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KKR acquires Avoca Capital as part of credit portfolio expansion

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The investment firm KKR has reached an agreement to acquire Avoca Capital, a European credit investment manager, at a time when KKR sees “significant” opportunities in the European credit space.

According to KKR, the Avoca platform has experienced strong inflows in recent years as institutional investors seek access to credit asset classes with a focus on attractive returns and downside protection.

The US-based firm stressed that, while European banks have shifted assets to comply with Basel III regulations on capital and leverage, alternative capital providers able to make longer-term investments are providing financing to European companies.

At the same time, those alternative capital sources are providing institutional investors with the returns they need to pay their pension and insurance obligations, KKR said.

Avoca Capital, which currently has $8bn (€5.8bn) in assets under management, invests across five strategies, namely European loans and bonds, credit, long/short credit, convertible bonds and structured and illiquid credit.

Henry Kravis and George Roberts, co-founders and co-chief executives at KKR, said the acquisition would allow the firm to expand its credit platform.

Alan Burke and Donal Daly, co-founders of Avoca, added that European credit markets were likely to grow “significantly” over the decade ahead as banks deleveraged and rebuilt their capital bases.

Burke will lead KKR’s European credit platform and, together with Nat Zilkha, help drive the future growth of KKR’s global credit business.

Both Burke and Zilkha will report to Craig Farr, who has responsibility for KKR’s global credit and capital markets businesses.

Daly will become a senior adviser to KKR.

KKR said the investment teams and processes at both KKR and Avoca, including the portfolio management of the respective firms’ strategies, would remain unchanged.

The transaction, for which financial details were not disclosed, is expected to close in the first quarter of 2014.

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