KKR, RAMS reel from impact of US loan woes


Fri, Aug 17, 2007 - Page 10

KKR Financial Holdings, an affiliate of US private equity giant Kohlberg Kravis Roberts & Co, said on Wednesday it would lose US$40 million from the sale of a mortgage portfolio, but warned its losses could balloon to US$290 million.

KKR Financial warned of further losses in a statement saying it had sold US$5.1 billion in residential mortgage loans. Its shares fell more than 31 percent to US$10.45 in the wake of the announcement.

The investment affiliate also said its US mortgage-backed securities investments had suffered "unprecedented disruption."


KKR Financial did not reveal who had purchased its large residential mortgage loan portfolio.

Investors have shunned such securities in recent days amid mounting fears about the distressed US housing market and rising foreclosures which have forced dozens of mortgage lenders out of business.

Aside from the US$40 million loss, KKR Financial cautioned that it could lose up to an additional US$250 million related to multibillion dollar mortgage-backed securities bets.

Many investors, and some big Wall Street banks, bought such securities during the years-long US property boom which fizzled out early last year and are now having trouble selling the securities to others.

In Australia, home loan group RAMS said yesterday it had failed to refinance A$6.17 billion (US$5 billion) in debt as fallout from a US mortgage credit crunch starved the market of liquidity.

stock plunge

"RAMS XCP [US extendable commercial paper] program were due to roll maturing notes overnight," the company said in a statement yesterday.

"Due to a lack of market liquidity, RAMS was unable to affect these rollovers," the company said.

"As a result, the two programs totaling A$6.17 billion have been extended and the refinancing period has commenced," it said.

RAMS now has 180 days to refinance the loans during which time the interest rates payable had been fixed at the LIBOR plus 25 basis points.

"The company is taking active steps to refinance the programs," it said.

Shares of RAMS fell A$0.48 or 35.9 percent yesterday to close at A$0.87.