KKR Financial Reviewing Biz Model

NEW YORK (Reuters) – KKR Financial Holdings LLC’s (KFN.N) new chief executive said on Tuesday the company was reviewing its capital structure, business model and operating expenses as the market turbulence continues.

William Sonneborn was appointed CEO on Monday of KKR Financial, a publicly traded debt fund managed by private equity firm Kohlberg Kravis Roberts & Co.

He succeeds Saturnino Fanlo, the company said in a statement on Monday, without providing details about Fanlo’s resignation.

“We recognize that we must address important issues with respect to our capital structure and long-term business model,” Sonneborn said on a brief conference call for investors on Tuesday.

He said he anticipated continued turbulence and difficulty across capital markets in 2009.

“Even assuming an economic recovery in 2010/11, we must seriously consider how this specialty finance model should evolve,” he said. “We will take a completely fresh look at our company, its capital structure, business model, operating expenses and strategic plan. We will inform you of the outcome of our work once it is completed.”

KKR Financial said in November it will not pay a third-quarter dividend, and arranged for more time to pay off its borrowings. The company also said at the time it was exploring various strategic alternatives, including a change in corporate structure, a conversion to a bank and the acquisition of a depository.

Sonneborn said on Tuesday the company has taken steps over the past few weeks to boost KFN’s financial flexibility, such as closing on a new credit facility with its lenders, further reducing its exposure to short-term debt and cutting the dividend.

“These actions will need to be supplemented by other steps to enhance our flexibility in the coming weeks and months,” he said.

By Megan Davies
(Editing by Maureen Bavdek)