10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from         to         

Commission file number: 001-33437

KKR FINANCIAL HOLDINGS LLC

(Exact name of registrant as specified in its charter) 

Delaware	11-3801844
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
555 California Street, 50th Floor San Francisco, CA	94104
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (415) 315-3620

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ý Yes  o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer x (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes  ý No

The number of shares of the registrant’s common shares outstanding as of May 4, 2016 was 100.

TABLE OF CONTENTS

		Page
Part I.
FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	59
Item 4.	Controls and Procedures	59
Part II.
OTHER INFORMATION
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3.	Defaults Upon Senior Securities	59
Item 4.	Mine Safety Disclosure	59
Item 5.	Other Information	59
Item 6.	Exhibits	60

2

PART I.    FINANCIAL INFORMATION

Item 1. Financial Statements

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands, except share information)

	March 31, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	361,344		$	320,122
Restricted cash and cash equivalents	377,079			487,374
Securities, at estimated fair value	336,764			417,519
Corporate loans, at estimated fair value	4,783,419			5,188,610
Equity investments, at estimated fair value ($71,976 and $82,430 pledged as collateral as of March 31, 2016 and December 31, 2015, respectively)	244,462			262,946
Oil and gas properties, net	113,802			114,868
Interests in joint ventures and partnerships, at estimated fair value	748,329			888,408
Derivative assets	26,246			40,852
Interest and principal receivable	20,980			22,196
Receivable for investments sold	55,788			19,930
Other assets	21,430			25,570
Total assets	$	7,089,643		$	7,788,395
Liabilities
Collateralized loan obligation secured notes, at estimated fair value	$	4,548,688		$	4,843,746
Senior notes	412,617			413,006
Junior subordinated notes	248,903			248,498
Payable for investments purchased	59,143			220,085
Accounts payable, accrued expenses and other liabilities	30,393			43,667
Accrued interest payable	23,800			20,619
Related party payable	2,667			3,892
Derivative liabilities	59,645			43,892
Total liabilities	5,385,856			5,837,405
Equity
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both March 31, 2016 and December 31, 2015	—			—
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both March 31, 2016 and December 31, 2015	—			—
Paid-in-capital	2,764,061			2,764,061
Accumulated deficit	(1,123,319		)	(895,950		)
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity	1,640,742			1,868,111
Noncontrolling interests	63,045			82,879
Total equity	1,703,787			1,950,990
Total liabilities and equity	$	7,089,643		$	7,788,395

See notes to condensed consolidated financial statements.

3

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

(Amounts in thousands)

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Revenues
Loan interest income	$	66,908		$	75,328
Securities interest income	5,064			15,591
Oil and gas revenue	2,641			2,828
Other	14,692			4,039
Total revenues	89,305			97,786
Investment costs and expenses
Interest expense	50,918			55,845
Oil and gas production costs	215			(48		)
Oil and gas depreciation, depletion and amortization	1,066			1,002
Other	799			854
Total investment costs and expenses	52,998			57,653
Other income (loss)
Net realized and unrealized gain (loss) on investments	(138,032		)	19,899
Net realized and unrealized gain (loss) on derivatives and foreign exchange	(10,216		)	(9,100		)
Net realized and unrealized gain (loss) on debt	(63,173		)	(83,816		)
Other income (loss)	1,539			3,853
Total other income (loss)	(209,882		)	(69,164		)
Other expenses
Related party management compensation	7,276			10,220
General, administrative and directors' expenses	15,776			5,812
Professional services	1,012			1,136
Total other expenses	24,064			17,168
Income (loss) before income taxes	(197,639		)	(46,199		)
Income tax expense (benefit)	60			347
Net income (loss)	$	(197,699	)	$	(46,546	)
Net income (loss) attributable to noncontrolling interests	(15,535		)	(6,071		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	(182,164		)	(40,475		)
Preferred share distributions	6,891			6,891
Net income (loss) available to common shares	$	(189,055	)	$	(47,366	)

See notes to condensed consolidated financial statements.

4

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands)

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Net income (loss)	$	(197,699	)	$	(46,546	)
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale	—			—
Unrealized gains (losses) on cash flow hedges	—			—
Total other comprehensive income (loss)	—			—
Comprehensive income (loss)	$	(197,699	)	$	(46,546	)
Less: Comprehensive income (loss) attributable to noncontrolling interests	—			—
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(197,699	)	$	(46,546	)

See notes to condensed consolidated financial statements.

5

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

(Unaudited)

(Amounts in thousands, except share information)

	KKR Financial Holdings LLC and Subsidiaries
	Preferred Shares			Common Shares			Accumulated Deficit			Noncontrolling interests			Total Equity
	Shares	Paid-In Capital		Shares	Paid-In Capital
Balance at January 1, 2015	14,950,000	$	378,983	100	$	2,385,078	$	(376,182	)	$	100,169		$	2,488,048
Cumulative effect adjustment from adoption of accounting guidance	—	—		—	—		(1,877		)	—			(1,877		)
Capital contributions	—	—		—	—		—			2,083			2,083
Net income (loss)	—	—		—	—		(40,475		)	(6,071		)	(46,546		)
Distributions declared on preferred shares	—	—		—	—		(6,891		)	—			(6,891		)
Distributions to Parent	—	—		—	—		(55,163		)	—			(55,163		)
Balance at March 31, 2015	14,950,000	$	378,983	100	$	2,385,078	$	(480,588	)	$	96,181		$	2,379,654

	KKR Financial Holdings LLC and Subsidiaries
	Preferred Shares			Common Shares			Accumulated Deficit			Noncontrolling interests			Total Equity
	Shares	Paid-In Capital		Shares	Paid-In Capital
Balance at January 1, 2016	14,950,000	$	378,983	100	$	2,385,078	$	(895,950	)	$	82,879		$	1,950,990
Capital contributions	—	—		—	—		—			1,706			1,706
Capital distributions	—	—		—	—		—			(6,005		)	(6,005		)
Net income (loss)	—	—		—	—		(182,164		)	(15,535		)	(197,699		)
Distributions declared on preferred shares	—	—		—	—		(6,891		)	—			(6,891		)
Distributions to Parent	—	—		—	—		(38,314		)	—			(38,314		)
Balance at March 31, 2016	14,950,000	$	378,983	100	$	2,385,078	$	(1,123,319	)	$	63,045		$	1,703,787

See notes to condensed consolidated financial statements.

6

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Cash flows from operating activities
Net income (loss)	$	(197,699	)	$	(46,546	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net realized and unrealized (gain) loss on derivatives and foreign exchange	10,216			9,100
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests	(15,535		)	(6,071		)
Net realized and unrealized (gain) loss on investments	153,567			(13,828		)
Depreciation and net amortization	18,273			5,707
Net realized and unrealized (gain) loss on debt	63,173			83,816
Changes in assets and liabilities:
Interest receivable	1,217			10,695
Other assets	(16,611		)	(29,189		)
Related party payable	(1,225		)	2,134
Accounts payable, accrued expenses and other liabilities	(13,274		)	25,160
Accrued interest payable	3,181			7,896
Net cash provided by (used in) operating activities	5,283			48,874
Cash flows from investing activities
Principal payments from corporate loans	223,558			233,002
Principal payments from securities	17,133			3,191
Proceeds from sales of corporate loans	374,229			550,568
Proceeds from sales of securities	13,024			38,262
Proceeds from equity and other investments	75,852			6,142
Purchases of corporate loans	(363,541		)	(352,743		)
Purchases of equity and other investments	(14,615		)	(35,407		)
Net change in proceeds, purchases and settlements of derivatives	11,058			(5,960		)
Net change in restricted cash and cash equivalents	110,295			(58,529		)
Net cash provided by (used in) investing activities	446,993			378,526
Cash flows from financing activities
Retirement of collateralized loan obligation secured notes	(361,550		)	(338,197		)
Proceeds from collateralized loan obligation warehouse facility	—			50,000
Distributions on common shares	(38,314		)	(55,163		)
Distributions on preferred shares	(6,891		)	(6,891		)
Capital distributions to noncontrolling interests	(6,005		)	—
Capital contributions from noncontrolling interests	1,706			2,083
Other capitalized costs	—			(80		)
Net cash provided by (used in) financing activities	(411,054		)	(348,248		)
Net increase (decrease) in cash and cash equivalents	41,222			79,152
Cash and cash equivalents at beginning of period	320,122			163,405
Cash and cash equivalents at end of period	$	361,344		$	242,557
Supplemental cash flow information
Cash paid for interest	$	41,104		$	36,364
Net cash paid (refunded) for income taxes	$	11		$	12
Non-cash investing and financing activities
Preferred share distributions declared, not yet paid	$	6,891		$	6,891

 See notes to condensed consolidated financial statements.

7

KKR FINANCIAL HOLDINGS LLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

KKR Financial Holdings LLC together with its subsidiaries (the “Company” or “KFN”) is a specialty finance company with expertise in a range of asset classes. The Company’s core business strategy is to leverage the proprietary resources of KKR Financial Advisors LLC (the “Manager”) with the objective of generating current income. The Company’s holdings primarily consist of below investment grade syndicated corporate loans, also known as leveraged loans, high yield debt securities and interests in joint ventures and partnerships. The corporate loans that the Company holds are typically purchased via assignment or participation in the primary or secondary market.

The majority of the Company’s holdings consist of corporate loans and high yield debt securities held in collateralized loan obligation (“CLO”) transactions that are structured as on‑balance sheet securitizations and are used as long term financing for the Company’s investments in corporate debt. The senior secured debt issued by the CLO transactions is primarily owned by unaffiliated third party investors and the Company owns the majority of the subordinated notes in the CLO transactions. The Company executes its core business strategy through its majority‑owned subsidiaries, including CLOs.

The Company is a subsidiary of KKR & Co. L.P. (“KKR & Co.”). KKR Fund Holdings L.P. (“KKR Fund Holdings”), a subsidiary of KKR & Co., is the sole holder of all of the outstanding common shares of the Company and is the parent of the Company (the “Parent”). The Manager, a wholly‑owned subsidiary of KKR Credit Advisors (US) LLC, manages the Company pursuant to an amended and restated management agreement (as amended the “Management Agreement”). KKR Credit Advisors (US) LLC is a wholly‑owned subsidiary of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), which is a subsidiary of KKR & Co.

The Company’s 7.375% Series A LLC Preferred Shares (“Series A LLC Preferred Shares”) and senior notes are traded on the New York Stock Exchange ("NYSE").

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The majority of the Company's significant accounting policies have remained unchanged from the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2015 ("2015 Annual Report"). As such, in addition to the below, refer to the Company's 2015 Annual Report for further discussion.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and entities established to complete secured financing transactions that are considered to be variable interest entities (“VIEs”) and for which the Company is the primary beneficiary. Also included in the condensed consolidated financial statements are the financial results of certain entities, which are not considered VIEs, but in which the Company is presumed to have control. The ownership interests held by third parties are reflected as noncontrolling interests in the accompanying financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing its estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While the Company believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are appropriate, actual results could differ from those estimates.

8

Consolidation

KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”), KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”), KKR CLO 11, Ltd ("CLO 11") and KKR CLO 13, Ltd ("CLO 13") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”) and during 2015, the Company called KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and KKR Financial CLO 2006-1, Ltd ("CLO 2006-1"), whereby the Company repaid all senior and mezzanine notes outstanding. These entities are VIEs which the Company consolidates as the Company has determined it has the power to direct the activities that most significantly impact these entities’ economic performance and the Company has both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities. In CLO transactions, subordinated notes have the first risk of loss and conversely, the residual value upside of the transactions. 

The Company finances the majority of its corporate debt investments through its CLOs. As of March 31, 2016, the Company’s CLOs held $4.8 billion par amount, or $4.5 billion estimated fair value, of corporate debt investments. As of December 31, 2015, the Company's CLOs held $5.5 billion par amount, or $5.1 billion estimated fair value, of corporate debt investments. The assets in each CLO can be used only to settle the debt of the related CLO. As of March 31, 2016 and December 31, 2015, the aggregate par amount of CLO debt totaled $4.5 billion and $4.9 billion, respectively, held by unaffiliated third parties.

The Company consolidates all non‑VIEs in which it holds a greater than 50 percent voting interest. Specifically, the Company consolidates majority owned entities for which the Company is presumed to have control. The ownership interests of these entities held by third parties are reflected as noncontrolling interests in the accompanying financial statements. The Company began consolidating a majority of these non‑VIE entities as a result of the asset contributions from its Parent during the second half of 2014. For certain of these entities, the Company previously held a percentage ownership, but following the incremental contributions from its Parent, were presumed to have control.

In addition, the Company has noncontrolling interests in joint ventures and partnerships that do not qualify as VIEs and do not meet the control requirements for consolidation as defined by GAAP.

All inter‑company balances and transactions have been eliminated in consolidation. 

Recent Accounting Pronouncements

Consolidation

In February 2015, the FASB issued guidance which eliminates the presumption that a general partner should consolidate a limited partnership and also eliminates the consolidation model specific to limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicle and whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. The guidance is effective for reporting periods starting after December 15, 2015 and for interim periods within the fiscal year. Early adoption is permitted, and a full retrospective or modified retrospective approach is required. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance

9

related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is currently evaluating the impact on its financial statements.

NOTE 3. SECURITIES

The Company accounts for all of its securities, including RMBS, at estimated fair value. The following table summarizes the Company’s securities as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Securities, at estimated fair value	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519
Total	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519

Net Realized and Unrealized Gains (Losses)

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(1,593	)	$	(526	)
Net (increase) decrease in unrealized losses	(50,126		)	1,834
Net (increase) decrease in unrealized losses	$	(51,719	)	$	1,308

Defaulted Securities

As of both March 31, 2016 and December 31, 2015, the Company had no corporate debt securities in default.

Concentration Risk

The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 90% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, JC Penney Corp. Inc and Mizuho Bank, Ltd. which combined represented $159.9 million, or approximately 55% of the estimated fair value of the Company’s corporate debt securities. As of December 31, 2015, approximately 89% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, Preferred Proppants LLC and JC Penney Corp. Inc, which combined represented $192.5 million, or approximately 52% of the estimated fair value of the Company’s corporate debt securities.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged securities for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	136,318	$	170,365
Total	$	136,318	$	170,365

10

NOTE 4. CORPORATE LOANS

The Company accounts for all of its corporate loans at estimated fair value. The following table summarizes the Company’s corporate loans as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610

Net Realized and Unrealized Gains (Losses)

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following tables present the Company’s realized and unrealized gains (losses) from corporate loans (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(30,714	)	$	(16,182	)
Net (increase) decrease in unrealized losses	44,923			82,274
Net realized and unrealized gains (losses)	$	14,209		$	66,092

For the corporate loans measured at estimated fair value under the fair value option of accounting, $6.3 million and $9.0 million of net gains were attributable to changes in instrument specific credit risk for the three months ended March 31, 2016 and March 31, 2015, respectively. Gains and losses attributable to changes in instrument specific credit risk were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates and general market conditions. In addition, gains and losses attributable to those loans on non-accrual status or specifically identified as more volatile based on financial or operating performance, restructuring or other factors, were considered instrument specific.

Non-Accrual Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on non-accrual status regardless of whether or not such loan is considered past due. As of March 31, 2016, the Company held a total par value and estimated fair value of $435.2 million and $115.6 million, respectively, of non-accrual loans carried at estimated fair value. As of December 31, 2015, the Company held a total par value and estimated fair value of $435.2 million and $127.5 million, respectively, of non-accrual loans. As of both March 31, 2016 and December 31, 2015, there were no corporate loans past due 90 or more days and still accruing.

Defaulted Loans

As of March 31, 2016, the Company held one corporate loan that was in default with a total estimated fair value of $105.1 million from one issuer. As of December 31, 2015, the Company held one corporate loan that was in default with a total estimated fair value of $113.6 million from one issuer.

