Careful readers will find one big change in the new version of Kohlberg Kravis Roberts’ prospectus: its view on the debt markets. KKR has stripped a 175-word dissertation out of the original offering document, which it filed in early July before the credit markets soured. The passage trumpeted the then-low cost of funding and robust demand for high-yield debt as a boon for private equity. By contrast, the prospectus now says that the cost of financing deals has “recently increased significantly”, and notes that this could hurt its business. Clearly, that’s a risk factor on any potential investor’s mind.
KKR has made a few other substantive changes, which weren’t dictated by market changes. It excised an admission, made in its original prospectus, that the general partner of the fund is “obligated to repay some or all of the carried interest it previously received” if later investments aren’t profitable. And it added some delicate language added about how KKR’s partners will seek to meet the tax code’s “Qualifying Income Exception”—a tax break that the firm will enjoy as a public partnership.
Of course, it’s hard to second-guess changes made by lawyers toiling late into the night. But some seem a bit odd. For example, in at least one spot the authors deflate a bit of bombast, no longer referring to KKR as “an integrated global platform for sourcing and making investments”. Rather, it’s now simply a “firm”.
Other changes may be more confusing for the firm’s potential investors. Its employees are now merely “focused” rather than “highly focused” about working with each other, while its advisers have been demoted from “experts” to “consultants”. But lawyers are conservative types. Perhaps they worried about the risk that disgruntled shareholders would slap KKR with lawsuits over improper disclosure of its employees’ and advisers’ actual levels of focus and expertise.