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KKR closes annex fund to €4.5bn European vehicle

The firm was targeting €400m to €700m for capital infusions in portfolio companies of KKR’s €4.5bn second European fund.

Kohlberg Kravis Roberts has closed KKR E2 Investors, an annex fund to the firm’s €4.5 billion second European fund.

KKR declined to discuss the total amount of the fund. A Reuters report citing an anonymous source said the fund closed with more than €400 million, toward the bottom of the target range.

The annex fund will be used to make additional capital infusions in portfolio companies in KKR European Fund II, and for add-on commitments in the firm’s third European fund, which closed on €4.7 billion last year, well below its €6 billion target.

KKR solicited commitments to the annex fund to existing investors in the second and third European funds, sources said. One such investor was the Washington State Investment Board, which committed $94 million to the annex fund, but only after diverting $94 million from its $700 million commitment to the firm’s third European fund.

KKR’s second European fund holds investments including Alliance Boots, the value of which the firm recently wrote up by $35 million, and ProSiebenSat, which has been written down to near zero, according to the firm’s second quarter earnings report.

Other firms have raised annex funds to re-invest in the struggling companies of past portfolios. MatlinPatterson raised $165 million for an annex fund earlier this year to aid distressed companies in its 2003 fund.

Sun Capital Partners is using $150 million to re-invest in the portfolio companies of its $1.5 billion fourth fund, with half the amount coming from Sun’s $6 billion fifth buyout fund.