KKR & Co. intends to invest at least $500 million in European deals over the next six months by acting as a bank for struggling companies and taking advantage of trillions of dollars of bad loans, said the firm’s head of asset management.
European banks are unwilling to unload large portfolios of assets worth as much as 3 trillion euros at prices attractive for investors because the lenders want to avoid writedowns, William Sonneborn said in an interview with Bloomberg Television’s Cristina Alesci being broadcast today. KKR is seeking to help the banks deleverage while lending to the companies that previously borrowed from them.
“We don’t know when Europe is going to get better, but we know we’re going to get paid double-digit rates while we wait for that day to come,” Sonneborn said. “The greatest opportunity is being a solutions provider to the bank and to the underlying borrower that has historically had the relationship with the bank.”
KKR, the New York-based alternative-asset manager run by Henry Kravis and George Roberts, and private-equity competitors are diversifying beyond traditional leveraged buyouts to find new sources of revenue. Apollo Global Management LLC co-founder Marc Rowan said in March that his firm wants to “be the new bank” by filling the holes created by the financial crises in the U.S. and Europe.
The estimate of assets that banks need to sell was raised after economists projected higher unemployment and an increased need for capital.
KKR is bullish on Europe in the long term because the continent’s large population and wealth can overcome its sovereign-debt crisis, Sonneborn said. He said he doesn’t anticipate a breakup in the euro currency zone.
“Crises either drive people apart, which creates world wars, or they bring people together,” he said. “My best bet is the European crisis will result in a tighter union.”
Sonneborn, 42, joined KKR in 2008, four years after KKR Asset Management was formed. The business has more than 60 deal-makers who oversaw $16.3 billion as of March 31.