(Reuters) — Private equity firm KKR & Co LP (KKR.N) reported a wider than expected third-quarter loss on Tuesday, as a stock market rout weighed on the value of its assets, yet it sought to please its shareholders by announcing a $500 million stock repurchase.
The share buyback, a first for a publicly listed alternative asset manager, reflects KKR’s frustration with its low valuation compared with traditional asset managers such as BlackRock (BLK.N) and T. Rowe Price Group Inc (TROW.O).
It was announced at a time when buyout firms have had to mark down the value of some of their assets and face choppy financing markets that have made leveraged buyouts more difficult. They have also suffered as a result of their exposure to the battered energy sector.
KKR said economic net loss was $286 million in the third quarter, versus economic net income of $508.7 million a year ago. This translated into post-tax economic net loss per adjusted unit of 37 cents, higher than the 30 cents average forecast by analysts in a Thomson Reuters poll.
Asset sales generated less cash than they did a year ago, and so total distributable earnings, which shows cash available to pay dividends, was $349.1 million in the third quarter, down from $504.8 million a year ago.
As a result, KKR disclosed a third-quarter distribution of 35 cents per common unit. Moving forward, KKR’s quarterly dividend will be a fixed 16 cents. The share buyback means KKR shareholders can expect a yield of around 3.6 percent, receiving roughly the same amount of cash back as they did last year.
Under KKR’s previous dividend policy, shareholders received about 75 to 80 percent of the firm’s distributable earnings.
New York-based KKR, which was founded in 1976 by Henry Kravis, George Roberts and Jerome Kohlberg, said assets under management totaled $98.7 billion as of the end of September.