Concentration Risk

The Company’s corporate loan portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 31% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., PQ

11

Corp and Texas Competitive Electric Holdings Company LLC (“TXU”), which combined represented $390.8 million, or approximately 8% of the aggregate estimated fair value of the Company’s corporate loans. As of December 31, 2015, approximately 31% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., TXU and PQ Corp, which combined represented $434.6 million, or approximately 8% of the aggregate estimated fair value of the Company’s corporate loans.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged loans for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	4,491,601	$	4,917,123
Total	$	4,491,601	$	4,917,123

NOTE 5. EQUITY INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS

The Company holds interests in joint ventures and partnerships, certain of which (i) the Company participates alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to commercial real estate and specialty lending focused businesses or (ii) are held as interests in private or public funds managed by KKR and its affiliates. Refer to Note 11 to these condensed consolidated financial statements for further discussion. As of March 31, 2016 and December 31, 2015, the Company held $748.3 million and $888.4 million, respectively, of interests in joint ventures and partnerships carried at estimated fair value.

In addition, as of March 31, 2016 and December 31, 2015, the Company held $244.5 million and $262.9 million, respectively, of equity investments, which were carried at estimated fair value and comprised primarily of common and preferred stock.

Net Realized and Unrealized Gains (Losses)

The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands):

	Three months ended March 31, 2016						Three months ended March 31, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	725		$	(2,162	)	$	1,424		$	—
Net (increase) decrease in unrealized losses	(15,992		)	(83,093		)	(22,426		)	(26,499		)
Net realized and unrealized gains (losses)	$	(15,267	)	$	(85,255	)	$	(21,002	)	$	(26,499	)

(1) Includes net loss attributable to noncontrolling interests of $15.5 million and $6.1 million for the three months ended March 31, 2016 and March 31, 2015, respectively.

Equity Method Investments

The Company holds certain investments where the Company does not control the investee and where the Company is not the primary beneficiary, but can exert significant influence over the financial and operating policies of the investee. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the investee unless predominant evidence to the contrary exists.

Under the equity method of accounting, the Company records its proportionate share of net income or loss based on the investee’s financial results. Given that the Company elected the fair value option to account for these equity method investments, the Company’s share of the investee’s underlying net income or loss predominantly represents fair value

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adjustments in the investments. Changes in estimated fair value are recorded in net realized and unrealized gain (loss) on investments in the consolidated statements of operations.

As of March 31, 2016 and December 31, 2015, the Company had equity method investments, at estimated fair value, totaling $400.8 million and $506.5 million, respectively. The Company's equity method investments are comprised primarily of the following issuers with the respective ownership percentages: (i) Maritime Finance Company, which the Company holds approximately 31% through its ownership of KKR Nautilus Aggregator Limited, (ii) LCI Helicopters Limited, which the Company holds approximately 33% common equity interest in and (iii) Mineral Acquisition Company, which the Company holds approximately 70% through its ownership of KKR Royalty Aggregator LLC. KKR Royalty Aggregator LLC is an investment company for accounting purposes and accordingly, does not consolidate Mineral Acquisition Company, which it wholly-owns. The Company consolidates both KKR Nautilus Aggregator Limited and KKR Royalty Aggregator LLC and reflects all ownership interests held by third parties as noncontrolling interests in its financial statements.

NOTE 6. BORROWINGS

The Company accounts for its collateralized loan obligation secured notes at estimated fair value, with changes in estimated fair value recorded in the condensed consolidated statements of operations, and all of its other borrowings at amortized cost. As of January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable.

Certain information with respect to the Company’s borrowings as of March 31, 2016 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,431,783	$	1,537,984	2.47	%	1871	$	1,530,018
CLO 2007-1 subordinated notes(3)	134,468		74,058		4.53		1871	143,694
CLO 2007-A subordinated notes(3)	15,096		15,640		6.59		563	43,222
CLO 2012-1 secured notes	367,500		372,968		2.70		3181	365,848
CLO 2012-1 subordinated notes(3)	18,000		8,960		14.06		3181	17,919
CLO 2013-1 secured notes	458,500		461,576		2.34		3393	481,092
CLO 2013-2 secured notes	339,250		340,151		2.80		3585	349,842
CLO 9 secured notes	463,750		460,374		2.63		3850	459,889
CLO 9 subordinated notes(3)	15,000		8,879		14.62		3850	14,875
CLO 10 secured notes	368,000		370,038		2.87		3546	381,593
CLO 11 secured notes	507,750		500,174		2.68		4032	500,785
CLO 11 subordinated notes(3)	28,250		20,623		16.84		4032	27,862
CLO 13 secured notes	370,000		374,429		2.84		4308	379,157
CLO 13 subordinated notes(3)	4,000		2,834		—		4308	4,099
Total collateralized loan obligation secured debt	4,521,347		4,548,688					4,699,895
8.375% Senior notes	258,750		289,350		8.38		9360	—
7.500% Senior notes	115,043		123,267		7.50		9485	—
Junior subordinated notes	283,517		248,903		5.57		7493	—
Total borrowings	$	5,178,657	$	5,210,208				$	4,699,895

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

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(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

Certain information with respect to the Company’s borrowings as of December 31, 2015 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,544,032	$	1,630,293	2.10	%	1962	$	1,732,855
CLO 2007-1 subordinated notes(3)	134,468		74,954		11.66		1962	150,912
CLO 2007-A subordinated notes(3)	15,096		17,060		14.49		654	48,856
CLO 2011-1 senior debt	249,301		249,301		1.67		1689	310,498
CLO 2012-1 secured notes	367,500		365,383		2.59		3272	361,684
CLO 2012-1 subordinated notes(3)	18,000		10,845		15.82		3272	17,715
CLO 2013-1 secured notes	458,500		450,280		2.05		3484	479,391
CLO 2013-2 secured notes	339,250		334,187		2.52		3676	347,989
CLO 9 secured notes	463,750		454,103		2.33		3941	463,574
CLO 9 subordinated notes(3)	15,000		9,972		15.92		3941	14,994
CLO 10 secured notes	368,000		363,977		2.75		3637	384,991
CLO 11 secured notes	507,750		491,699		2.38		4123	501,286
CLO 11 subordinated notes(3)	28,250		23,306		5.28		4123	27,890
CLO 13 secured notes	370,000		364,986		2.84		4399	323,781
CLO 13 subordinated notes(3)	4,000		3,400		—		4399	3,500
Total collateralized loan obligation secured debt	4,882,897		4,843,746					5,169,916
8.375% Senior notes	258,750		289,660		8.38		9451	—
7.500% Senior notes	115,043		123,346		7.50		9576	—
Junior subordinated notes	283,517		248,498		5.43		7584	—
Total borrowings	$	5,540,207	$	5,505,250				$	5,169,916

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

CLO Debt

For the CLO secured notes, which the Company measured based on the estimated fair value of the financial assets of its CLOs as of January 1, 2015, there were no gains (losses) attributable to changes in instrument specific credit risk for both the three months ended March 31, 2016 and March 31, 2015.

The indentures governing the Company’s CLO transactions stipulate the reinvestment period during which the collateral manager, which is an affiliate of the Company’s Manager, can generally sell or buy assets at its discretion and can reinvest principal proceeds into new assets. CLO 2007‑1 and CLO 2007‑A were no longer in their reinvestment periods as of March 31, 2016. As a result, principal proceeds from the assets held in each of these transactions are generally used to amortize the outstanding balance of senior notes outstanding. CLO 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11 and

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CLO 13 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019 and January 2020, respectively.

Pursuant to the terms of the indentures governing our CLO transactions, the Company has the ability to call its CLO transactions after the end of the respective non-call periods. During November 2015, the Company called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. During July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, the Company called CLO 2006-1 and repaid aggregate senior and mezzanine notes totaling $181.8 million par amount. As described below in Note 7 to these condensed consolidated financial statements, the Company used a pay-fixed, receive-variable interest rate swap to hedge interest rate risk associated with CLO 2006-1. In connection with the repayment of CLO 2006-1 notes, the related interest rate swap, with a contractual notional amount of $84.0 million, was terminated.

During the three months ended March 31, 2016, $112.2 million of original CLO 2007-1 senior notes were repaid. During the three months ended March 31, 2015, $169.8 million of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 senior notes were repaid. CLO 2011-1 does not have a reinvestment period and all principal proceeds from holdings in CLO 2011-1 are used to amortize the transaction. During March 2016, the Company called CLO 2011-1 and repaid all senior notes totaling $249.3 million par amount. During the three months ended March 31, 2015, $1.5 million of original CLO 2011-1 senior notes were repaid.

On December 16, 2015, the Company closed CLO 13, a $412.0 million secured financing transaction maturing on January 16, 2028. The Company issued $370.0 million par amount of senior secured notes to unaffiliated investors, $350.0 million of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.19% and $20.0 million of which was fixed rate with a weighted-average coupon of 3.83%. The Company also issued $4.0 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 13 collateralize the CLO 13 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

During June 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 million. Subsequently, in July 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million.

On May 7, 2015, the Company closed CLO 11, a $564.5 million secured financing transaction maturing on April 15, 2027. The Company issued $507.8 million par amount of senior secured notes to unaffiliated investors, all of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.06%. The Company also issued $28.3 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 11 collateralize the CLO 11 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.

CLO Warehouse Facility

On March 2, 2015, CLO 11 entered into a $570.0 million CLO warehouse facility ("CLO 11 Warehouse"), which matured upon the closing of CLO 11 on May 7, 2015. The CLO 11 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing were used to repay the CLO 11 Warehouse in full. Debt issued under the CLO 11 Warehouse was non-recourse to the Company beyond the assets of CLO 11 and bore interest at rates ranging from LIBOR plus 1.25% to 1.75%. Upon the closing of CLO 11 on May 7, 2015, the aggregate amount outstanding under the CLO 11 Warehouse was repaid.

On July 22, 2015, CLO 13 entered into a $350.0 million CLO warehouse facility ("CLO 13 Warehouse"), which matured upon the closing of CLO 13 on December 16, 2015. The CLO 13 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing will be used to repay the CLO 13 Warehouse in full. Debt issued under the CLO 13 Warehouse was non-recourse to the Company beyond the assets of CLO 13 and bore interest at rates ranging from LIBOR plus 1.50% to 2.25%. Upon the closing of CLO 13 on December 16, 2015, the aggregate amount outstanding under the CLO 13 Warehouse was repaid.

NOTE 7. DERIVATIVE INSTRUMENTS

The Company enters into derivative transactions in order to hedge its interest rate and foreign currency exposure to the effects of interest rate and foreign currency changes. Additionally, the Company enters into derivative transactions in the course of its portfolio management activities. The counterparties to the Company’s derivative agreements are major financial institutions with which the Company and its affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, the Company is potentially exposed to losses. The counterparties to the Company’s

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derivative agreements are major financial institutions and, as a result, the Company does not anticipate that any of the counterparties will fail to fulfill their obligations.

The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	As of March 31, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	281,333		$	(53,229	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(383,238		)	19,332			(375,524		)	38,608
Options	—			498			—			95
Total				$	(33,399	)				$	(3,040	)

Free-Standing Derivatives

Free-standing derivatives are derivatives that the Company has entered into in conjunction with its investment and risk management activities, but for which the Company has not designated the derivative contract as a hedging instrument for accounting purposes. Such derivative contracts may include interest rate swaps, commodity derivatives, credit default swaps and foreign exchange contracts and options. Free-standing derivatives also include investment financing arrangements (total rate of return swaps) whereby the Company receives the sum of all interest, fees and any positive change in fair value amounts from a reference asset with a specified notional amount and pays interest on such notional amount plus any negative change in fair value amounts from such reference asset.

Gains and losses on free-standing derivatives are reported in net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Unrealized gains (losses) represent the change in fair value of the derivative instruments and are noncash items.

Interest Rate Swaps

The Company uses interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs as well as certain of its floating rate junior subordinated notes. As of March 31, 2016 and December 31, 2015, the Company had interest rate swaps with a notional amount of $281.3 million and $297.7 million, respectively.  

Foreign Exchange Derivatives

The Company holds certain positions that are denominated in a foreign currency, whereby movements in foreign currency exchange rates may impact earnings if the United States dollar significantly strengthens or weakens against foreign currencies. In an effort to minimize the effects of these fluctuations on earnings, the Company will from time to time enter into foreign exchange options or foreign exchange forward contracts related to the assets denominated in a foreign currency. As of March 31, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $383.2 million and $375.5 million, respectively, the majority of which related to certain of our foreign currency denominated assets.

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Free-Standing Derivatives Gain (Loss)

The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations (amounts in thousands):

	Three months ended March 31, 2016								Three months ended March 31, 2015
	Realized gains (losses)		Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	—	$	(11,731	)	$	(11,731	)	$	(5,297	)	$	(244	)	$	(5,541	)
Foreign exchange forward contracts and options(1)	11,212		(10,242		)	970			15			(594		)	(579		)
Common stock warrants	142		—			142			—			(1,891		)	(1,891		)
Total rate of return swaps	—		—			—			(165		)	(21		)	(186		)
Options	—		403			403			—			(903		)	(903		)
Net realized and unrealized gains (losses)	$	11,354	$	(21,570	)	$	(10,216	)	$	(5,447	)	$	(3,653	)	$	(9,100	)

(1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets.

A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. The Company has International Swaps and Derivatives Association ("ISDA") agreements or similar agreements with certain financial institutions which contain netting provisions. While these derivative instruments are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities on a gross basis in its condensed consolidated balance sheets. As of March 31, 2016, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $0.4 million net liability, net of $6.9 million collateral posted, (ii) $0.7 million net asset, net of $0.1 million collateral held and (iii) $5.2 million net asset, net of $33.7 million collateral held. Comparatively, as of December 31, 2015, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $2.4 million net asset, net of $20.7 million collateral posted, (ii) $1.6 million net asset, net of $0.1 million collateral held and (iii) $9.1 million net asset, net of $23.6 million collateral held.

NOTE 8. FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Not Carried at Estimated Fair Value

The Company accounts for its investments, as well as its collateralized loan obligation secured notes at estimated fair value. The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of March 31, 2016 (amounts in thousands): 

	As of March 31, 2016				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	738,423	$	738,423	$	738,423	$	—	$	—
Liabilities:
Senior notes	412,617		391,250		391,250		—		—
Junior subordinated notes	248,903		200,179		—		—		200,179

The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2015 (amounts in thousands): 

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	As of December 31, 2015				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	807,496	$	807,496	$	807,496	$	—	$	—
Liabilities:
Senior notes	413,006		394,390		394,390		—		—
Junior subordinated notes	248,498		216,757		—		—		216,757

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Balance as of March 31, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	138,982	$	150,068	$	289,050
Residential mortgage-backed securities	—		—		47,714		47,714
Total securities	—		138,982		197,782		336,764
Corporate loans	—		4,486,437		296,982		4,783,419
Equity investments, at estimated fair value	44,133		61,766		138,563		244,462
Interests in joint ventures and partnerships, at estimated fair value	—		—		748,329		748,329
Derivatives:
Foreign exchange forward contracts and options	—		23,272		2,476		25,748
Options	—		—		498		498
Total derivatives	—		23,272		2,974		26,246
Total	$	44,133	$	4,710,457	$	1,384,630	$	6,139,220
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,548,688	$	—	$	4,548,688
Derivatives:
Interest rate swaps	—		53,229		—		53,229
Foreign exchange forward contracts and options	—		5,781		635		6,416
Total derivatives	—		59,010		635		59,645
Total	$	—	$	4,607,698	$	635	$	4,608,333

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The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2015
Assets:
Securities:
Corporate debt securities	$	—	$	172,912	$	194,986	$	367,898
Residential mortgage-backed securities	—		—		49,621		49,621
Total securities	—		172,912		244,607		417,519
Corporate loans	—		4,889,876		298,734		5,188,610
Equity investments, at estimated fair value	40,765		75,533		146,648		262,946
Interests in joint ventures and partnerships, at estimated fair value	—		—		888,408		888,408
Derivatives:							0
Foreign exchange forward contracts and options	—		37,120		3,637		40,757
Options	—		—		95		95
Total derivatives	—		37,120		3,732		40,852
Total	$	40,765	$	5,175,441	$	1,582,129	$	6,798,335
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,843,746	$	—	$	4,843,746
Derivatives:
Interest rate swaps	—		41,743		—		41,743
Foreign exchange forward contracts and options	—		1,399		750		2,149
Total derivatives	—		43,142		750		43,892
Total	$	—	$	4,886,888	$	750	$	4,887,638

Level 3 Fair Value Rollforward

The following table presents additional information about assets and liabilities, including derivatives that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2016 (amounts in thousands):

	Assets
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Foreign Exchange Options, Net			Options
Beginning balance as of January 1, 2016	$	194,986		$	49,621		$	298,734		$	146,648		$	888,408		$	2,887		$	95
Total gains or losses (for the period):
Included in earnings(1)	(44,882		)	332			(6,827		)	(8,085		)	(80,695		)	(1,046		)	403
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			2,306			—			14,067			—			—
Sales				—			—			—			—			—			—
Settlements	(36		)	(2,239		)	2,769			—			(73,451		)	—			—
Ending balance as of March 31, 2016	$	150,068		$	47,714		$	296,982		$	138,563		$	748,329		$	1,841		$	498
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(44,882	)	$	329		$	(6,827	)	$	(8,085	)	$	(80,695	)	$	(1,046	)	$	403

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(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.

