Published on : Aug 19, 2015
The energy sector has ended up putting more pressure on KKR & Co. than previously imagined. By the 15th of September, Samson Resources Corp. will prepare to enter bankruptcy. The action will amount to the second buyout by KKR that has failed.
In 2014, Energy Holdings Corp. had applied for court protection. Between the two blowouts, KKR could essentially lose almost US$5 billion of the investors’ money from their private equity fund that the company had lost in its recent deals.
Energy prices have fallen, affecting the private equity and hedge fund industries on a large scale. Most of the affected firms have incurred over US$17 billion that was lost from a few public energy producers since mid-2014. Among the affected companies are Carlyle Group LP, Riverstone Holdings, and Apollo Global Management LLC.
The energy-related losses of KKR are especially visible as they do come with their two major deals that are now lost. One of them is the US$48 billion takeover of Energy Future Holdings. It was registered as the largest buyout on record. The other is the US$7.2 billion Samson purchase. The purchase was ranked the second largest private equity deal of 2011.
University of Michigan business and law professor Erik Gordon said KKK have used their funds to the farthest extent on the two bets and have earned nothing out of them. KKK spokesperson Anita Davis refused to comment on the proceedings.
The 2006 Fund LP for KKR was a US$17.6 billion buyout pool. Out of this fund, US$3 billion was used for the deals with Samson and Energy Future Holdings. Nearly US$700 million was invested from KKR’s stake in the pool. The investors filled in the remainder separately.