Record success for KKR

With 36 deals already worth $14.6bn so far this year, KKR has become a rising star in the leveraged loans bookrunner market, and is pushing to become a top bookrunner in the US. The spike has pushed KKR up to 14th in the US Leveraged Loans Bookrunner League Table in 2017 YTD. Volume so far this year is already the highest on record for KKR, eclipsing full-year 2016 ($3.5bn), full-year 2015 ($2.2bn), and full-year 2014 ($6.7bn)—combined. It has also earned an estimated $67m in loans revenue this YTD, more than double the entirety of 2016 (estimated $30m). KKR has stepped in to handle their loan transactions in-house, to great effect and recognition.

Borrowers working with KKR as bookrunner

Using their unique status as a private equity firm with the ability to broker loan transactions, KKR has been able to make inroads with borrowers when more traditional means of acquiring money become difficult to engage. This February, KKR was the sole bookrunner for repricing on a $1.4bn institutional loan for UFC (with Goldman Sachs as lead left previously), and a $2.3bn term loan for WME IMG. These two sole-bookrunner transactions have already surpassed all of KKR’s leveraged loan lending over the past 2 years. Plus, KKR can contribute to more traditionally structured syndicated loans. First Data has been at the forefront of KKR’s ascendance, going to them as a bookrunner for two institutional loans in April and June this year totaling $8.0bn.

New role for private equity firms

KKR has an innate prescience in the sponsorship world, which has led to a good reputation among both banks and borrowers—and they have been proactive in acquiring prospective borrowers in the syndicated loans market. However, KKR is not regulated like a traditional bank, allowing it to take more chances. This is evident in the Federal Reserve requirement that banks not issue debt to borrowers whose leverage exceeds 6 times its EBITDA.

KKR is able to bypass this bank regulation in order to provide capital to riskier companies. S&P ratings of company borrowers working with KKR fluctuate between B+ and B-. Also, the average margin of a loans involving KKR is L+450, compared to the average of L+340 for the entire leveraged market. This “sponsor-broker” partnership that KKR has created is one that bears watching as a possibly profitable experiment. If successful, the market could see an influx of private equity firms such as Apollo ($45m via 3 bookrunner deals in 2017 YTD) engaging the loans market.