The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2015 (amounts in thousands):

	Assets																					Liabilities
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Warrants			Options			Collateralized Loan Obligation Secured Notes
Beginning balance as of January 1, 2015	$	317,034		$	55,184		$	347,077		$	81,719		$	718,772		$	—		$	5,212		$	5,501,099
Total gains or losses (for the period):
Included in earnings(1)	(3,996		)	1,776			(55,770		)	(23,327		)	(32,362		)	(1,891		)	(903		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			1,308			—			35,537			—			—			—
Sales	(4,213		)	—			(25,511		)	—			—			—			—			—
Settlements	(914		)	(3,025		)	69,082			44,927			(2,657		)	2,412			—			—
Ending balance as of March 31, 2015	$	307,911		$	53,935		$	336,186		$	103,319		$	719,290		$	521		$	4,309		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(9,354	)	$	153		$	(55,026	)	$	(22,961	)	$	(32,362	)	$	(1,891	)	$	(903	)	$	—

(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized loss on debt in the condensed consolidated statements of operations.

(2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of March 31, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statements for further discussion.

There were no transfers between Level 1 and Level 2 for the Company’s financial assets and liabilities measured at fair value on a recurring and non-recurring basis for the three months ended March 31, 2016 and March 31, 2015.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of March 31, 2016 (dollar amounts in thousands): 

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	Balance as of March 31, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	150,068	Yield analysis	Yield	12%	7% - 13%	Decrease
				Net leverage	9x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1050	1050bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	12x	12x	Increase
Residential mortgage – backed securities	$	47,714	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	296,982	Yield Analysis	Yield	13%	4% - 24%	Decrease
				Net leverage	8x	1x - 14x	Decrease
				EBITDA multiple	9x	6x - 13x	Increase
Equity investments, at estimated fair value(6)	$	138,563	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	59%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	41%	0% - 50%	(8	)
			Market comparables	LTM EBITDA multiple	9x	4x - 15x	Increase
				Forward EBITDA multiple	8x	4x - 12x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	9x	3x - 11x	Increase
Interests in joint ventures and partnerships(9)	$	748,329	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	34%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	66%	0% - 100%	(8	)
			Market comparables	Control Premium	7%	4% - 11%	Decrease
				LTM EBITDA multiple	5x	1x - 9x	Increase
			Discounted cash flows	Weighted average cost of capital	10%	7% - 24%	Decrease
				Average price per BOE(10)	$18.80	$12.56 - $21.70	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	6x	6x	Increase
Foreign exchange options, net	$	1,841	Option pricing model	Forward and spot rates	12,000	6 - 13,500	(11	)
Options(12)	$	498	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	7x	7x	Increase
				Forward EBITDA multiple	7x	7x	Increase
			Discounted cash flows	Weighted average cost of capital	15%	15%	Decrease
				LTM EBITDA exit multiple	6x	6x	Increase

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(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $14.2 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach.

(9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $162.0 million was valued solely using a discounted cash flow technique, while $44.6 million was valued solely using a market comparables technique and $18.1 million was valued solely using a yield analysis.

(10) Natural resources assets with an estimated fair value of $92.6 million as of March 31, 2016 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 26% liquids and 74% natural gas.

(11) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(12) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

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The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2015 (dollar amounts in thousands):

	Balance as of December 31, 2015		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	194,986	Yield analysis	Yield	23%	6% - 31%	Decrease
				Net leverage	10x	10x-12x	Decrease
				EBITDA multiple	7x	7x - 10x	Increase
				Discount margin	750	750bps	Decrease
Residential mortgage – backed securities	$	49,621	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	298,734	Yield Analysis	Yield	11%	3% - 18%	Decrease
				Net leverage	7x	1x - 19x	Decrease
				EBITDA multiple	9x	6x - 15x	Increase
Equity investments, at estimated fair value(6)	$	146,648	Inputs to market comparables, discounted cash flow and broker quotes	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	52%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	42%	0% - 100%	(8	)
				Weight ascribed to broker quotes	6%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	8x	4x - 13x	Increase
				Forward EBITDA multiple	8x	3x - 11x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	8x	0x - 9x	Increase
			Broker quotes	Offered quotes	4	0 - 5	Increase
Interests in joint ventures and partnerships(10)	$	888,408	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	43%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	57%	0% - 100%	(8	)
			Market comparables	LTM EBITDA multiple	5x	1x - 9x	Decrease
			Discounted cash flows	Weighted average cost of capital	8%	6% - 20%	Decrease
				Average price per BOE(11)	$20.61	$14.33 - $23.22	Increase
			Yield analysis	Yield	16%	16%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	8x	8x	Increase
Foreign exchange options, net	$	2,887	Option pricing model	Forward and spot rates	11,500	6 -14,000	(12	)
Options(13)	$	95	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
			Discounted cash flows	Weighted average cost of capital	14%	14%	Decrease
				LTM EBITDA exit multiple	8x	8x	Increase

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(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $6.4 million was valued solely using broker quotes, while $11.3 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable.

(9) The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable.

(10) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $164.4 million was valued solely using a discounted cash flow technique, while $98.9 million was valued solely using a market comparables technique and $17.5 million was valued solely using a yield analysis.

(11) Natural resources assets with an estimated fair value of $114.1 million as of December 31, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas.

(12) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(13) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

NOTE 9. SHAREHOLDERS’ EQUITY

Preferred Shares

The Company has 14.95 million of Series A LLC Preferred Shares issued and outstanding, which trade on the NYSE under the ticker symbol “KFN.PR”. Distributions on the Series A LLC Preferred Shares are cumulative and are payable, when, as, and if declared by the Company's board of directors, quarterly on January 15, April 15, July 15 and October 15 of each year at a rate per annum equal to 7.375%.

Common Shares

On May 4, 2007, the Company adopted an amended and restated share incentive plan (the “2007 Share Incentive Plan”) that provided for the grant of qualified incentive common share options and other share‑based awards to the Manager, directors, officers and any key employees of the Manager and to any other individual or entity performing services for the

24

Company. The 2007 Share Incentive Plan was terminated in May 2015, but continued to govern unvested awards with respect to 37,214 restricted KKR common units as of December 31, 2015, which were converted from KFN shares in connection with the merger transaction. All such remaining outstanding awards vested on March 1, 2016.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Commitments

The Company participates in certain contingent financing arrangements, whereby the Company is committed to provide funding of up to a specific predetermined amount at the discretion of the borrower or has entered into an agreement to acquire interests in certain assets. As of March 31, 2016 and December 31, 2015, the Company had unfunded financing commitments for corporate loans totaling $7.4 million and $8.6 million, respectively. The Company did not have any significant losses as of March 31, 2016, nor does it expect any significant losses related to those assets for which it committed to fund.

The Company participates in joint ventures and partnerships alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to the Company’s interests in joint ventures and partnerships that hold commercial real estate and natural resources investments, as well as specialty lending focused businesses. The Company estimated these future contributions to total approximately $121.0 million as of March 31, 2016 and $163.0 million as of December 31, 2015.

Guarantees

As of March 31, 2016 and December 31, 2015, the Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.4 billion and $1.6 billion, respectively. Under non-recourse debt, the lender generally does not have recourse against any other assets owned by the borrower or any related parties of the borrower, except for certain specified exceptions listed in the respective loan documents including customary “bad boy” acts and environmental losses. In connection with certain of these investments, joint and several non-recourse carve-out guarantees and environmental indemnities were provided, pursuant to which KFN guarantees losses or the full amount of the applicable loan in the event of specified bad acts or environmental matters. In addition, completion guarantees were provided for certain properties to complete all or portions of development projects, and partial payment guarantees were provided for certain investments. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against it that have not yet occurred. However, based on prior experience, the Company expects the risk of material loss to be low.

Contingencies

From time to time, the Company is involved in various legal proceedings, lawsuits and claims incidental to the conduct of the Company’s business. The Company’s business is also subject to extensive regulation, which may result in regulatory proceedings against it. It is inherently difficult to predict the ultimate outcome, particularly in cases in which claimants seek substantial or unspecified damages, or where investigations or proceedings are at an early stage and the Company cannot predict with certainty the loss or range of loss that may be incurred; however, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s financial results in any particular period. Based on current discussion and consultation with counsel, management believes that the final resolution of these matters would not have a material impact on the Company’s consolidated financial statements.

NOTE 11. MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS

The Manager manages the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors. The Management Agreement expires on December 31 of each year, but is automatically renewed for a 1 year term each December 31 unless terminated upon the affirmative vote of at least two-thirds of the Company’s independent directors, or by a vote of the holders of a majority of the Company’s outstanding common shares, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination under this clause (2) by accepting a mutually acceptable reduction of management fees. The Manager must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the sum of the average annual base management fee and the average annual incentive fee for the two12-month periods immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.

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The Management Agreement contains certain provisions requiring the Company to indemnify the Manager with respect to all losses or damages arising from acts not constituting bad faith, willful misconduct, or gross negligence. The Company has evaluated the impact of these guarantees on its condensed consolidated financial statements and determined that they are not material.

The following table summarizes the components of related party management compensation on the Company’s condensed consolidated statements of operations, which are described in further detail below (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Base management fees, net	$	1,029	$	4,053
CLO management fees	6,247		6,167
Incentive fees	—		—
Total related party management compensation	$	7,276	$	10,220

Base Management Fees

The Company pays its Manager a base management fee quarterly in arrears. During 2016 and 2015, certain related party fees received by affiliates of the Manager were credited to the Company via an offset to the base management fee (“Fee Credits”). Specifically, as described in further detail under “CLO Management Fees” below, a portion of the CLO management fees received by an affiliate of the Manager for certain of the Company’s CLOs were credited to the Company via an offset to the base management fee.

The table below summarizes the aggregate base management fees (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Base management fees, gross	$	5,783		$	8,491
CLO management fees credit(1)	(4,754		)	(4,438		)
Total base management fees, net	$	1,029		$	4,053

(1) See “CLO Management Fees” for further discussion.

CLO Management Fees

An affiliate of the Manager entered into separate management agreements with the respective investment vehicles for all of the Company’s Cash Flow CLOs pursuant to which it is entitled to receive fees for the services it performs as collateral manager for all of these CLOs, except for CLO 2011-1. The collateral manager has the option to waive the fees it earns for providing management services for the CLO.

Fees Waived

The collateral manager waived CLO management fees totaling of $0.5 million for CLO 2005-2 during the three months ended March 31, 2015. The Company called CLO 2005-2 in November 2015.

Fees Charged and Fee Credits

The Company recorded management fees expense for the majority of its CLOs during both the three months ended March 31, 2016 and 2015. The Manager credits the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLO 2007-1, CLO 2007-A, CLO 2012-1, CLO 9 and CLO 11 via an offset to the base management fees payable to the Manager. As the Company owns less than 100% of the subordinated notes of these CLOs (with the remaining subordinated notes held by third parties), the Company received a Fee Credit equal only to the Company’s pro rata share of the aggregate CLO management fees paid by these CLOs. Specifically, the amount of the reimbursement for each of these CLOs was calculated by taking the product of (x) the total CLO management fees received by an affiliate of the Manager during the period for such CLO multiplied by (y) the percentage of the subordinated notes of such CLO held by the Company. The remaining portion of the CLO management fees paid by each of these CLOs was not credited to the Company, but instead resulted in a dollar-for-dollar reduction in the interest expense paid by the Company to the third party holder of the

26

CLO’s subordinated notes. Similarly, the Manager credited the Company the CLO management fees from CLO 2013-1, CLO 2013-2 and CLO 10 based on the Company’s 100% ownership of the subordinated notes in the CLO.

The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Charged and retained CLO management fees(1)	$	1,493	$	1,729
CLO management fees credit	4,754		4,438
Total CLO management fees	$	6,247	$	6,167

(1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO.

Subordinated note holders in CLOs have the first risk of loss and conversely, the residual value upside of the transactions. When CLO management fees are paid by a CLO, the residual economic interests in the CLO transaction are reduced by an amount commensurate with the CLO management fees paid. The Company records any residual proceeds due to subordinated note holders as interest expense on the condensed consolidated statements of operations. Accordingly, the increase in CLO management fees is directly offset by a decrease in interest expense.

Incentive Fees

The Manager earned incentive fees totaling zero for both of the three months ended March 31, 2016 and March 31, 2015.

Reimbursable General and Administrative Expenses

Certain general and administrative expenses are incurred by the Company’s Manager on its behalf that are reimbursable to the Manager pursuant to the Management Agreement. The Company incurred reimbursable general and administrative expenses to its Manager totaling $1.0 million and $2.3 million for the three months ended March 31, 2016 and March 31, 2015, respectively. Expenses incurred by the Manager and reimbursed by the Company are reflected in general, administrative and directors expenses on the condensed consolidated statements of operations.

Contributions and Distributions

The Company has made certain distributions to its Parent, as the sole holder of its common shares. The Company distributed $38.3 million and $55.2 million during the three months ended March 31, 2016 and March 31, 2015, respectively.

Affiliated Investments

The Company has invested in corporate loans, debt securities and other investments of entities that are affiliates of KKR. As of March 31, 2016, the aggregate par amount of these affiliated investments totaled $655.4 million, or approximately 11% of the total investment portfolio, and consisted of 6 issuers. Of the total affiliated investments, $644.4 million of corporate loans and $11.0 million of equity investments. As of December 31, 2015, the aggregate par amount of these affiliated investments totaled $734.3 million, or approximately 11% of the total investment portfolio, and consisted of 8 issuers. The total $734.3 million in affiliated investments was comprised of $723.3 million of corporate loans and $11.0 million of equity investments.

In addition, the Company has invested in certain joint ventures and partnerships alongside KKR and its affiliates. As of March 31, 2016 and December 31, 2015, the estimated fair value of these interests in joint ventures and partnerships totaled $685.3 million and $805.5 million, respectively.

NOTE 12. SEGMENT REPORTING

Operating segments are defined as components of a company that engage in business activities that may earn revenues and incur expenses for which separate financial information is available and reviewed by the chief operating decision maker or

27

group in determining how to allocate resources and assessing performance. The Company operates its business through the following reportable segments: credit (“Credit”), natural resources (“Natural Resources”) and other (“Other”).

The Company’s reportable segments are differentiated primarily by their investment focuses. The Credit segment consists primarily of below investment grade corporate debt comprised of senior secured and unsecured loans, mezzanine loans, high yield bonds, private and public equity investments, and distressed and stressed debt securities. The Natural Resources segment consists of non-operated working and overriding royalty interests in oil and natural gas properties, as well as interests in joint ventures and partnerships focused on the oil and gas sector. The Other segment includes all other portfolio holdings, consisting solely of commercial real estate. The segments currently reported are consistent with the way decisions regarding the allocation of resources are made, as well as how operating results are reviewed by the Company.

The Company evaluates the performance of its reportable segments based on several net income (loss) components. Net income (loss) includes (i) revenues, (ii) related investment costs and expenses, (iii) other income (loss), which is comprised primarily of unrealized and realized gains and losses on investments, debt and derivatives, and (iv) other expenses, including related party management compensation and general and administrative expenses. Certain corporate assets and expenses that are not directly related to the individual segments, including interest expense and related costs on borrowings, base management fees and professional services are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period-end. Certain other corporate assets and expenses, including prepaid insurance, incentive fees, insurance expenses and directors’ expenses are not allocated to individual segments in the Company’s assessment of segment performance. Collectively, these items are included as reconciling items between reported segment amounts and consolidated totals.

