Capital Markets Overview

KKR Capital Markets Overview Craig J. Farr July 18, 2012

CONFIDENTIAL

Who Are We? •

KKR Capital Markets (“KCM”) is an established capital markets business with a team of over 30 dedicated executives that have with expertise in: • Debt & Equity • Derivatives • Structured Products

•

Focuses predominately on KKR companies, but also selectively provides capital markets services to third parties • Activities consist of arranging capital markets financings/transactions and capital markets advice • Not a trading business

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Evolution of the Business We have evolved from a small team focused on syndicating excess private equity to a full-service, stand-alone business able to lead a variety of capital markets transactions globally through direct investor relationships and structuring skills 2010

2011 & Today

2007

2008

2009

Large private equity checks

Credit crisis closes markets

Markets improve, opening door for new deals and exits

Further improved Enhanced capital markets transaction activity despite volatile markets

KCM Professionals: 4

KCM Professionals: 10

KCM Professionals: 15

KCM Professionals: 31

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KCM Professionals: 32

The KCM Team KKR Capital Markets Craig Farr Global Head of KCM

U.S.

Europe

Jeff Rowbottom

Neil Shah

John Empson

Ed Law(1)

James Connolly

Peter Glaser

Valeria Rebulla

Mark Danzey

Greg Guest

Robert Lewin

Taddeo Vender

Sandy Clark

Chris Rulon-Miller

Adam Smith

Cade Thompson

Akhil Bansal

Mark Basile

Doug Brody

Richard Chand

Chris Lee

BV Krishnan

Rex Chung

George Mueller

Corey Flood

Dhiren Mehta

Stanley Ho

Phil Kim

Matthew Kretzman

Tashwinder Singh

Angad Banga

Josh Lederman

Paul Sigfusson

Asia / India

Suruchi Nangia Mayank Gupta Simrun Mehta

Previous Experience

(1) 4

Located in New York with Partial US Industry Coverage

Key Activities Our capital markets business primarily involves acting as an underwriter, arranger, placement agent, syndication agent, dealer-manager, capital markets advisor or financing provider across a broad range of transactions New Acquisition

 Financing

Portfolio Company

 Refinancing

Exit

 IPOs

- Leveraged Loans

- New Issue Debt

- Positioning/Valuation

- ABLs/Revolvers

- Bank Amend/Extend

- Process Management

- High Yield

- Bank Negotiations

- Underwriting/Distribution

- Mezzanine

- Exchange/Tender Offers

- Unitranche

- IR/FX Risk Management

- Bridges

- Buyback Execution

 Private Equity - Positioning - Syndication

- Restructuring Advice

 Growth Capital

 Follow-Ons - Marketed/Blocks - Dribble Outs

 Dividend Recaps  Structured Sales

- Pre-IPO Equity - Equity-Linked Securities - New Issue Debt

Capital Markets Advice Capital Structures – Security Selection – Markets – Pricing – Transaction Structuring – Transaction Execution 5

How KCM Creates Value: Key Pillars

Access to Capital

Idea Generation

Aligned Advice

Product Flow

Best Execution

Holistic Risk Management

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Greater Access to Capital

• Led execution/marketing of IPO

• 6.8x total leverage

• Valuation premium to closest peer

• Fully underwritten “cov-lite”

• Allocated to “sticky" shareholder base, setting foundation for long-term monetizations

• Flexibility to optimize currency mix at KKR’s option

• 6 follow ons with an avg. size of ~$1 bn

• 144A for life / no registration rights

• 4.5x MOIC

• Created unique competition among lenders to drive commitment size and terms

• Syndicated $1,053 mm of private equity to facilitate the transaction

• 8.5% KCM participation viewed as a partnership with relationship banks

• Led structuring of the debt financing

• Joint-Physical Bookrunner construct • ABL Revolver – Excess Liquidity • Covenant-Lite Term Loan

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• Private capital solution was available

• Obtained $5 bn commitment from 10+ banks on favorable terms • Large $2.25 bn reserve-based revolver and $2.25 bn funded unsecured loan to bridge to a HY offering

Holistic Risk Management Centralized information and best practices

KKR Portfolio Company Interest Rate Risk % of Net Debt Which is Fixed / Hedged

Proactive stewardship of portfolio

90% 80%

77% 68%

70%

66% 56%

60%

~$113 bn of portfolio company debt refinanced during 2009 – YTD 2012(1)

50% 40% 30% 20%

~85% of KKR portfolio maturities are in 2015 or later

(1)

8

10% 0% 2012

Reflects all KKR portfolio company refinancings including those in which KKR Capital Markets did not participate.

