KKR Advisor: Economy Facing Tough Two-Year Road

NEW YORK (Reuters) – The economy could be facing a very tough two year road ahead, a senior adviser at buyout giant Kohlberg Kravis Roberts & Co said on Friday, adding that KKR would probably hang onto its portfolio companies for a year more than the seven year average due to the credit crisis.

George Fisher said his biggest concerns are that people are being too optimistic about how long the contraction will last, and of another wave of greed a few years down the road.

“The biggest problem we’re all facing is too many people are wishing and hoping that we get through this fast,” he told a packed auditorium at Columbia University. “I personally believe this could be a two year, really tough economic scenario that we’re facing.”

Fisher said another big concern was that as stimulus is applied to the economy, the seeds will be sown for “the next wave of greed”.

“That’s inevitable as we sit here — that there will be another wave of abuse and greed,” he said. “It seems to be human nature.”

KKR has previously announced plans to go public through a complex transaction that involves merging with its Amsterdam-listed affiliate KKR Private Equity Investors LP (KPE) (KKR.AS). It recently delayed those plans to this year, from 2008.

Questioned about the decision behind KKR’s own plans to go public, he noted share falls by rivals such as Fortress and Blackstone and said “in a sense I suspect, we were a little bit lucky in being slow”.

“What’s happened with Fortress, Blackstone, some of the funds we have those have not been success stories for anybody — us or our bretheran.”

He said that to go public has some advantages. “In a good market it certainly gives you a currency you can use effectively. In a market like today, it is probably, obviously, not as wise.”

Blackstone Group (BX.N) listed in June 2007 for $31 a share, and is currently trading around $4.

Fortress Investment Group (FIG.N) started trading on Feb. 9 2007, starting off at $35 a share after having been priced at $18.50 the day before. It is now trading at $1.32, having lost 93 percent of its value since it was priced.

KKR also has a publicly traded debt fund that it manages, KKR Financial Holdings LLC’s (KFN.N).

Fisher was talking at a Private Equity and Venture Capital Conference at Columbia University, (Additional reporting by Svea Herbst-Bayliss; Editing by Bernard Orr)