With the Canadian door and fiberboard maker teetering on the verge of
bankruptcy, KKR finds itself in the awkward position of having bought
the company for $1.9 billion in 2005, and then loaded up the company's
debt. Bloomberg reports that the private equity firm is now having to
bargain with creditors who are deciding whether to force Masonite into
bankruptcy for violating loan covenants. The other creditors are now
voicing concerns that KKR has divided loyalties since squeezing more
from the company because as an owner it would prefer to have lower
borrowing costs.
Masonite is likely only the start of many such conflicts for private
equity firms who have been busy buying up discounted leveraged debt.
Buyout shops such as KKR and Apollo Management already own more than
$80 billion in corporate debt, often in their own portfolio companies.
However as the corporate default rate has started to climb, private
equity firms may have to do workouts from both sides of the table. -
George White
See Bloomberg story
Kohlberg Kravis Roberts & Co.'s decision to buy up loans in its portfolio company, door and window maker Masonite International Corp., may be swinging back to hit it in the face.
