Feb. 29 (Bloomberg) -- Kohlberg Kravis Roberts & Co.'s publicly traded buyout fund, KKR Private Equity Investors LP, wrote down stakes in seven investments as a slowing economy hurt earnings and declining bond prices eroded the value of holdings.

The fund marked down its stake in Dutch chipmaker NXP BV by 25 percent and in ProSiebenSat.1 Media AG, Germany's biggest broadcaster, by 27 percent, the Amsterdam-listed company said in a statement today. KKR also cut by more than 80 percent the value of its holding in ATU, the German car-repair company it bailed out last week. The fund's shares have slid 37 percent in 12 months and trade for 38 percent less than net asset value.

``All of us at KKR are extremely displeased with this discount,'' Henry Kravis, KKR co-founder, said on a conference call with investors today. The firm would not expect the disparity between the market and net asset value ``would be so wide,'' he said.

Falling bond and loan prices indicate private equity firms may struggle to profit from their investments, after they gorged on a record $1.4 trillion of takeovers in 2006 and 2007. A slower U.S. economy is also hurting sales at companies they own. KKR is raising 7.7 billion euros ($11.7 billion) for its biggest European takeover fund.

``NXP has underperformed versus our expectations due to overall softness in the semiconductor business,'' KKR member Paul Raether said during the call. The firm has replaced the presidents of two NXP units, he added. ``We hope to see positive results from these managerial changes as well as from the cost- cutting measures we've implemented.''

Customer Switch

NXP has struggled as customers switch away from its traditional cathode-ray-tube televisions for which it made parts. Bonds sold by NXP to fund its 3.4 billion-euro ($5.2 billion) buyout by KKR and four other firms, now trade at 74 cents on the dollar, UniCredit SpA prices on Bloomberg show.

Publicly traded private equity funds such as KKR mark the value of their holdings to market each quarter and disclose the results, unlike traditional private investment partnerships.

Apollo Management LP's publicly traded private-equity fund, AP Alternative Assets LP, said today fourth-quarter net asset value dropped 2.5 percent from the third quarter as debt markets tumbled. It was first quarterly decline for AP Alternative, which went public in Amsterdam in June 2006.

Creativity Needed

SVG Capital Plc, the biggest investor in London-based Permira Advisers LLP, will report earnings March 6. Blackstone Group LP, manager of the world's biggest buyout fund, reports earnings next month.

``Capital is not nearly as plentiful as it was a year ago and the cost is much higher,'' Kravis said. ``It's possible to get deals done in this environment. It just takes more work and a lot of creativity.''

New York-based KKR raised $5 billion for the fund in a May 2006 initial public offering, three times the initial target. The shares have fallen 37 percent since then, compared with a 3.6 percent loss in the Amsterdam Exchanges Index. The stock dropped 2.9 percent to $15.35 in Amsterdam trading.

The writedowns dragged the fund to a 0.1 percent loss for the year after making an 8 percent gain in the first three quarters, it said in today's statement. The fund's net asset value fell to $4.98 billion, or $24.36 per unit, from $5.27 billion, or $25.77, at the end of the third quarter. It didn't provide year-earlier figures.

NXP accounts for about 6 percent of the publicly traded fund's assets, making it the seventh-biggest investment after Alliance Boots Ltd. and First Data Corp.

Television Buyer

KKR teamed up with Silver Lake Partners, Bain Capital, Apax Partners Worldwide LLP and AlpInvest Partners NV to buy an 80 percent stake in NXP in August 2006. NXP's former parent, Royal Philips Electronics NV, owns the rest.

NXP's 511 million euros of 8.625 percent notes due 2015 were quoted at 74 cents on the euro with a yield of about 14.3 percent, according to UniCredit SpA. The difference in yield between NXP's bonds and government securities of similar maturities rose 16 basis points to 1058 basis points, down from as much as 1206 basis points on Feb. 11. Investors typically view a security trading 1,000 basis points or more above the benchmark as distressed.

KKR and Permira agreed to acquire 50.5 percent of ProSiebenSat.1 for 3.1 billion euros in December 2006 and last year combined the broadcaster with SBS Broadcasting Group, to create Europe's No. 2 TV company. The group aims to challenge European market leader, RTL Group. In December, the firms agreed to buy an additional 12 percent stake in ProSiebenSat.1 from Axel Springer AG for 509.4 million euros. The shares have slumped 45 percent in the past 12 months.

ATU

Raether said KKR cut the value its investment in ProSiebenSat.1 after shares of broadcasters declined amid concern television advertising will decline this year.

Last week, KKR and Doughty Hanson & Co. proposed a 140 million-euro bailout of ATU Auto-Teile-Unger, the German car- repair firm owned by the two leveraged buyout firms. ATU missed performance targets in November after warmer weather hurt sales of winter tires. KKR hired Goldman Sachs Group Inc. in January to advise on a restructuring.

KKR also reduced by the value of its holding in Capmark Financial Group Inc., the former commercial mortgage unit of GM, due to credit market turmoil, Raether added.

To contact the reporter for this story: Edward Evans in London at at eevans3@bloomberg.net

Last Updated: February 29, 2008 14:03 EST