2013

2014

2015

Benefits Across Key Stakeholders • Source larger, unique deals

Limited Partners

• Flexible capital enhances upside • Product flows for limited partners • Better exits

Other Parts of KKR

• Allows PE to focus on industry specialization/corporate relationships • Expands KAM mezzanine capabilities • Improves CPG relationships • More carry derived from larger equity commitments

Public Unitholders

• Better capital structures enhance equity value

• Greater return on balance sheet capital • More fund commitments from close limited partner relationships

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How Does KCM Get Paid?

Conventional Model

Bank 4

Bank 3

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Bank 1

Bank 2

KCM Participation

KCM

Bank 4

Bank 1 Bank 2

Bank 3

Synergy with Other Parts of KKR: Private Equity

Situation Large maturity towers in 2014

KCM Value-Add

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Negotiated with key lenders

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Executed 4 large-scale exchanges over the last 3 years

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Resulted in $16 bn of debt extended to 2018 - 2022

through 2016 and a desire to proactively extend

Situation Visant had deleveraged and KKR was interested in returning some capital to LPs

11

KCM Value-Add •

Dividend recapitalization with customized terms

•

Developed anchor orders and committed capital to ensure strong market execution

Synergy with Other Parts of KKR: KAM

Situation Company sought to refinance

KCM Value-Add •

Worked with KAM (which provided mezzanine note) to arrange senior credit facilities

•

Aided with an amendment and incremental term loan to facilitate a strategic acquisition

debt and desired capital structure to suit acquisition strategy

Situation Sponsors sought committed financing to support their acquisition of the Company

12

KCM Value-Add •

KCM provided $147 mm senior credit facility

•

KAM was an anchor order and received a full $35 mm allocation

•

KCM sole-led the deal producing $3.6 mm of economics for the Firm

Synergy with Other Parts of KKR: CPG KCM’s co-investment channel allows CPG to offer efficient, well orchestrated coinvestment opportunities to prospective and exiting Limited Partners, augmenting fund commitments Limited partners desire to co-invest for the following reasons: •

Direct source of proprietary deal flow

•

Access to best-in-class deal teams and company management

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Further opportunity to diligence KKR

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Differentiated color and insight into the latest sector trends

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Opportunity to lower average fees by co-investing on a reduced or no-fee basis

The joint KCM / CPG approach, in particular, to the co-investment process offers our limited partners: •

Streamlined process with frequent dialogue to enhance clarity and maximize efficiency

•

Best-in-class system for handling compliance and confidentiality issues

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Synergy with Other Parts of KKR: Balance Sheet

Situation • KKR sought £485 mm of committed financing to purchase Pets at Home in a £1 bn

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acquisition

Situation NXP was nearing IPO launch and

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seeking to extend maturities, but desired price protection in a volatile market

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•

KCM Value-Add KCM underwrote ~20% of the senior facilities and arranged 100% of the mezzanine With KCM’s knowledge of the asset and investor relationships, KCM delivered more debt at a lower cost and better terms

KCM Value-Add Partnered with underwriters to provide a $162.5 mm backstop on high yield execution Marketed the transaction to large existing bondholders and set stage for successful IPO

2011 Operating Trends • Selectively provided capital markets services to third parties • Third party transactions include companies in which KKR considering making an investment or companies/sponsors with whom KCM has a relationship • Apply the same rigorous processes that we use for KKR transactions

•

Select new hires and internal transfers to support our significant organic growth and continue to increase transaction volume • Focused on mid-level and junior resources to support transaction execution and provide significant operating leverage for our senior team

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More Opportunities for KCM to Grow

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Drivers

Commentary

Recovering private equity and capital markets

More acquisition finance mandates, refinancings, and exits

Larger balance sheet

Participate in more underwritings

Increased penetration of non-KKR opportunities

Leverage the broader KKR platform to enhance our relationship with clients

Strategic partnerships in origination and distribution

Broaden capabilities and deal flow

Increased bank regulation

Monetize risk management opportunities in credit, interest rates and foreign exchange