
Nothing like seeing billionaires have a hard time. But that's the case with big-time private equity kingpins, like
KKR's Henry Kravis.
Despite being the pioneer of the industry, KKR was a bit late to the IPO feeding frenzy, with arch enemy
Blackstone (NYSE:
BX) snagging the riches.
Interestingly enough, KKR had to report some of the misery in an updated
IPO filing (which is the first amended document).
If you look at page 30, you'll find the following:
"For example, the cost of financing leveraged buyout transactions by issuing high-yield debt securities in the public capital markets has recently increased significantly. If conditions in the debt markets do not become more favorable to us in the near term, we may need to rely on financing commitments provided directly by investment banks or other sources in order to consummate pending transactions or finance future transactions. Such financing may be significantly more costly, with terms that may be significantly more restrictive, than financing that was, until recently, available to us in the public capital markets. More costly and restrictive financing may adversely impact the returns of our leveraged buyout transactions and, therefore, adversely affect our results of operations and financial condition. In addition, in the event of a prolonged market downturn, our business could be affected in different ways. Our profitability may also be adversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in net income relating to changes in market and economic conditions."
Yes, it's a bummer for an upcoming IPO. Just look at the horrendous after-market performance of Blackstone. In fact, despite a strong quarterly report, the stock had a tepid performance today.
And, if KKR does have troubles financing mega deals like
TXU (NYSE:
TXU) and
First Data Corp (NYSE:
FDC), we might see the next filing for withdrawal of the public offering.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.