KKR Capstone Founder Flies Coach; Portfolio Companies Are Performing

Dean Nelson, founder and head of KKR’s operational group (KKR Capstone), said during today’s Reuters PE and Hedge Fund Summit that he only flies coach. This despite being having “top elite status” on at least two airlines. So take that, Wall Street Culture of Excess.

(On one hand, if there is any industry more acutely aware of its conspicuous consumption, it’s private equity. The magnifying glass has been on private equity’s excessive lifestyles far longer than it has on Wall Street CEOs, thanks to the SEIU.)

Beyond that, Nelson defended KKR’s portfolio companies, saying that the firm’s lineup of “defensible” companies were hanging in, despite posting sizable mark-downs for 2008. Companies like TXU, Dollar General, First Data and HCA are performing well, he said.

Two thirds of the firm’s work of recent has been focused on growing Ebitda, he said, adding that 69% of KKR’s companies grew Ebitda last year. Dollar General, the discount retailer is now open for longer hours, has cleaner stores and offers a private label. US Food Service, a food supplier that competes with Sysco, improved its sales force coverage, he said.

The firm hopes that by driving Ebitda, its companies will be more attractive to refinance when their debt begins to hit maturities in 2012. Until then, KKR’s companies are “chipping away” at their debt.

Regarding Masonite, the firm’s first bankrupt portfolio company of the year, Nelson said, “the capital structure got away from us.” The company is more efficient than when KKR bought it, but the firm couldn’t have predicted the housing crisis.

The firm also owns retailers like Sealy, the mattress company, and Toys R Us, a toy store chain, both of which are holding up, Nelson said. Sealy is using this lull in consumer spending to snap up market share, even though the firm is careful to avoid “profit-less prosperity” by growing the low margin end of its business.

Nelson also said KKR would be “happy and willing” to participate in the government’s public to private offerings, but his firm has still not seen enough details. (View Reuters story here)