The following table presents the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations (amounts in thousands):

	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015		Three months ended March 31, 2016		Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015
Total revenues	$	77,395		$	94,958		$	2,641		$	2,828		$	9,269		$	—	$	—	$	—		$	89,305		$	97,786
Total investment costs and expenses	50,984			55,967			1,614			1,340			400			346		—		—			52,998			57,653
Total other income (loss)	(173,946		)	(65,992		)	(27,242		)	(7,753		)	(8,694		)	4,581		—		—			(209,882		)	(69,164		)
Total other expenses	23,864			16,403			130			510			70			155		—		100			24,064			17,168
Income tax expense (benefit)	23			48			—			—			37			299		—		—			60			347
Net income (loss)	$	(171,422	)	$	(43,452	)	$	(26,345	)	$	(6,775	)	$	68		$	3,781	$	—	$	(100	)	$	(197,699	)	$	(46,546	)
Net income (loss) attributable to noncontrolling interests	(9,711		)	(5,858		)	(5,824		)	(213		)	—			—		—		—			(15,535		)	(6,071		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(161,711	)	$	(37,594	)	$	(20,521	)	$	(6,562	)	$	68		$	3,781	$	—	$	(100	)	$	(182,164	)	$	(40,475	)

(1) Consists of insurance and directors’ expenses which are not allocated to individual segments.

The following table shows total assets of our reportable segments reconciled to amounts reflected in the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Total assets	$	6,663,815	$	7,303,305	$	208,161	$	230,815	$	217,667	$	254,275	$	—	$	—	$	7,089,643	$	7,788,395

(1) Total consolidated assets as of March 31, 2016 included $63.0 million of noncontrolling interests, of which $34.5 million was related to the Credit segment and $28.5 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included $82.9 million of noncontrolling interests, of which $50.3 million was related to the Credit segment and $32.6 million was related to the Natural Resources segment.

NOTE 13. SUBSEQUENT EVENTS

On March 24, 2016, the Company's board of directors declared a cash distribution on its Series A LLC Preferred Shares totaling $6.9 million, or $0.460938 per share. The distribution was paid on April 15, 2016 to preferred shareholders of record as of the close of business on April 8, 2016.

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On May 9, 2016, the Company's board of directors declared a cash distribution for the quarter ended March 31, 2016 on its common shares totaling $24.6 million, or $245,741 per common share. The distribution was paid on May 10, 2016 to common shareholders of record as of the close of business on May 9, 2016.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except where otherwise expressly stated or the context suggests otherwise, the terms “we,” “us” and “our” refer to KKR Financial Holdings LLC and its subsidiaries.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q.Certain information contained in this Quarterly Report on Form 10-Q constitutes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on our current expectations, estimates and projections. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. The words “believe,” “anticipate,” “intend,” “aim,” “expect,” “strive,” “plan,” “estimate,” and “project,” and similar words identify forward-looking statements. Such statements are not guarantees of future performance, events or results and involve potential risks and uncertainties. Accordingly, actual results and the timing of certain events could differ materially from those addressed in forward-looking statements due to a number of factors including, but not limited to, changes in interest rates and market values, financing and capital availability, changes in prepayment rates, general economic and political conditions and events, changes in market conditions, particularly in the global fixed income, credit and equity markets, the impact of current, pending and future legislation, regulation and legal actions, and other factors not presently identified. Other factors that may impact our actual results are discussed under “Risk Factors” in Item 1A of the Company’s Annual Report on Form 10-K filed with the Securities Exchange Commission, or the SEC, on March 29, 2016. We do not undertake, and specifically disclaim, any obligation to publicly release the result of any revisions that may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except for as required by federal securities laws.

EXECUTIVE OVERVIEW

We are a specialty finance company with expertise in a range of asset classes. Our core business strategy is to leverage the proprietary resources of KKR Financial Advisors LLC (our “Manager”) with the objective of generating current income. Our holdings primarily consist of below investment grade syndicated corporate loans, also known as leveraged loans, high yield debt securities and interests in joint ventures and partnerships. The corporate loans that we hold are typically purchased via assignment or participation in the primary or secondary market.

The majority of our holdings consist of corporate loans and high yield debt securities held in collateralized loan obligation (“CLO”) transactions that are structured as on-balance sheet securitizations and are used as long term financing for our investments in corporate debt. The senior secured debt issued by the CLO transactions is primarily owned by unaffiliated third party investors and we own the majority of the subordinated notes in the CLO transactions. As of March 31, 2016, our CLO transactions consisted of KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”) KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”), KKR CLO 11, Ltd. (“CLO 11”) and KKR CLO 13, Ltd. (“CLO 13”) (collectively the “Cash Flow CLOs”). During March 2016, we called KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”), whereby we repaid all senior and mezzanine notes outstanding. Also, during 2015, we called KKR Financial CLO 2005-2, Ltd. ("CLO 2005-2"), KKR Financial CLO 2005-1, Ltd ("CLO 2005-1") and KKR Financial CLO 2006-1, Ltd. ("CLO 2006-1"), whereby we repaid all senior and mezzanine notes outstanding. We execute our core business strategy through our majority-owned subsidiaries, including CLOs.

We are a Delaware limited liability company and were organized on January 17, 2007. We are the successor to KKR Financial Corp., a Maryland corporation. We intend to continue to operate so that we qualify, for United States federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation.

We are a subsidiary of KKR & Co. L.P. (“KKR & Co.”). KKR Fund Holdings L.P. (“KKR Fund Holdings”), a subsidiary of KKR & Co., is the sole holder of all of our outstanding common shares and is our parent (the “Parent”). We are externally managed and advised by our Manager, a subsidiary of KKR Credit Advisors (US) LLC, pursuant to an amended and restated management agreement (as amended the “Management Agreement”). KKR Credit Advisors (US) LLC is a subsidiary of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), which is a subsidiary of KKR & Co.

Our 7.375% Series A LLC Preferred Shares (“Series A LLC Preferred Shares”) and senior notes are traded on the New York Stock Exchange ("NYSE").

Consolidated Summary of Results

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Our net loss available to common shares for the three months ended March 31, 2016 totaled $189.1 million, while we had net loss available to common shares for the three months ended March 31, 2015 totaling $47.4 million. Additional discussion around our results, as well as the components of net income for our reportable segments, are detailed further below under “Results of Operations.”

Consolidation

Our Cash Flow CLOs are all variable interest entities (‘‘VIEs’’) that we consolidate as we have determined we have the power to direct the activities that most significantly impact these entities’ economic performance and we have both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities.

We also consolidate non-VIEs in which we hold a greater than 50 percent voting interest. The ownership interests held by third parties of our consolidated non-VIE entities are reflected as noncontrolling interests in our condensed consolidated financial statements. We began consolidating a majority of these non-VIE entities as a result of the asset contributions from our Parent during the second half of 2014. For certain of these entities, we previously held a percentage ownership, but following the incremental contributions from our Parent, we were presumed to have control.

As our condensed consolidated financial statements in this Quarterly Report on Form 10-Q are presented to reflect the consolidation of the CLOs and above non-VIE entities we hold investments in, the information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations also reflects these entities on a consolidated basis, which is consistent with the disclosures in our condensed consolidated financial statements.

Non-Cash “Phantom” Taxable Income

We intend to continue to operate so that we qualify, for United States federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Holders of our Series A LLC Preferred Shares are subject to United States federal income taxation and generally other taxes, such as state, local and foreign income taxes, on their allocable share of our gross ordinary income, regardless of whether or when they receive cash distributions. We generally allocate our gross ordinary income using a monthly convention, which means that we determine our gross ordinary income for the taxable year to be allocated to our Series A LLC Preferred Shares and then prorate that amount on a monthly basis. Our Series A LLC Preferred Shares will receive an allocation of our gross ordinary income. If the amount of cash distributed to our Series A LLC Preferred Shares in any year exceeds our gross ordinary income for such year, additional gross ordinary income will be allocated to the Series A LLC Preferred Shares in future years until such excess is eliminated. Consequently, in some taxable years, holders of our Series A LLC Preferred Shares may recognize taxable income in excess of our cash distributions. Furthermore, even if we did not pay cash distributions with respect to a taxable year, holders of our Series A LLC Preferred Shares may still have a tax liability attributable to their allocation of our gross ordinary income from us during such year in the event that cash distributed in a prior year exceeded our gross ordinary income in such year.

CRITICAL ACCOUNTING POLICIES

Our condensed consolidated financial statements are prepared by management in conformity with GAAP. Our significant accounting policies are fundamental to understanding our financial condition and results of operations because some of these policies require that we make significant estimates and assumptions that may affect the value of our assets or liabilities and financial results. We believe that certain of our policies are critical because they require us to make difficult, subjective, and complex judgments about matters that are inherently uncertain. In addition to the below, refer to “Part I-Item 1. Financial Statements-Note 2. Summary of Significant Accounting Policies” and our Form 10-K filed with the SEC on March 29, 2016 for further discussion.

Recent Accounting Pronouncements

Consolidation

In February 2015, the FASB issued guidance which eliminates the presumption that a general partner should consolidate a limited partnership and also eliminates the consolidation model specific to limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicle and whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. The guidance is effective for reporting periods starting after December 15, 2015 and for interim periods within

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the fiscal year. Early adoption is permitted, and a full retrospective or modified retrospective approach is required. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years, and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. We are currently evaluating the impact on our financial statements.

RESULTS OF OPERATIONS

Consolidated Results

The following tables show data of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations for the three months ended March 31, 2016 and 2015 (amounts in thousands):

	Credit						Natural Resources						Other					Reconciling  Items(1)					Total Consolidated
	Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015		Three months ended March 31, 2016		Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015
Total revenues	$	77,395		$	94,958		$	2,641		$	2,828		$	9,269		$	—	$	—	$	—		$	89,305		$	97,786
Total investment costs and expenses	50,984			55,967			1,614			1,340			400			346		—		—			52,998			57,653
Total other income (loss)	(173,946		)	(65,992		)	(27,242		)	(7,753		)	(8,694		)	4,581		—		—			(209,882		)	(69,164		)
Total other expenses	23,864			16,403			130			510			70			155		—		100			24,064			17,168
Income tax expense (benefit)	23			48			—			—			37			299		—		—			60			347
Net income (loss)	$	(171,422	)	$	(43,452	)	$	(26,345	)	$	(6,775	)	$	68		$	3,781	$	—	$	(100	)	$	(197,699	)	$	(46,546	)
Net income (loss) attributable to noncontrolling interests	(9,711		)	(5,858		)	(5,824		)	(213		)	—			—		—		—			(15,535		)	(6,071		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(161,711	)	$	(37,594	)	$	(20,521	)	$	(6,562	)	$	68		$	3,781	$	—	$	(100	)	$	(182,164	)	$	(40,475	)

(1) Consists of insurance and directors’ expenses which are not allocated to individual segments.

Revenues

Revenues consist primarily of interest income and discount accretion from our investment portfolio, and to a lesser extent dividend income primarily from our equity investments and interests in joint ventures and partnerships. In addition, revenues include oil and gas revenue from our overriding royalty interest properties.

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

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Revenues decreased $8.5 million in the first quarter of 2016 compared to the first quarter of 2015. This was primarily due to an $18.9 million decline in interest income earned from our corporate debt portfolio, partially offset by a $10.7 million increase in other income.

The decline in interest income was largely due to a smaller portfolio generating recurring income. Specifically, as of March 31, 2016, the aggregate par value of our corporate debt portfolio totaled $5.7 billion, as compared to $6.9 billion as of March 31, 2015. This was primarily due to the fact that we called CLO 2006-1, CLO 2005-1, CLO 2005-2 and CLO 2011-1 during 2015 and first quarter of 2016. Refer to "Revenues" below in the Credit segment for further discussion.

Other income within revenues increased $10.7 million in the first quarter of 2016 compared to the first quarter of 2015. Other income was primarily comprised of dividend income, the majority of which was from our interests in joint ventures and partnerships and equity investments. In particular, we received $9.3 million of dividend payments from certain of our commercial real estate assets during the first quarter of 2016.Unlike our corporate debt portfolio, which have stated coupon rates, dividends are not necessarily contractual in their amounts or timing and may vary depending on investment performance.

Investment Costs and Expenses

Investment costs and expenses is comprised of interest expense, oil and gas production costs, depreciation, depletion and amortization expense (“DD&A”) related to our oil and gas properties and other investment expenses.

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total investment costs and expenses decreased $4.7 million in the first quarter of 2016 compared to the first quarter of 2015 largely driven by a decrease in interest expense, specifically in our collateralized loan obligation secured notes and interest rate swaps. Specifically, CLO note discount accretion, a component of interest expense on our collateralized loan obligation secured notes, decreased $3.8 million period over period due to the fact that the first quarter of 2015 included $3.5 million of accelerated accretion of debt discount due to principal paydowns in CLO 2007-1 and the calling of CLO 2006-1 in February 2015. Additionally, interest expense related to our interest rate swaps decreased $1.4 million during the first quarter of 2016 compared to the same prior year period. In conjunction with CLO 2006-1 being called in the first quarter of 2015, we also terminated the related interest rate swap, which resulted in a decrease in interest expense related to our interest rate swaps. Refer to "Investment Costs and Expenses" below in the Credit segment for further discussion.

Other Income (Loss)

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Other loss increased $140.7 million in the first quarter of 2016 compared to the first quarter of 2015 primarily due to a $157.9 million unfavorable change in net realized and unrealized gain (loss) on investments, partially offset by a $20.6 million decrease in net realized and unrealized loss on debt.

Net realized and unrealized gain (loss) on investments changed $157.9 million from a net unrealized gain of $19.9 million in the first quarter of 2015 to a net unrealized loss of $138.0 million in the first quarter of 2016. A majority of this unfavorable change was related to our corporate debt portfolio which declined in value largely attributable to general market conditions, which impacted our investments in the oil and gas, education, and marine sectors. For example, the S&P/LSTA Loan Index returned 1.55% for the three months ended March 31, 2016 as compared to 2.12% for the same period in the prior year. Refer to "Other Income (Loss)" below in the Credit segment for further discussion. Additionally, our interests in joint ventures and partnerships in the oil and gas sectors, held in both the credit and natural resources segments, were negatively impacted during the first quarter of 2016. Refer to "Other Income (Loss)" below in the Credit and Natural Resources segment for further discussion.

Net realized and unrealized loss on debt decreased $20.6 million in the first quarter of 2016 compared to the first quarter of 2015. Beginning January 1, 2015, we measured the financial liabilities of our consolidated CLOs using the fair value of the financial assets of our consolidated CLOs, which was determined to be more observable. Accordingly, these financial assets were measured at fair value and these financial liabilities were measured as: (i) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs, less (ii) the sum of the fair value of any beneficial interests retained by us.

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Other Expenses

Other expenses include related party management compensation, general, administrative and directors’ expenses and professional services. Related party management compensation consists of base management fees payable to our Manager pursuant to the Management Agreement, collateral management fees and incentive fees.

Base Management Fees

We pay our Manager a base management fee quarterly in arrears. During 2016 and 2015, certain related party fees received by affiliates of our Manager were credited to us via an offset to the base management fee (“Fee Credits”). Specifically, as described in further detail under “CLO Management Fees” below, a portion of the CLO management fees received by an affiliate of our Manager for certain of our CLOs were credited to us via an offset to the base management fee.

The table below summarizes the aggregate base management fees (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Base management fees, net	$	5,783		$	8,491
CLO management fees credit(1)	(4,754		)	(4,438		)
Total base management fees, net	$	1,029		$	4,053

(1) See “CLO Management Fees” for further discussion.

CLO Management Fees

An affiliate of our Manager entered into separate management agreements with the respective investment vehicles for all of our Cash Flow CLOs pursuant to which it is entitled to receive fees for the services it performs as collateral manager for all of these CLOs, except for CLO 2011-1. The collateral manager has the option to waive the fees it earns for providing management services for the CLO.

