
|
Record Date
|
|
Payment Date
|
|
Cash Distribution Declared
per Preferred Share
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
March 24, 2016
|
|
April 8, 2016
|
|
April 15, 2016
|
|
$0.460938
|
|
June 23, 2016
|
|
July 8, 2016
|
|
July 15, 2016
|
|
$0.460938
|
|
September 22, 2016
|
|
October 10, 2016
|
|
October 17, 2016
|
|
$0.460938
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
March 26, 2015
|
|
April 8, 2015
|
|
April 15, 2015
|
|
$0.460938
|
|
June 25, 2015
|
|
July 8, 2015
|
|
July 15, 2015
|
|
$0.460938
|
|
September 24, 2015
|
|
October 8, 2015
|
|
October 15, 2015
|
|
$0.460938
|
|
December 23, 2015
|
|
January 8, 2016
|
|
January 15, 2016
|
|
$0.460938
|
|
|
Record and
Declaration Date
|
|
Payment Date
|
|
Cash Distribution
Declared per
Common Share
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
First Quarter ended March 31, 2016
|
|
May 9, 2016
|
|
May 10, 2016
|
|
$245,741
|
|
Second Quarter ended June 30, 2016
|
|
July 21, 2016
|
|
July 22, 2016
|
|
$179,230
|
|
Third Quarter ended September 30, 2016
|
|
(1)
|
|
(1)
|
|
(1)
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
First Quarter ended March 31, 2015
|
|
May 7, 2015
|
|
May 8, 2015
|
|
$342,908
|
|
Second Quarter ended June 30, 2015
|
|
August 6, 2015
|
|
August 7, 2015
|
|
$521,120
|
|
Third Quarter ended September 30, 2015
|
|
November 5, 2015
|
|
November 6, 2015
|
|
$375,155
|
|
Fourth Quarter ended December 31, 2015
|
|
February 25, 2016
|
|
February 26, 2016
|
|
$383,135
|
Change in interest rates
|
Annual Impact
|
||
Increase of 1.0%
|
$
|
1,759
|
|
Increase of 2.0%
|
$
|
7,558
|
|
Increase of 3.0%
|
$
|
13,357
|
|
Increase of 4.0%
|
$
|
19,156
|
|
Increase of 5.0%
|
$
|
24,955
|
|
|
As of September 30, 2016
|
||||||
|
Notional
|
|
Estimated
Fair Value
|
||||
Free-Standing Derivatives:
|
|
|
|
|
|
||
Interest rate swaps
|
$
|
125,000
|
|
|
$
|
(47,907
|
)
|
Foreign exchange forward contracts and options
|
(297,947
|
)
|
|
24,642
|
|
||
Common stock warrants
|
—
|
|
|
1,613
|
|
||
Options
|
—
|
|
|
2,227
|
|
||
Total
|
|
|
|
$
|
(19,425
|
)
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3 - 5 years
|
|
More than
5 years
|
|
Total
|
||||||||||
Free-Standing Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Interest rate swaps
|
$
|
(641
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(47,266
|
)
|
|
$
|
(47,907
|
)
|
Foreign exchange forward contracts and options
|
9,555
|
|
|
11,167
|
|
|
3,920
|
|
|
—
|
|
|
24,642
|
|
|||||
Total
|
$
|
8,914
|
|
|
$
|
11,167
|
|
|
$
|
3,920
|
|
|
$
|
(47,266
|
)
|
|
$
|
(23,265
|
)
|
Exhibit
Number
|
|
Description
|
|
|
|
10.1
|
|
Fee Waiver Letter, dated November 7, 2016, between KKR Financial Advisors LLC and KKR Financial Holdings LLC
|
31.1
|
|
Chief Executive Officer Certification
|
31.2
|
|
Chief Financial Officer Certification
|
32
|
|
Certification Pursuant to 18 U.S.C. Section 1350
|
101.INS
|
|
XBRL Instance Document.
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
|
KKR Financial Holdings LLC
|
|
|
|
Signature
|
|
Title
|
|
|
|
/s/ WILLIAM J. JANETSCHEK
|
|
Chief Executive Officer (Principal Executive Officer)
|
William J. Janetschek
|
|
|
|
|
|
|
|
|
/s/ THOMAS N. MURPHY
|
|
Chief Financial Officer (Principal Financial and
|
Thomas N. Murphy
|
|
Accounting Officer)
|
|
|
|
Date: November 9, 2016
|
|
|
1 Year Kkr Financial Chart |
1 Month Kkr Financial Chart |
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