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KKR Resisting Weakened Debt Markets

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Yesterday I posted about some impacts the sub-prime mortgage meltdown was having on commercial real estate, linking to stories and observations about changes in the CMBS and CDO markets.

Today the New York Times has a blurb talking about how KKR is trying to resist banks attempts to tighten credit.

As the debt markets weaken, making financing buyout deals more expensive for investment banks, Kohlberg Kravis has refused to pay higher interest rates for the bonds and loans that are the lifeblood of those transactions, Reuters said, citing unnamed sources. “If they keep giving it to investment banks, nobody's going to want to write a commitment letter,” one unnamed banker told Reuters.

Meanwhile, the firm's prospectus for its initial public offering clearly states that Kohlberg Kravis intends to reduce its reliance on those same banks to finance future transactions.

Kohlberg Kravis declined to comment to Reuters. But sources told Reuters that the company's belief is that the banks agreed to lend them the money — end of story. It is not the firm's concern if the banks cannot syndicate the debt.

This is doubly interesting in light of KKR's rumored interest in Macy's and because of its plans to follow in Blackstone Group's footsteps and conduct an IPO later this year.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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