Our Manager credited us for a portion of the CLO management fees received by an affiliate of our Manager from CLO 2007-1, CLO 2007‑A, CLO 2012-1, CLO 9 and CLO 11 via an offset to the base management fees payable to our Manager. As we own less than 100% of the subordinated notes of these CLOs (with the remaining subordinated notes held by third parties), we received a Fee Credit equal only to our pro rata share of the aggregate CLO management fees paid by these CLOs. Specifically, the amount of the reimbursement for each of these CLOs was calculated by taking the product of (x) the total CLO management fees received by an affiliate of our Manager during the period for such CLO multiplied by (y) the percentage of the subordinated notes of such CLO held by us. The remaining portion of the CLO management fees paid by each of these CLOs was not credited to us, but instead resulted in a dollar‑for‑dollar reduction in the interest expense paid by us to the third party holder of the CLO’s subordinated notes. Similarly, our Manager credited to us the CLO management fees from CLO 2013-1, CLO 2013-2 and CLO 10 based on our 100% ownership of the subordinated notes in the CLO.

The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Charged and retained CLO management fees(1)	$	1,493	$	1,729
CLO management fees credit	4,754		4,438
Total CLO management fees	$	6,247	$	6,167

(1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by us based on our ownership percentage in the CLO.

Subordinated note holders in CLOs have the first risk of loss and conversely, the residual value upside of the transactions. When CLO management fees are paid by a CLO, the residual economic interests in the CLO transaction are reduced by an amount commensurate with the CLO management fees paid. We record any residual proceeds due to subordinated

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note holders as interest expense on the consolidated statements of operations. Accordingly, the increase in CLO management fees is directly offset by a decrease in interest expense.

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Other expenses increased $6.9 million in the first quarter of 2016 compared to the first quarter of 2015. This was primarily due to a $10.0 million increase in general, administrative and directors' expenses as a result of the write-off of costs associated with our CLOs, partially offset by a $2.9 million decrease in related party management compensation, which includes base management fees and CLO management fees. Base management fees declined $3.0 million in the first quarter of 2016 compared to the prior year period primarily due to a decrease in the gross base management fees as a result of lower overall retained earnings largely from net realized and unrealized losses on investments.

Segment Results

We operate our business through multiple reportable segments, which are differentiated primarily by their investment focuses.

Credit (“Credit”): The Credit segment includes primarily below investment grade corporate debt comprised of senior secured and unsecured loans, mezzanine loans, high yield bonds, private and public equity investments, and distressed and stressed debt securities.

Natural resources (“Natural Resources”): The Natural Resources segment consists of non-operated overriding royalty interests in oil and natural gas properties, as well as interests in joint ventures and partnerships focused on the oil and gas sector.

Other (“Other”): The Other segment includes all other portfolio holdings, consisting solely of commercial real estate.

The segments currently reported are consistent with the way decisions regarding the allocation of resources are made, as well as how operating results are reviewed by our chief operating decision maker.

We evaluate the performance of our reportable segments based on several net income (loss) components. Net income (loss) includes: (i) revenues; (ii) related investment costs and expenses; (iii) other income (loss), which is comprised primarily of unrealized and realized gains and losses on investments, debt and derivatives and (iv) other expenses, including related party management compensation and general and administrative expenses. Certain corporate assets and expenses that are not directly related to the individual segments, including interest expense and related costs on borrowings, base management fees and professional services are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period‑end. Certain other corporate assets and expenses, including prepaid insurance, incentive fees, insurance expenses and directors’ expenses are not allocated to individual segments in our assessment of segment performance. Collectively, these items are included as reconciling items between reported segment amounts and consolidated totals. For further financial information related to our segments, refer to “Part I-Item 1. Financial Statements-Note 12. Segment Reporting.”

The following discussion and analysis regarding our results of operations is based on our reportable segments.

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Credit Segment

The following table presents the net income (loss) components of our Credit segment (amounts in thousands):

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Revenues
Corporate loans and securities interest income	$	70,887		$	87,611
Residential mortgage-backed securities interest income	682			806
Net discount accretion	403			2,501
Dividend income	5,185			4,007
Other	238			33
Total revenues	77,395			94,958
Investment costs and expenses
Interest expense:
Collateralized loan obligation secured notes	36,428			40,025
Senior notes	6,731			6,743
Junior subordinated notes	4,056			3,969
Interest rate swaps	2,973			4,379
Total interest expense	50,188			55,116
Other	796			851
Total investment costs and expenses	50,984			55,967
Other income (loss)
Realized and unrealized gain (loss) on derivatives and foreign exchange:
Interest rate swap	(11,731		)	(5,541		)
Total rate of return swaps	—			(186		)
Common stock warrants	142			(1,891		)
Foreign exchange(1)	273			(464		)
Options	403			(903		)
Total realized and unrealized gain (loss) on derivatives and foreign exchange	(10,913		)	(8,985		)
Net realized and unrealized gain (loss) on investments	(101,399		)	22,956
Net realized and unrealized gain (loss) on debt	(63,173		)	(83,816		)
Other income	1,539			3,853
Total other income (loss)	(173,946		)	(65,992		)
Other expenses
Related party management compensation:
Base management fees	964			3,795
CLO management fees	6,247			6,167
Total related party management compensation	7,211			9,962
Professional services	948			1,064
Other general and administrative	15,705			5,377
Total other expenses	23,864			16,403
Income (loss) before income taxes	(171,399		)	(43,404		)
Income tax expense (benefit)	23			48
Net income (loss)	$	(171,422	)	$	(43,452	)

(1) Includes foreign exchange contracts and foreign exchange remeasurement gain or loss.

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Revenues

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Revenues decreased $17.6 million in the first quarter of 2016 compared to the first quarter of 2015. The decrease was primarily attributable to a $16.7 million decrease in corporate loans and securities interest income. Specifically, interest income related to our corporate loans decreased $8.3 million and interest income related to our corporate debt securities decreased $8.4 million in the first quarter of 2016 compared to the same prior year period.

A large driver of the decrease in corporate loan and security interest income was due to a decline in the aggregate par value of our corporate loan and debt security portfolios as of March 31, 2016 compared to 2015, slightly offset by an increase in interest rates earned on the assets. The decline in the aggregate par value of our corporate debt portfolio was attributable to the fact that we called CLO 2006-1, CLO 2005-1, CLO 2005-2 and CLO 2011-1 during 2015 and the first quarter of 2016. We also closed CLO 11 and CLO 13 during 2015; however, total new assets only partially offset the decline in portfolio due to the called CLOs. As of March 31, 2016, our corporate loan portfolio had an aggregate par value of $5.3 billion with a weighted average coupon of 5.0%, while our corporate debt securities portfolio had an aggregate par value of $426.5 million with a weighted average coupon of 10.5%. In comparison, as of March 31, 2015, our corporate loan portfolio had an aggregate par value of $6.3 billion with a weighted average coupon of 4.7%, while our corporate debt securities portfolio had an aggregate par value of $586.8 million with a weighted average coupon of 7.9%.

Since April 30, 2014, the date we became a subsidiary of KKR & Co., we have called five CLOs and as a result, the amount of invested capital in our portfolio of CLOs has decreased. Unless we change our existing practice, we expect the size of our CLO portfolio to continue to decrease as well as associated interest income and interest expense, as a result of the foregoing, if not offset by new issuances or other opportunities of comparable size and/or amount.

Investment Costs and Expenses

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total investment costs and expenses decreased $5.0 million in the first quarter of 2016 compared to the first quarter of 2015 primarily as a result of a $4.9 million decline in total interest expense, which was largely attributable to a $3.6 million decrease in interest expense related to our collateralized loan obligation secured notes coupled with a $1.4 million decrease in interest expense related to our interest rate swaps.

Interest expense on our collateralized loan obligation secured notes is comprised of three main components: interest expense on our CLO senior notes, interest expense on our CLO subordinated notes and CLO note discount accretion. During the first quarter of 2016, we recorded $28.6 million of interest expense on our CLO senior notes, $4.1 million of interest expense on our CLO subordinated notes and $3.3 million of CLO note discount accretion. Comparatively, during the first quarter of 2015, we recorded $22.9 million of interest expense on our CLO senior notes, $9.9 million of interest expense on our CLO subordinated notes and $7.1 million of CLO note discount accretion.

CLO note discount accretion decreased $3.8 million in the first quarter of 2016 compared to the first quarter of 2015 due to the inclusion of $3.5 million of accelerated accretion of debt discount in the first quarter of 2015 due to principal paydowns in CLO 2007-1 and the calling of CLO 2006-1 in February 2015. In addition, interest expense on our CLO subordinated notes decreased $5.8 million during the first quarter compared to the same prior year period. Subordinated note holders receive the residual interest after all other payments have been made. As CLO 2007-1, our largest CLO, continued to amortize during 2015 and into 2016, the underlying portfolio of assets generating interest income diminished, resulting in lower subordinated note payments. CLO 2007-1 repaid approximately $858.0 million of senior notes from March 31, 2015 to March 31, 2016. These aggregate declines were partially offset by the increase in interest expense on our CLO senior notes of $5.7 million in the first quarter of 2016 as compared to the same prior year period primarily due to interest expense on CLO 11 and CLO 13, which closed in March 2015 and July 2015, respectively.

In addition, interest expense related to our interest rate swaps decreased $1.4 million during the first quarter of 2016 compared to the same prior year period. In conjunction with CLO 2006-1 being called in the first quarter of 2015, we also terminated the related interest rate swap, which resulted in a decrease in interest expense related to our interest rate swaps. For further information, refer to "Part I-Item1. Financial Statements-Note 6. Borrowings."

Other Income (Loss)

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Other income (loss) consists of gains and losses that can be highly variable, primarily driven by episodic sales, mark-to-market and foreign currency exchange rates as of each period-end.

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total other loss increased $108.0 million in the first quarter of 2016 compared to the first quarter of 2015 largely attributable to the following two factors.

First, net realized and unrealized gain (loss) on investments negatively changed $124.4 million in the first quarter of 2016 compared to the first quarter of 2015 from a net realized and unrealized gain of $23.0 million in the first quarter of 2015 to a net realized and unrealized loss of $101.4 million in the first quarter of 2016. The most significant changes were in our corporate debt securities, corporate loans portfolios and interests in joint ventures and partnerships.

Net realized and unrealized gains (losses) on our corporate debt securities negatively changed by $54.4 million for the first quarter of 2016 as compared to the same prior year period, from net realized and unrealized gains of $2.1 million in the first quarter of 2015 to net realized and unrealized losses of $52.3 million in the first quarter of 2016. A majority of the loss during the first quarter of 2016 was related to one issuer in the oil and gas sector which had unrealized losses totaling $44.2 million during the period due to the significant drop in commodity prices.

Net realized and unrealized gains on our corporate loans declined $51.9 million for the first quarter of 2016 as compared to the same prior year period, from $66.1 million in the first quarter of 2015 to $14.2 million in the first quarter of 2016. A majority of the decline was due to the fact that the first quarter of 2015 included unrealized gains related to an issuer that restructured during the period.

Unrealized losses on interests in joint ventures and partnerships increased $25.0 million during the first quarter of 2016 compared to the same prior year period from $23.4 million in the first quarter of 2015 to $48.5 million in the first quarter of 2016. Of the $48.5 million, $33.4 million was due to two investments in the marine and oil and gas sectors.

The table below details the components of net realized and unrealized gain (loss) on investments, which is included in other income (loss), separated by financial instrument for the three months ended March 31, 2016 and 2015 (amounts in thousands):

	For the three months ended March 31, 2016									For the three months ended March 31, 2015
	Unrealized gains (losses)			Realized gains (losses)			Total			Unrealized gains (losses)			Realized gains (losses)			Total
Corporate loans	$	44,923		$	(30,714	)	$	14,209		$	82,274		$	(16,182	)	$	66,092
Corporate debt securities	(50,145		)	(2,127		)	(52,272		)	1,680			399			2,079
RMBS	19			534			553			153			(924		)	(771		)
Equity investments, at estimated fair value	(15,992		)	725			(15,267		)	(22,426		)	1,424			(21,002		)
Interests in joint ventures and partnerships, at estimated fair value and other	(48,452		)	(170		)	(48,622		)	(23,442		)	—			(23,442		)
Total	$	(69,647	)	$	(31,752	)	$	(101,399	)	$	38,239		$	(15,283	)	$	22,956

Second, unrealized loss on debt, representing the change in estimated fair value of our financial liabilities, decreased $20.6 million in the first quarter of 2016 compared to the first quarter of 2015. As discussed above, beginning January 1, 2015, we measured the financial liabilities of our consolidated CLOs using the fair value of the financial assets of our consolidated CLOs, which was determined to be more observable. Accordingly, these financial assets were measured at fair value and these financial liabilities were measured as: (i) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental to the operations of the CLOs, less (ii) the sum of the fair value of any beneficial interests retained by us.

Other Expenses

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Other expenses increased $7.5 million in the first quarter of 2016 compared to the first quarter of 2015 primarily due to a $10.3 million increase in other general and administrative expenses slightly offset by a $2.8 million decrease in related party

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management compensation. A majority of the increase in other general and administrative expenses was related to the write-off of costs associated with our CLOs.

Related party management compensation includes base management fees and CLO management fees. Base management fees declined $2.8 million in the first quarter of 2016 compared to the prior year period primarily due to a decrease in the gross base management fees as a result of lower overall retained earnings largely from net realized and unrealized losses on investments. See “Consolidated Results” above for further discussion around the base management fees and Fee Credits.

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Natural Resources Segment

The following table presents the net income (loss) components of our Natural Resources segment (amounts in thousands): 

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Revenues
Oil and gas revenue:
Natural gas sales	$	370		$	330
Oil sales	2,297			1,841
Natural gas liquids sales	(26		)	657
Total revenues	2,641			2,828
Investment costs and expenses
Oil and gas production costs:
Severance and ad valorem taxes	215			(48		)
Total oil and gas production costs	215			(48		)
Oil and gas depreciation, depletion and amortization	1,066			1,002
Interest expense:
Senior notes	208			243
Junior subordinated notes	125			143
Total interest expense	333			386
Total investment costs and expenses	1,614			1,340
Other income (loss)
Net realized and unrealized gain (loss) on investments	(27,242		)	(7,753		)
Total other income (loss)	(27,242		)	(7,753		)
Other expenses
Related party management compensation:
Base management fees	30			137
Total related party management compensation	30			137
Professional services	29			38
Other general and administrative	71			335
Total other expenses	130			510
Income (loss) before income taxes	(26,345		)	(6,775		)
Income tax expense (benefit)	—			—
Net income (loss)	$	(26,345	)	$	(6,775	)

Our natural resources assets are accounted for and presented on our condensed consolidated balance sheets in one of two ways: (i) at cost net of depreciation, depletion and amortization presented within oil and gas properties, net or (ii) estimated fair value within interests in joint ventures and partnerships, at estimated fair value with net realized and unrealized gains or losses on these holdings recorded in other income (loss) on our condensed consolidated statements of operation.

Revenues

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Revenues remained relatively stable at $2.6 million in the first quarter of 2016 compared to $2.8 million in the first quarter of 2015 and represented sales from oil and gas production on our overriding royalty interest properties. As of March 31, 2016 and 2015, our oil and natural gas properties had carrying amounts of $113.8 million and $119.3 million, respectively.

Investment Costs and Expenses

Investment costs and expenses primarily consist of production costs, DD&A and allocated corporate expenses such as interest expense and related costs on borrowings. DD&A represents recurring charges related to the exhaustion of mineral reserves for our oil and natural gas properties.

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For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total investment costs and expenses increased $0.3 million in the first quarter of 2016 compared to the first quarter of 2015. The increase was primarily due to a $0.3 million increase in oil and gas production costs, specifically in severance and ad valorem taxes, which was due to the receipt of a tax refund in the first quarter of 2015.

Other Income (Loss)

Our oil and gas results and estimated fair values depend substantially on natural gas, oil and NGL prices and production levels, as well as drilling and operating costs.

