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Thursday 30 March 2017

KKR: Private equity giant to provide €500m of finance to housebuilders

Robert Gallagher, chief executive of Activate Capital; Johannes Huth, head of KKR Europe, Africa and the Middle East; Dan O’Connor, chairman of Activate Capital; Fergal McAleavey, ISIF; and Finance Minister Michael Noonan. Photo: Tom Burke
Robert Gallagher, chief executive of Activate Capital; Johannes Huth, head of KKR Europe, Africa and the Middle East; Dan O’Connor, chairman of Activate Capital; Fergal McAleavey, ISIF; and Finance Minister Michael Noonan. Photo: Tom Burke
Peter Flanagan

Peter Flanagan

One of the biggest private equity firms in the world has signed up with the Government to provide half a billion euro worth of financing to housebuilders that could see 11,000 new homes come on stream.

KKR will join with the Ireland Strategic Investment Fund (ISIF) to create Activate Finance.

Since the crash, home builders have struggled to get access to capital to build badly-needed homes.

Most of the banks will only lend up to 65pc of the value of any development project. Under the terms of this deal however, Activate Finance will make available up to 90pc of the value of new construction projects.

It is expected that the plan will lead to the construction of around 11,000 new houses over the life of the fund. Unlike other schemes though, this will focus mainly on medium and large-scale developments.

Under the terms of the deal, ISIF will contribute €325m while KKR's credit division will come up with the remaining €175m.

Terms of the loans were not revealed, but Activate Capital chairman Dan O'Connor said the loans would be extended at an interest rate "in the teens".

This is KKR's second major deal in Ireland since it took over Avoca Capital last year.

The company was set up originally as Kohlberg Kravis Roberts and quickly became known as one of the most successful, and aggressive, private equity funds in the world.

It earned notoriety in 1988 when it led the takeover for US food and tobacco giant RJR Nabisco for $28bn. At the time it was the most expensive corporate takeover in history. The deal became a touchstone for the excesses of the 1980s and was later immortalised in the book 'Barbarians at the Gate. Welcoming the deal, Finance Minister Michael Noonan said it was "a win-win for the State from all perspectives: economically, we are increasing activity in the housing sector, which is vital for our economic competitiveness and long term growth prospects".

KKR's head of Europe, Johannes Huth, added: "This is about supporting the strong recovery under way in the Irish economy, by providing for the housing needs of Ireland's growing population and expanding workforce."

Irish Independent

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