Following KKR’s quarterly earnings call on Thursday, KKR CFO Bill Janetschek answered questions on how the company uses credit facilities.
“When you think about the administrative ease by having a subscription facility in each one of the funds, we’ve been doing that for the past few years,” Janetschek said. “It’s again more for administrative ease as opposed to anything else.”
“Typically on average, we have a facility, we draw on a facility and it usually gets paid down every 6 months,” he added.
There are points of contention surrounding subscription credit facilities, and KKR’s drawdown period is longer than the typical 90 days, but the firm does report return with and without leverage, which LPs want.
“As we report to our LPs, we report the IRR because of us having the ability you use that subscription line, but we also report a return as if we didn’t use the subscription line, so we actually have these transparency reports where again we report both for those numbers.”
In an audience poll conducted at sister publication Private Equity International’s CFOs and COOs Forum at the start of 2019, 42 percent said the average length of loans drawn on their credit line was around three months, and a quarter said they were averaging more than six months. In a separate poll, 31 percent replied they had “generally extended” the duration of the loans over the course of the last year.