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total other loss, comprised solely of net realized and unrealized loss on investments, increased $19.5 million in the first quarter of 2016 compared to the first quarter of 2015. Net unrealized losses totaled $27.2 million during the first quarter of 2016 as compared to $7.8 million during the first quarter of 2015. The quarter over quarter increase in unrealized losses was primarily attributable to a significant drop in long-term oil, condensate, natural gas liquids and natural gas prices, which began during the fourth quarter of 2014 and continued through the first quarter of 2016. For example, the price of WTI crude oil declined from approximately $61 per barrel as of March 31, 2015 to $47 per barrel as of March 31, 2016 and the price of natural gas declined from $3.35 per mcf as of March 31, 2015 to $2.86 per mcf as of March 31, 2016.

Other Expenses

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Total other expenses decreased $0.4 million in the first quarter of 2016 compared to the first quarter of 2015. As mentioned above, corporate expenses are allocated based on the investment portfolio balance in each respective segment as of period-end. In addition to the diminishing aggregate corporate costs period over period, the carrying value of our natural resources assets, comprised of oil and gas properties and interests in joint ventures and partnerships, declined from $255.7 million, excluding noncontrolling interests, as of March 31, 2015, to $177.9 million, excluding noncontrolling interests, as of March 31, 2016, which resulted in a smaller allocation. The overall reduction in natural resources assets was primarily due to a decline in estimated fair values as described above under "Other Income (Loss)".

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Other Segment

The following table presents the net income (loss) components of our Other segment (amounts in thousands):

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Revenues
Dividend income	$	9,269		$	—
Total revenues	9,269			—
Investment costs and expenses
Interest expense:
Senior notes	248			216
Junior subordinated notes	149			127
Total interest expense	397			343
Other	3			3
Total investment costs and expenses	400			346
Other income (loss)
Net realized and unrealized gain (loss) on derivatives and foreign exchange:
Foreign exchange(1)	697			(115		)
Total realized and unrealized gain (loss) on derivatives and foreign exchange	697			(115		)
Net realized and unrealized gain (loss) on investments	(9,391		)	4,696
Total other income (loss)	(8,694		)	4,581
Other expenses
Related party management compensation:
Base management fees	35			121
Total related party management compensation	35			121
Professional services	35			34
Total other expenses	70			155
Income before income taxes	105			4,080
Income tax expense	37			299
Net income	$	68		$	3,781

(1) Includes foreign exchange contracts and foreign exchange remeasurement gain or loss.

Our commercial real estate assets are carried at estimated fair value and are included within interests in joint ventures and partnerships, at estimated fair value on our condensed consolidated balance sheets. Net realized and unrealized gains or losses on these holdings are recorded in other income (loss) on our condensed consolidated statements of operation.

Revenues

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Revenues increased $9.3 million in the first quarter of 2016 compared to the first quarter of 2015 and represented dividend income from our commercial real estate investments. Specifically, in the first quarter of 2016 we received an $8.1 million dividend payment related to a real estate investment we acquired in the first quarter of 2013. In contrast to our corporate debt portfolio, which typically earns interest at stated coupon rates and frequencies, revenues generated from our commercial real estate assets are often delayed from the date of acquisition and are episodic in their frequency and amount. Our commercial real estate assets had a carrying value of $212.3 million and $226.9 million as of March 31, 2016 and 2015, respectively, and are included within interests in joint ventures and partnerships, at estimated fair value on our condensed consolidated balance sheets.

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Investment Costs and Expenses

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Investment costs and expenses remained relatively flat for the first quarter of 2016 as compared to the first quarter of 2015 at $0.4 million and $0.3 million, respectively. Certain corporate assets and expenses that are not directly related to an individual segment, including interest expense and related costs on borrowings, are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period-end. As of March 31, 2016 and 2015, our commercial real estate assets had carrying values of $212.3 million and $226.9 million, respectively.

Other Income (Loss)

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Other income (loss) unfavorably changed $13.3 million in the first quarter of 2016 compared to the first quarter of 2015 from other income of $4.6 million in the first quarter of 2015 to other loss of $8.7 million in the first quarter of 2016. The change was largely attributable to one of our commercial real estate investments acquired in the first quarter of 2013 which had unrealized losses of $8.3 million in the first quarter of 2016 primarily as a result of its $8.1 million dividend payment during the same period. Generally, as our investment's equity decreases through losses and dividend payments, so does the value of our investment. Our commercial real estate assets are carried at estimated fair value and are included within interests in joint ventures and partnerships, at estimated fair value on our condensed consolidated balance sheets. Net realized and unrealized gains or losses on these holdings are recorded in other income (loss) on our condensed consolidated statements of operation.

Other Expenses

For the three months ended March 31, 2016 compared to the three months ended March 31, 2015

Other expenses decreased slightly in the first quarter of 2016 compared to the first quarter of 2015 primarily due to a decrease in total allocable net base management fees expense. Other expenses are comprised of certain corporate expenses that are not directly related to an individual segment, including base management fees and professional services, and are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period-end. As of March 31, 2016 and 2015, our commercial real estate assets had carrying values of $212.3 million and $226.9 million, respectively.

Income Tax Provision

We intend to continue to operate so that we qualify, for United States federal income tax purposes, as a partnership and not as an association or publicly traded partnership taxable as a corporation. Therefore, we generally are not subject to United States federal income tax at the entity level, but are subject to limited state and foreign taxes. Holders of our Series A LLC Preferred Shares will be allocated a share of our gross ordinary income for our taxable year ending within or with their taxable year. Holders of our Series A LLC Preferred Shares will not be allocated any gains or losses from the sale of our assets.

We hold equity interests in certain subsidiaries that have elected or intend to elect to be taxed as real estate investment trusts (“REIT subsidiaries”) under the Internal Revenue Code of 1986, as amended (the “Code”). A REIT is not subject to United States federal income tax to the extent that it currently distributes its income and satisfies certain asset, income and ownership tests, and recordkeeping requirements, but it may be subject to some amount of federal, state, local and foreign taxes based on its taxable income.

We have wholly‑owned domestic and foreign subsidiaries that are taxable as corporations for United States federal income tax purposes and thus are not consolidated by us for United States federal income tax purposes. For financial reporting purposes, current and deferred taxes are provided for on the portion of earnings recognized by us with respect to our interest in the domestic taxable corporate subsidiaries, because each is taxed as a regular corporation under the Code. Deferred income tax assets and liabilities are computed based on temporary differences between the GAAP consolidated financial statements and the United States federal income tax basis of assets and liabilities as of each consolidated balance sheet date. The foreign corporate subsidiaries were formed to make certain foreign and domestic investments from time to time. The foreign corporate subsidiaries are organized as exempted companies incorporated with limited liability under the laws of the Cayman Islands, and are anticipated to be exempt from United States federal and state income tax at the corporate entity level because they restrict their activities in the United States to trading in stock and securities for their own account. They generally will not be subject to corporate income tax in our financial statements on their earnings, and no provision for income taxes for the three months ended

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March 31, 2016 was recorded; however, we will be required to include their current taxable income in our calculation of our gross ordinary income allocable to holders of our Series A LLC Preferred Shares.

CLO 2005‑1, CLO 2005‑2, CLO 2006‑1, CLO 2007‑1, CLO 2007‑A, CLO 2009‑1 and CLO 2011‑1 are our foreign subsidiaries that elected to be treated as disregarded entities or partnerships for United States federal income tax purposes. These subsidiaries were established to facilitate securitization transactions, structured as secured financing transactions.

Our REIT subsidiaries are not expected to incur a federal tax expense, but are subject to limited state and foreign income tax expense related to the 2016 tax year.

For the three months ended March 31, 2016, we recorded total income tax expense of less than $0.1 million. Cumulative tax assets and liabilities are included in other assets and accounts payable, accrued expenses and other liabilities, respectively, on our condensed consolidated balance sheets.

Investment Portfolio

Our investment portfolio primarily consists of corporate debt holdings, consisting of corporate loans and corporate debt securities. The details of our corporate debt portfolio are discussed below under “Corporate Debt Portfolio.” Also included in our investment portfolio are our other holdings, including royalty interests in oil and gas properties, equity investments, and interests in joint ventures and partnerships, which are all discussed below under “Other Holdings.”

Corporate Debt Portfolio

Our corporate debt investment portfolio primarily consists of investments in corporate loans and corporate debt securities. Our corporate loans primarily consist of senior secured, second lien and subordinated loans. The corporate loans we invest in are generally below investment grade and are primarily floating rate indexed to three‑month LIBOR. Our investments in corporate debt securities primarily consist of fixed rate investments in below investment grade corporate bonds that are senior secured, senior unsecured and subordinated. We evaluate and monitor the asset quality of our investment portfolio by performing detailed credit reviews and by monitoring key credit statistics and trends. The key credit statistics and trends we monitor to evaluate the quality of our investments include credit ratings of both our investments and the issuer, financial performance of the issuer including earnings trends, free cash flows of the issuer, debt service coverage ratios of the issuer, financial leverage of the issuer, and industry trends that have or may impact the issuer’s current or future financial performance and debt service ability.

We do not require specific collateral or security to support our corporate loans and debt securities; however, these loans and debt securities are either secured through a first or second lien on the assets of the issuer or are unsecured. We do not have access to any collateral of the issuer of the corporate loans and debt securities, rather the seniority in the capital structure of the loans and debt securities determines the seniority of our investment with respect to prioritization of claims in the event that the issuer defaults on the outstanding debt obligation.

Corporate Loans

Our corporate loan portfolio had an aggregate par value of $5.3 billion as of March 31, 2016 and $5.7 billion as of December 31, 2015. Our corporate loan portfolio consists of debt obligations of corporations, partnerships and other entities in the form of senior secured loans, second lien loans and subordinated loans. The following table summarizes our corporate loans portfolio stratified by type:

Corporate Loans

(Amounts in thousands)

	March 31, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Senior secured	$	5,056,869	$	4,940,144	$	4,591,706	$	5,513,949	$	5,401,562	$	4,997,394
Second lien	85,889		83,815		78,522		83,492		81,453		78,267
Subordinated	132,374		140,695		113,191		125,205		136,800		112,949
Total	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610

As of March 31, 2016, $5.1 billion par amount, or 97.1%, of our corporate loan portfolio was floating rate and $152.1 million par amount, or 2.9%, was fixed rate. In addition, as of March 31, 2016, $173.7 million par amount, or 3.3%, of our corporate loan portfolio was denominated in foreign currencies, of which 72.8% was denominated in Euros. As of December 31, 2015, $5.6 billion par amount, or 97.5%, of our corporate loan portfolio was floating rate and $142.6 million par

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amount, or 2.5%, was fixed rate. In addition, as of December 31, 2015, $163.2 million par amount, or 2.9%, of our corporate loan portfolio was denominated in foreign currencies, of which 70.6% was denominated in Euros.

As of March 31, 2016, our fixed rate corporate loans had a weighted average coupon of 16.1% and a weighted average years to maturity of 4.1 years, as compared to 15.7% and 4.2 years, respectively, as of December 31, 2015. All of our floating rate corporate loans have index reset frequencies of less than twelve months with the majority resetting at least quarterly. The weighted average coupon on our floating rate corporate loans was 4.7% as of March 31, 2016 and 4.5% as of December 31, 2015, and the weighted average coupon spread to LIBOR of our floating rate corporate loan portfolio was 3.8% as of March 31, 2016 and 3.7% as of December 31, 2015. The weighted average years to maturity of our floating rate corporate loans was 4.0 years as of March 31, 2016 and 4.1 years as of December 31, 2015.

Non‑Accrual Loans

Loans are placed on non‑accrual when there is uncertainty regarding whether future income amounts on the loan will be earned and collected. While on non‑accrual status, interest income is recognized using the cost‑recovery method, cash‑basis method or some combination of the two methods. A loan is placed back on accrual status when the ultimate collectability of the principal and interest is no longer in doubt. When placed on non‑accrual status, previously recognized accrued interest is reversed and charged against current income.

As of March 31, 2016, we held a total par value and estimated fair value of non-accrual loans of $435.2 million and $115.6 million, respectively, and $435.2 million and $127.5 million, respectively, as of December 31, 2015.

Defaulted Loans

Defaulted loans consist of corporate loans that have defaulted under the contractual terms of their loan agreements. As of March 31, 2016, we had one corporate loan that was in default with a total estimated fair value of $105.1 million from one issuer. As of December 31, 2015, we had one corporate loan that was in default with a total estimated fair value of $113.6 million from one issuer.

Concentration Risk

Our corporate loan portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 31% of the total estimated fair value of the our corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., PQ Corp., and Texas Competitive Electric Holdings Company LLC (“TXU”) which combined represented $390.8 million, or approximately 8% of the aggregate estimated fair value of our corporate loans. As of December 31, 2015, approximately 31% of the total estimated fair value of the our corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., TXU and PQ Corp., which combined represented $434.6 million, or approximately 8% of the aggregate estimated fair value of our corporate loans.

Corporate Debt Securities

Our corporate debt securities portfolio had an aggregate par value of $426.5 million and $447.8 million as of March 31, 2016 and December 31, 2015, respectively. Our corporate debt securities portfolio consists of debt obligations of corporations, partnerships and other entities in the form of senior secured, senior unsecured and subordinated bonds. Our corporate debt securities are included in securities on our consolidated balance sheets. The following table summarizes our corporate debt securities portfolio stratified by type: 

Corporate Debt Securities

(Amounts in thousands)

	March 31, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Senior secured	$	181,096	$	164,493	$	56,855	$	178,396	$	166,313	$	110,406
Senior unsecured	123,471		123,534		130,364		137,634		137,949		142,990
Subordinated	121,904		109,280		101,831		131,720		122,997		114,502
Total	$	426,471	$	397,307	$	289,050	$	447,750	$	427,259	$	367,898

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As of March 31, 2016, $280.5 million par amount, or 69.7%, of our corporate debt securities portfolio was fixed rate and $122.0 million par amount, or 30.3%, was floating rate. In addition, we had $23.9 million par amount of other securities that do not have fixed or floating coupons, such as subordinated notes in third‑party‑controlled CLOs. As of December 31, 2015, $307.1 million par amount, or 72.3%, of our corporate debt securities portfolio was fixed rate and $117.9 million par amount, or 27.7%, was floating rate. In addition, we had $22.8 million par amount of other securities that do not have fixed or floating coupons, such as subordinated notes in CLOs.

As of March 31, 2016, $27.1 million par amount, or 6.4%, of our corporate debt securities portfolio, was denominated in foreign currencies, of which 88.2% was denominated in Euros. As of December 31, 2015, $26.2 million par amount, or 5.8%, of our corporate debt securities portfolio, was denominated in foreign currencies, of which 87.3% was denominated in Euros.

As of March 31, 2016, our fixed rate corporate debt securities had a weighted average coupon of 8.7% and a weighted average years to maturity of 2.7 years, as compared to 8.4% and 2.8 years, respectively, as of December 31, 2015. All of our floating rate corporate debt securities have index reset frequencies of less than twelve months. The weighted average coupon on our floating rate corporate debt securities was 14.6% as of March 31, 2016 and 14.7% as of December 31, 2015, both of which included a single PIK security earning 15% and excluded other securities such as subordinated notes in third‑party‑ controlled CLOs that do not earn a stated rate. The weighted average coupon spread to LIBOR of our floating rate corporate debt securities was 1.0% as of both March 31, 2016 and December 31, 2015. The weighted average years to maturity of our floating rate corporate debt securities was 5.6 years and 5.9 years as of March 31, 2016 and December 31, 2015, respectively.

Defaulted Securities

As of both March 31, 2016 and December 31, 2015, we had no corporate debt securities in default.

Concentration Risk

Our corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 90% of the estimated fair value of our corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, JC Penney Corp. Inc., and Mizuho Bank Ltd which combined represented $159.9 million, or approximately 55% of the estimated fair value of our corporate debt securities. As of December 31, 2015, approximately 89% of the estimated fair value of our corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, Preferred Proppants LLC and JC Penney Corp. Inc. which combined represented $192.5 million, or approximately 52% of the estimated fair value of our corporate debt securities.

Other Holdings

Our other holdings primarily consisted of royalty interests in oil and gas properties, equity investments, as well as interests in joint ventures and partnerships.

