A Listed Investment Trust
Not for distribution into the U.S. or to U.S. persons
The Trust Company (RE Services) Limited as the Responsible Entity has announced the launch of ASX-listed1 KKR Credit Income Fund (KKC) (Trust) and has appointed KKR Australia Investment Management Pty Limited as the Manager. The Offer2 is expected to raise up to approximately $750 million3.
KKC will offer investors an opportunity to gain exposure to a range of investments that are generally only open to institutional investors such as pension funds and sovereign wealth funds.
KKR and the Manager
The Manager is an affiliate of Kohlberg Kravis Roberts & Co. L.P. (KKR), a global alternative asset manager and KKR Credit Advisors (US) LLC (KKR Credit) is the Investment Adviser through which KKR conducts its global credit investment business.
KKR manages approximately US$206 billion of assets with nearly US$70 billion of assets being managed by KKR Credit4.
KKR Credit has approximately 120 investment professionals who seek and analyse new investment opportunities.
Target distribution and target total return
The Trust will provide investors with access to global credit investment opportunities that aims to deliver investors quarterly distributions5 with a distribution yield (net of fees and expenses) of 4% - 6% per annum ("Target Distribution") and a target annual return (net of fees) of 6% - 8% per annum ("Target Total Return").
Investment objective and strategy
The Trust's investment objective is to provide Unitholders with an income stream as well as to achieve attractive long-term capital appreciation over the market cycle by providing investors with exposure to underlying credit investments that are diversified by number of investments and across geographies and asset classes. These assets will typically have a high income component. The Trust will seek to achieve this objective by investing directly & indirectly in the KKR managed funds.
To achieve the Investment Strategy and target portfolio construction, the Manager intends to invest in the following KKR managed funds which are discussed below:
- Global Credit Opportunities Fund (GCOF)
- European Direct Lending Fund (EDLF)
The Trust will gain exposure to GCOF which will invest in a diversified range of credit investments being primarily loans, bonds and notes (fixed and floating rate) as well as related financial instruments including senior secured loans, traded senior secured bank loans and high yield bonds.
The Trust's exposure to EDLF seeks to take advantage of the attractive fundamentals that KKR Credit sees in Europe for originated senior lending.
The focus will be on providing highly negotiated and customised originated senior lending to corporate and other issuers.
The Manager intends to hedge currency risk back to the Australian Dollar.
Access to KKR’s other credit strategies through the Trust is intended to provide investors with investment opportunities that are not available elsewhere and will supplement clients’ existing portfolios of equities, hybrid products and cash products.
- Ability to secure a Broker Firm allocation in the KKR Credit Income Fund with a subscription price of $2.50 per unit
- KKR Australia to fund all establishment costs, meaning NAV6 will equal the issue price
- Target Distribution of 4% - 6% per annum (net of fees) and a Total Target Return of 6% - 8% per annum (net of fees) with quarterly distributions
- Access to a leading global alternative asset manager with nearly US$70 billion of fixed income assets managed by KKR Credit
- Exposure to a portfolio of global credit investments diversified across a number of asset classes, total number of deals, geographies and investment types which will help to mitigate investment risks
- Low expected correlation of the Trust's assets to Australian and global equities which means that investors should be less exposed to a downturn in global equity markets
- To be listed on the ASX under code KKC
Issuer: The Trust Company (RE Services) Limited (Responsible Entity)
Transaction: Listed Investment Trust
Morgans Role: Joint Lead Arranger and Joint Lead Manager
Offer Size: $750 million
Offer Open: 14 October 2019
Morgans Closing Date: 31 October 2019
1. Application will be made to list KKR Credit Income Fund on ASX.
2. Morgans will receive fees for its role.
3. The Offer size may be more or less than $750 million.
4. As at 30 June 2019.
5. The first quarterly income distribution is scheduled to be paid within 10 days of the quarter ended in March 2020.
6. The NAV will reflect the value of the loan portfolio assets and move accordingly.
Investors should review the PDS to understand the features and risks of the KKR Credit Income Fund. Application for KKR Credit Income Fund can only be made by completing the application form attached to the PDS. If you have any questions about the offer, please contact your Morgans adviser, call 134 226 or find your nearest office here.
KKR Credit Income Fund is being offered only in Australia and the Prospectus will only constitute an offer to a person receiving it in Australia. Not for distribution, directly or indirectly, in the United States or to, or for the account or benefit of, US Persons, except in accordance with an available exemption from the registration requirements of the US Securities Act. The distribution of the Prospectus (including an electronic copy) in jurisdictions outside Australia may be restricted by law.
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