Natural Resources Holdings

Our natural resources holdings consisted of the following as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	As of March 31, 2016		As of December 31, 2015
Oil and gas properties, net	$	113,802	$	114,868
Interests in joint ventures and partnerships(1)	92,580		114,136
Total	$	206,382	$	229,004

_____________________

(1) Includes $28.5 million and $32.6 million of noncontrolling interests as of March 31, 2016 and December 31, 2015, respectively. Refer to “Interests in Joint Ventures and Partnerships Holdings” below for further discussion around the aggregate balance of our interests in joint ventures and partnerships.

As of March 31, 2016 and December 31, 2015, our oil and gas properties, net totaled $113.8 million and $114.9 million, respectively, and consisted solely of overriding royalty interests in acreage located in Texas. The overriding royalty interests include producing oil and natural gas properties operated by unaffiliated third parties. We had approximately 962 and 902 gross

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productive wells as of March 31, 2016 and December 31, 2015, respectively, in which we own an overriding royalty interest, and the acreage is still under development.

The meaningful fall in commodity prices, which started during the second half of 2014, continued throughout 2015 and into 2016. In particular, the long-term price of WTI crude and natural gas declined during the first quarter of 2016 adversely impacting the value of our natural resources assets, but prices recovered towards the end of the quarter with the long-term price of WTI crude oil declining from approximately $50 per barrel to $47 per barrel and the long-term price of natural gas remaining relatively stable at approximately $2.90 per mcf as of December 31, 2015 and March 31, 2016, respectively. Specifically, the value of our interests in joint ventures and partnerships, which are carried at estimated fair value, declined significantly. For the first quarter ended March 31, 2016, unrealized losses on our natural resources assets totaled $27.2 million. If commodity prices remain depressed or decline or if a decline is not offset by other factors, we would expect the value of our natural resources assets to continue to be adversely impacted.

Equity Holdings

As of March 31, 2016 and December 31, 2015, our equity investments carried at estimated fair value totaled $244.5 million and $262.9 million, respectively. The following table summarizes the changes in our equity investments, at estimated fair value (amounts in thousands):

	For the three months ended March 31, 2016			For the three months ended March 31, 2015
Beginning balance	$	262,946		$	181,378
Additions	5,879			46,352
Dispositions and paydowns	(9,057		)	(1,954		)
Unrealized gains (losses)	(15,992		)	(22,425		)
Other(1)	686			(1,758		)
Ending balance	$	244,462		$	201,593

_____________________

(1) Includes foreign exchange translation.

Interests in Joint Ventures and Partnerships Holdings

As of March 31, 2016 and December 31, 2015, our interests in joint ventures and partnerships, which primarily hold assets related to commercial real estate, natural resources and specialty lending, had an aggregate estimated fair value of $748.3 million, which included noncontrolling interests of $63.0 million and $888.4 million, which included noncontrolling interests of $82.9 million, respectively. We currently consolidate majority owned entities for which we are presumed to have control. Specifically, we consolidate three entities, all of which are classified as interests in joint ventures and partnerships. Noncontrolling interests represent the ownership interests that certain third parties hold in these entities that are consolidated in our financial results.

Equity

Our total equity at March 31, 2016 totaled $1.7 billion and included $63.0 million of noncontrolling interests, which represents the equity component held by third parties. Comparatively, our total equity at December 31, 2015 totaled $2.0 billion and included $82.9 million of noncontrolling interests.

Contributions and Distributions

We received contributions of certain assets, including cash, from our Parent and we made distributions of other assets, including cash, to our Parent in order to consolidate related assets among our Parent's subsidiaries and/or to facilitate the management and administration of such assets by us.

On October 26, 2015, our board of directors approved the receipt of a contribution from our Parent of certain general partner interests in an alternative credit fund. The estimated fair value of the contribution totaled approximately $251.7 million at the time of transfer and was completed on October 30, 2015.

Separately, on October 26, 2015, our board of directions also approved the distribution of cash to our Parent totaling $251.7 million, which was paid on October 30, 2015.

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Preferred Shareholders

The following table shows the distributions declared on our 14.95 million Series A LLC Preferred Shares outstanding:

Declaration Date		Record Date	Payment Date	Cash Distribution Declared per Preferred Share
Year ended December 31, 2016
	March 24, 2016	April 8, 2016	April 15, 2016	$0.460938
Year ended December 31, 2015
	March 26, 2015	April 8, 2015	April 15, 2015	$0.460938
	June 25, 2015	July 8, 2015	July 15, 2015	$0.460938
	September 24, 2015	October 8, 2015	October 15, 2015	$0.460938
	December 23, 2015	January 8, 2016	January 15, 2016	$0.460938

Common Shareholders

Our Parent owns 100 common shares, constituting all of our outstanding common shares. The following table shows the distributions declared on our common shares:

		Record and Declaration Date	Payment Date	Cash Distribution Declared per Common Share
Year ended December 31, 2016
	First Quarter ended March 31, 2016	May 9, 2016	May 10, 2016	$245,741
Year ended December 31, 2015
	First Quarter ended March 31, 2015	May 7, 2015	May 8, 2015	$342,908
	Second Quarter ended June 30, 2015	August 6, 2015	August 7, 2015	$521,120
	Third Quarter ended September 30, 2015	November 5, 2015	November 6, 2015	$375,155
	Fourth Quarter ended December 31, 2015	February 25, 2016	February 26, 2016	$383,135

Distribution amounts and the decision whether or not to declare and pay a distribution are determined by the executive committee, which was established by the board of directors. Distributions are determined based upon a review of various factors including current market conditions, our liquidity needs, legal and contractual restrictions on the payment of distributions, including those under the terms of our preferred shares which would have impacted our common shareholders, the amount of ordinary taxable income or loss earned by us, gains or losses recognized by us on the disposition of assets and our liquidity needs. For this purpose, we generally determined gains or losses based upon the price we paid for those assets.

Holders of Series A LLC Preferred Shares will not be allocated any gains or losses from any sale of our assets. Shareholders may have taxable income or tax liability attributable to our shares for a taxable year that is greater than our cash distributions for such taxable year. See “Non‑Cash ‘Phantom’ Taxable Income” below for further discussion about taxable income allocable to holders of our shares. We may not declare or pay distributions on our common shares unless all accrued distributions have been declared and paid, or set aside for payment, on our Series A LLC Preferred Shares.

LIQUIDITY AND CAPITAL RESOURCES

We actively manage our liquidity position with the objective of preserving our ability to fund our operations and fulfill our commitments on a timely and cost-effective basis. Although we believe our current sources of liquidity are adequate to preserve our ability to fund our operations and fulfill our commitments, we may evaluate opportunities to issue incremental capital. As of March 31, 2016, we had unrestricted cash and cash equivalents totaling $361.3 million.

The majority of our investments are held in Cash Flow CLOs. Accordingly, the majority of our cash flows have historically been received from our investments in the secured and subordinated notes of our Cash Flow CLOs. However, during the period in which a Cash Flow CLO is not in compliance with an over-collateralization test (‘‘OC Test’’), as outlined in its respective indenture, the cash flows we would generally expect to receive from our Cash Flow CLO holdings are paid to

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the secured note holders of the Cash Flow CLOs. As described in further detail below, as of March 31, 2016, all of our Cash Flow CLOs were in compliance with their respective coverage tests (specifically, their OC Tests and interest coverage (‘‘IC’’) tests) and made cash distributions to secured and/or subordinated note holders, including us.

CLO issuances typically increase when the spread between the assets and liabilities generates an attractive return to subordinated note holders. In the case where demand for loans leads to extremely tight spreads or if interest rates for the liabilities increases, the return to subordinated note holders will be less attractive, and the issuance of CLOs will generally decline. Since April 30, 2014, the date we became a subsidiary of KKR & Co., we have called five CLOs and as a result, the amount of invested capital in our portfolio of CLOs has decreased.

The CLOs that we issued prior to 2012 (“legacy CLOs”) were larger in total transaction size relative to those that were issued subsequently. As a result, our interests in the subordinated notes of legacy CLOs were significantly greater compared to our interests in the subordinated notes of those CLOs issued since 2012. Therefore, as our legacy CLOs are called and the assets held within the CLOs are sold to repay the CLO note holders, including us as a subordinated note holder, our capital invested in our CLO portfolio will decline. Unless we change our existing practice, we expect the size of our CLO portfolio to continue to decrease as well as associated interest income and interest expense, as a result of the foregoing, if not offset by new issuances or other opportunities of comparable size and/or amount. Based on the above factors combined with alternative investment opportunities, we may selectively deploy capital to other assets outside of CLOs and credit.

Sources of Funds

Cash Flow CLO Transactions

In accordance with GAAP, we consolidate each of our CLO subsidiaries, or Cash Flow CLOs, as we have the power to direct the activities of these VIEs, as well as the obligation to absorb losses of the VIEs or the right to receive benefits of the VIEs that could potentially be significant to the VIEs. We utilize CLOs to fund our investments in corporate loans and corporate debt securities.

On December 16, 2015, we closed CLO 13, a $412.0 million secured financing transaction maturing on January 16, 2028. We issued $370.0 million par amount of senior secured notes to unaffiliated investors, $350.0 million of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.19% and $20.0 million of which was fixed rate with a weighted-average coupon of 3.83%. The CLO also issued $4.0 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 13 collateralize the CLO 13 debt, and as a result, those investments are not available to us, our creditors or shareholders.  

During June 2015, we issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 million. Subsequently, in July 2015, we issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million.

On May 7, 2015, we closed CLO 11, a $564.5 million secured financing transaction maturing on April 15, 2027. We issued $507.8 million par amount of senior secured notes to unaffiliated investors, all of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.06%. The CLO also issued $28.3 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 11 collateralize the CLO 11 debt, and as a result, those investments are not available to us, our creditors or shareholders.

The indentures governing our Cash Flow CLOs include numerous compliance tests, the majority of which relate to the CLO’s portfolio.

In the case of our Cash Flow CLOs, in the event that a portfolio profile test is not met, the indenture places restrictions on the ability of the CLO’s manager to reinvest available principal proceeds generated by the collateral in the CLOs until the specific test has been cured. In addition to the portfolio profile tests, the indentures for these CLOs include OC Tests which set the ratio of the collateral value of the assets in the CLO to the tranches of debt for which the test is being measured, as well as interest coverage tests. For purposes of the calculation, collateral value is the par value of the assets unless an asset is in default, is a discounted obligation, or is a CCC-rated asset in excess of the percentage of CCC-rated asset limit specified for each CLO.

If an asset is in default, the indenture for each CLO transaction defines the value used to determine the collateral value, which value is the lower of the market value of the asset or the recovery value proscribed for the asset based on its type and rating by Standard & Poor’s or Moody’s.

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A discount obligation is an asset with a purchase price of less than a particular percentage of par. The discount obligation amounts are specified in each CLO and are generally set at a purchase price of less than 80% of par for corporate loans and 75% of par for corporate debt securities.

The indenture for each CLO specifies a CCC-threshold for the percentage of total assets in the CLO that can be rated CCC. All assets in excess of the CCC threshold specified for the respective CLO are also included in the OC Tests at market value and not par.

Defaults of assets in CLOs, ratings downgrade of assets in CLOs to CCC, price declines of CCC assets in excess of the proscribed CCC threshold amount, and price declines in assets classified as discount obligations may reduce the over-collateralization ratio such that a CLO is not in compliance. If a CLO is not in compliance with an OC Test, cash flows normally payable to the holders of junior classes of notes will be used by the CLO to amortize the most senior class of notes until such point as the OC Test is brought back into compliance. While being out of compliance with an OC Test would

not impact our investment portfolio or results of operations, it would impact our unrestricted cash flows available for operations, new investments and cash distributions. As of March 31, 2016, all of our CLOs were in compliance with their respective OC Tests.

An affiliate of our Manager has entered into separate management agreements with our Cash Flow CLOs and is entitled to receive fees for the services performed as collateral manager. The indentures governing the CLO transactions stipulate the reinvestment period during which the collateral manager can generally sell or buy assets at its discretion and can reinvest principal proceeds into new assets. CLO 2007-1 and CLO 2007-A were no longer in their reinvestment periods as of March 31, 2016. As a result, principal proceeds from the assets held in each of these transactions are generally used to amortize the outstanding balance of senior notes outstanding. CLO 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11 and CLO 13 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019 and January 2020, respectively.

Pursuant to the terms of the indentures governing our CLO transactions, we have the ability to call our CLO transactions after the end of their respective non-call periods. During November 2015, we called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. During July 2015, we called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, we called CLO 2006-1 and repaid aggregate senior and mezzanine notes totaling $181.8 million par amount. In connection with the repayment of CLO 2006-1 notes, the related pay-fixed, receive-variable interest rate swap to hedge interest rate risk associated with CLO 2006-1, with a contractual notional amount of $84.0 million, was terminated.

During the three months ended March 31, 2016, $112.2 million of original CLO 2007-1 senior notes were repaid. During the three months ended March 31, 2015, $169.8 million of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 senior notes were repaid. CLO 2011-1 does not have a reinvestment period and all principal proceeds from holdings in CLO 2011-1 are used to amortize the transaction. During March 2016, we called CLO 2011-1 and repaid all senior notes totaling $249.3 million par amount. During the three months ended March 31, 2015, $1.5 million of original CLO 2011-1 senior notes were repaid.

CLO Warehouse Facility

On July 22, 2015, CLO 13 entered into a $350.0 million CLO warehouse facility ("CLO 13 Warehouse"), which matured upon the closing of CLO 13 on December 16, 2015. The CLO 13 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing were used to repay the CLO 13 Warehouse in full. Debt issued under the CLO 13 Warehouse was non-recourse to us beyond the assets of CLO 13 and bore interest at rates ranging from LIBOR plus 1.50% to 2.25%. Upon the closing of CLO 13 on December 16, 2015, the aggregate amount outstanding under the CLO 13 Warehouse was repaid.

On March 2, 2015, CLO 11 entered into a $570.0 million CLO warehouse facility ("CLO 11 Warehouse"), which matured upon the closing of CLO 11 on May 7, 2015. The CLO 11 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing were used to repay the CLO 11 Warehouse in full. Debt issued under the CLO 11 Warehouse was non-recourse to us beyond the assets of CLO 11 and bore interest at rates ranging from LIBOR plus 1.25% to 1.75%. Upon the closing of CLO 11 on May 7, 2015, the aggregate amount outstanding under the CLO 11 Warehouse was repaid.

Off-Balance Sheet Arrangements

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We participate in certain contingent financing arrangements, whereby we are committed to provide funding of up to a specific predetermined amount at the discretion of the borrower or have entered into an agreement to acquire interests in certain assets. As of March 31, 2016 and December 31, 2015, we had unfunded financing commitments for corporate loans totaling $7.4 million and $8.6 million, respectively.

We participate in joint ventures and partnerships alongside KKR and its affiliates through which we contribute capital for assets, including development projects related to our interests in joint ventures and partnerships that hold commercial real estate and natural resources investments, as well as specialty lending focused businesses. As of March 31, 2016, we estimated these future contributions to total approximately $121.0 million, whereby approximately 68% was related to our credit segment and 32% was related to our other segment. As of December 31, 2015, we estimated these future contributions to total approximately $163.0 million, whereby approximately 44% was related to our credit segment, 34% was related to our natural resources segment and 22% was related to our other segment.

As of March 31, 2016 and December 31, 2015, we had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.4 billion and $1.6 billion, respectively. Under non-recourse debt, the lender generally does not have recourse against any other assets owned by the borrower or any related parties of the borrower, except for certain specified exceptions listed in the respective loan documents including customary ‘‘bad boy’’ acts and environmental losses. In connection with certain of these investments, joint and several non-recourse carve-out guarantees and environmental indemnities were provided, pursuant to which KFN guarantees losses or the full amount of the applicable loan in the event of specified bad acts or environmental matters. In addition, completion guarantees were provided for certain properties to complete all or portions of development projects, and partial payment guarantees were provided for certain investments.

PARTNERSHIP TAX MATTERS

Non-Cash “Phantom” Taxable Income

We intend to continue to operate so that we qualify, for United States federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Holders of our Series A LLC Preferred Shares are subject to United States federal income taxation and generally other taxes, such as state, local and foreign income taxes, on their allocable share of our gross ordinary income, regardless of whether or when they receive cash distributions. We generally allocate our gross ordinary income using a monthly convention, which means that we determine our gross ordinary income for the taxable year to be allocated to our Series A LLC Preferred Shares and then prorate that amount on a monthly basis. Our Series A LLC Preferred Shares will receive an allocation of our gross ordinary income. If the amount of cash distributed to our Series A LLC Preferred Shares in any year exceeds our gross ordinary income for such year, additional gross ordinary income will be allocated to the Series A LLC Preferred Shares in future years until such excess is eliminated. Consequently, in some taxable years, holders of our Series A LLC Preferred Shares may recognize taxable income in excess of our cash distributions. Furthermore, even if we did not pay cash distributions with respect to a taxable year, holders of our Series A LLC Preferred Shares may still have a tax liability attributable to their allocation of gross ordinary income from us during such year in the event that cash distributed in a prior year exceeded our gross ordinary income in such year.

Qualifying Income Exception

We intend to continue to operate so that we qualify, for United States federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. In general, if a partnership is ‘‘publicly traded’’ (as defined in the Code), it will be treated as a corporation for United States federal income tax purposes. A publicly traded partnership will be taxed as a partnership, however, and not as a corporation, for United States federal income tax purposes so long as it is not required to register under the Investment Company Act and at least 90% of its gross income for each taxable year constitutes ‘‘qualifying income’’ within the meaning of Section 7704(d) of the Code. We refer to this exception as the ‘‘qualifying income exception.’’ Qualifying income generally includes rents, dividends, interest (to the extent such interest is neither derived from the ‘‘conduct of a financial or insurance business’’ nor based, directly or indirectly, upon ‘‘income or profits’’ of any person), income and gains derived from certain activities related to minerals and natural resources, and capital gains from the sale or other disposition of stocks, bonds and real property. Qualifying income also includes other income derived from the business of investing in, among other things, stocks and securities.

If we fail to satisfy the ‘‘qualifying income exception’’ described above, our gross ordinary income would not pass through to holders of our Series A LLC Preferred Shares and such holders would be treated for United States federal (and certain state and local) income tax purposes as shareholders in a corporation. In such case, we would be required to pay income tax at regular corporate rates on all of our net income. In addition, we would likely be liable for state and local income and/or

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franchise taxes on all of our income. Distributions to holders of our Series A LLC Preferred Shares would constitute ordinary dividend income taxable to such holders to the extent of our earnings and profits, and these distributions would not be deductible by us. If we were taxable as a corporation, it could result in a material reduction in cash flow and after-tax return for holders of our Series A LLC Preferred Shares and thus could result in a substantial reduction in the value of our Series A LLC Preferred Shares and any other securities we may issue.

Tax Consequences of Investments in Natural Resources and Real Estate

As referenced above, we have made certain investments in natural resources and real estate. It is likely that the income from natural resources investments will be treated as effectively connected with the conduct of a United States trade or business with respect to holders of our Series A LLC Preferred Shares that are not ‘‘United States persons’’ within the meaning of Section 7701(a)(30) of the Code. Furthermore, any notional principal contracts that we enter into, if any, in connection with investments in natural resources likely would generate income that would be treated as effectively connected with the conduct of a United States trade or business. Further, our investments in real estate through pass-through entities may generate operating income that is treated as effectively connected with the conduct of a United States trade or business.

To the extent our income is treated as effectively connected income, a holder who is a non-United States person generally would be required to (i) file a United States federal income tax return for such year reporting its allocable share, if any, of our gross ordinary income effectively connected with such trade or business and (ii) pay United States federal income tax at regular United States tax rates on any such income. Moreover, if such a holder is a corporation, it might be subject to a United States branch profits tax on its allocable share of our effectively connected income. In addition, distributions to such a holder would be subject to withholding at the highest applicable federal income tax rate to the extent of the holder’s allocable share of our effectively connected income. Any amount so withheld would be creditable against such holder’s United States federal income tax liability, and such holder could claim a refund to the extent that the amount withheld exceeded such holder’s United States federal income tax liability for the taxable year.

If we are engaged in a United States trade or business, a portion of any gain recognized by an investor who is a non-United States person on the sale or exchange of its Series A LLC Preferred Shares may be treated for United States federal income tax purposes as effectively connected income, and hence such holder may be subject to United States federal income tax on the sale or exchange. Moreover, if the fair market value of our investments in United States real property interests, which include our investments in natural resources, real estate and REIT subsidiaries that invest primarily in real estate, represent more than 10% of the total fair market value of our assets, our Series A LLC Preferred Shares could be treated as United States real property interests. In such case, gain recognized by an investor who is a non-United States person on the sale or exchange of its Series A LLC Preferred Shares would be treated for United States federal income tax purposes as effectively connected income (unless our Series A LLC Preferred Shares are regularly traded on a securities market and the non-United States person owned 5% or less of the shares of our Series A LLC Preferred Shares during the applicable compliance period). We believe that the fair market value of our investments in United States real property interests represented more than 10% of the total fair market value of our assets during the first quarter of 2016. As a result, although the Treasury regulations are not entirely clear, the Series A LLC Preferred Shares (unless our Series A LLC Preferred Shares are regularly traded on a securities market and the non-United States person owned 5% or less of the shares of our Series A LLC Preferred Shares during the applicable compliance period) could be treated as United States real property interests. Moreover, it is possible that the Internal Revenue Service ("IRS") could take the position that such shares would be treated as United States real property interests for the five years following the last date on which more than 10% of the total fair market value of our assets consisted of United States real property interests. If gain from the sale of our Series A LLC Preferred Shares is treated as effectively connected income, the holder may be subject to United States federal income and/or withholding tax on the sale or exchange.

In addition, all holders of our Series A LLC Preferred Shares will likely have state tax filing obligations in jurisdictions in which we have made investments in natural resources or real estate (other than through a REIT subsidiary). As a result, holders of our Series A LLC Preferred Shares will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, holders may be subject to penalties if they fail to comply with those requirements. Our current investments may cause our holders to have state tax filing obligations in the following states: Florida, Georgia, Illinois, Kansas, Louisiana, Maryland, Mississippi, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Virginia and West Virginia. We may make investments in other states or non-U.S. jurisdictions in the future.

For holders of our Series A LLC Preferred Shares that are regulated investment companies, to the extent that our income from our investments in natural resources and real estate exceeds 10% of our gross income, then we will likely be treated as a ‘‘qualified publicly traded partnership’’ for purposes of the income and asset diversification tests that apply to regulated investment companies. Although the calculation of our gross income for purposes of this test is not entirely clear, it is

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possible we may be treated as a ‘‘qualified publicly traded partnership’’ for our 2016 tax year. However, no assurance can be provided that we will or will not be treated as a ‘‘qualified publicly traded partnership’’ in 2016 or any future year.

OUR INVESTMENT COMPANY ACT STATUS

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is, holds itself out as being, or proposes to be, primarily engaged in the business of investing, reinvesting or trading in securities and Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” (within the meaning of the Investment Company Act) having a value exceeding 40% of the value of the issuer’s total assets (exclusive of United States government securities and cash items) on an unconsolidated basis (the “40% test”). Excluded from the term “investment securities” are, among others, securities issued by majority‑owned subsidiaries unless the subsidiary is an investment company or relies on the exceptions from the definition of an investment company provided by Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act (a “fund”).

We are organized as a holding company. We conduct our operations primarily through our majority‑owned subsidiaries. Each of our subsidiaries is either outside of the definition of an investment company in Sections 3(a)(1)(A) and 3(a)(1)(C), described above, or excepted from the definition of an investment company under the Investment Company Act. We believe that we are not, and that we do not propose to be, primarily engaged in the business of investing, reinvesting or trading in securities and we do not believe that we have held ourselves out as such. We intend to continue to conduct our operations so that we are not required to register as an investment company under the Investment Company Act.

 We monitor our holdings regularly to confirm our continued compliance with the 40% test. In calculating our position under the 40% test, we are responsible for determining whether any of our subsidiaries is majority‑owned. We treat as majority‑owned subsidiaries for purposes of the 40% test entities, including those that issue CLOs, in which we own at least 50% of the outstanding voting securities or that are otherwise structured consistent with applicable SEC staff guidance. Some of our majority‑owned subsidiaries may rely solely on the exceptions from the definition of “investment company” found in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act. In order for us to satisfy the 40% test, our ownership interests in those subsidiaries or any of our subsidiaries that are not majority‑owned for purposes of the Investment Company Act, together with any other “investment securities” that we may own, may not have a combined value in excess of 40% of the value of our total assets on an unconsolidated basis and exclusive of United States government securities and cash items. However, many of our majority‑owned subsidiaries either fall outside of the general definitions of an investment company or rely on exceptions provided by provisions of, and rules and regulations promulgated under, the Investment Company Act (other than Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act) and, therefore, the securities of those subsidiaries that we own and hold are not investment securities for purposes of the Investment Company Act. In order to conform to these exceptions, these subsidiaries are limited with respect to the assets in which each of them can invest and/or the types of securities each of them may issue. We must, therefore, monitor each subsidiary’s compliance with its applicable exception and our freedom of action relating to such a subsidiary, and that of the subsidiary itself, may be limited as a result. For example, our subsidiaries that issue CLOs generally rely on the exception provided by Rule 3a‑7 under the Investment Company Act, while our real estate subsidiaries, including those that are taxed as REITs for United States federal income tax purposes, generally rely on the exception provided by Section 3(c)(5)(C) of the Investment Company Act. Each of these exceptions requires, among other things that the subsidiary (i) not issue redeemable securities and (ii) engage in the business of holding certain types of assets, consistent with the terms of the exception. Similarly, any subsidiaries engaged in the ownership of oil and gas assets may, depending on the nature of the assets, be outside the definition of an investment company or rely on exceptions provided by Section 3(c)(5)(C) or Section 3(c)(9) of the Investment Company Act. While Section 3(c)(9) of the Investment Company Act does not limit the nature of the securities issued, it does impose business engagement requirements that limit the types of assets that may be held.

We do not treat our interests in majority‑owned subsidiaries that are outside of the general definition of an investment company or that rely on Section 3(c)(5)(A), (B), (C) or Section 3(c)(9) of, or Rule 3a‑7 under, the Investment Company Act as investment securities when calculating our 40% test.

We sometimes refer to our subsidiaries that rely on Rule 3a‑7 under the Investment Company Act as “CLO subsidiaries.” Rule 3a‑7 under the Investment Company Act is available to certain structured financing vehicles that are engaged in the business of holding financial assets that, by their terms, convert into cash within a finite time period and that issue fixed income securities entitling holders to receive payments that depend primarily on the cash flows from these assets, provided that, among other things, the structured finance vehicle does not engage in certain portfolio management practices resembling those employed by management investment companies (e.g., mutual funds). Accordingly, each of these CLO subsidiaries is subject to an indenture (or similar transaction documents) that contains specific guidelines and restrictions

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limiting the discretion of the CLO subsidiary and its collateral manager. In particular, these guidelines and restrictions prohibit the CLO subsidiary from acquiring and disposing of assets primarily for the purpose of recognizing gains or decreasing losses resulting from market value changes. Thus, a CLO subsidiary cannot acquire or dispose of assets primarily to enhance returns to the owner of the equity in the CLO subsidiary; however, subject to this limitation, sales and purchases of assets may be made so long as doing so does not violate guidelines contained in the CLO subsidiary’s relevant transaction documents. A CLO subsidiary generally can, for example, sell an asset if the collateral manager believes that its credit quality has declined since its acquisition or that the credit profile of the obligor will deteriorate and the proceeds of permitted dispositions may be reinvested in additional collateral, subject to fulfilling the requirements set forth in Rule 3a‑7 under the Investment Company Act and the CLO subsidiary’s relevant transaction documents. As a result of these restrictions, our CLO subsidiaries may suffer losses on their assets and we may suffer losses on our investments in those CLO subsidiaries.

We sometimes refer to our subsidiaries that rely on Section 3(c)(5)(C) of the Investment Company Act, as our “real estate subsidiaries.” Section 3(c)(5)(C) of the Investment Company Act is available to companies that are primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. While the SEC has not promulgated rules to address precisely what is required for a company to be considered to be “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate,” the SEC’s Division of Investment Management, or the “Division,” has taken the position, through a series of no‑action and interpretive letters, that a company may rely on Section 3(c)(5)(C) of the Investment Company Act if, among other things, at least 55% of the company’s assets consist of mortgage loans, other assets that are considered the functional equivalent of mortgage loans and certain other interests in real property (collectively, “qualifying real estate assets”), and at least 25% of the company’s assets consist of real estate‑ related assets (reduced by the excess of the company’s qualifying real estate assets over the required 55%), leaving no more than 20% of the company’s assets to be invested in miscellaneous assets. The Division has also provided guidance as to the types of assets that can be considered qualifying real estate assets. Because the Division’s interpretive letters are not binding except as they relate to the companies to whom they are addressed, if the Division were to change its position as to, among other things, what assets might constitute qualifying real estate assets our REIT subsidiaries might be required to change its investment strategy to comply with the changed position. We cannot predict whether such a change would be adverse.

Based on current guidance, our real estate subsidiaries classify investments in mortgage loans as qualifying real estate assets, as long as the loans are “fully secured” by an interest in real estate on which we retain the unilateral right to foreclose. That is, if the loan‑to‑value ratio of the loan is equal to or less than 100%, then the mortgage loan is considered to be a qualifying real estate asset. Mortgage loans with loan‑to‑value ratios in excess of 100% are considered to be only real estate‑related assets. Our real estate subsidiaries consider agency whole pool certificates to be qualifying real estate assets. Examples of agencies that issue whole pool certificates are the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. An agency whole pool certificate is a certificate issued or guaranteed as to principal and interest by the United States government or by a federally chartered entity, which represents the entire beneficial interest in the underlying pool of mortgage loans. By contrast, an agency certificate that represents less than the entire beneficial interest in the underlying mortgage loans is not considered to be a qualifying real estate asset, but is considered by our real estate subsidiaries to be a real estate‑related asset.

Most non‑agency mortgage‑backed securities do not constitute qualifying real estate assets because they represent less than the entire beneficial interest in the related pool of mortgage loans; however, based on Division guidance, where our real estate subsidiaries’ investment in non‑agency mortgage‑backed securities is the “functional equivalent” of owning the underlying mortgage loans, our real estate subsidiaries may treat those securities as qualifying real estate assets. Moreover, investments in mortgage‑ backed securities that do not constitute qualifying real estate assets are classified by our real estate subsidiaries as real estate‑related assets. Therefore, based upon the specific terms and circumstances related to each non‑agency mortgage‑backed security that our real estate subsidiaries own, our real estate subsidiaries will make a determination of whether that security should be classified as a qualifying real estate asset or as a real estate‑ related asset; and there may be instances where a security is recharacterized from being a qualifying real estate asset to a real estate‑related asset, or conversely, from being a real estate‑related asset to being a qualifying real estate asset based upon the acquisition or disposition or redemption of related classes of securities from the same securitization trust. If our real estate subsidiaries acquire securities that, collectively, receive all of the principal and interest paid on the related pool of underlying mortgage loans (less fees, such as servicing and trustee fees, and expenses of the securitization), and that subsidiary has unilateral foreclosure rights with respect to those mortgage loans, then our real estate subsidiaries will consider those securities, collectively, to be qualifying real estate assets. If another entity acquires any of the securities that are expected to receive cash flow from the underlying mortgage loans, then our real estate subsidiaries will consider whether it has appropriate foreclosure rights with respect to the underlying loans and whether its investment is a first loss position in deciding whether these securities should be classified as qualifying real estate assets. If our real estate subsidiaries own more than one subordinate class, then, to determine the classification of subordinate classes other than the first loss class, our real estate subsidiaries will consider whether such classes are contiguous with the first loss class (with no other classes absorbing losses after the first loss class and

54

before any other subordinate classes that our real estate subsidiaries own), whether our real estate subsidiaries own the entire amount of each such class and whether our real estate subsidiaries would continue to have appropriate foreclosure rights in connection with each such class if the more subordinate classes were no longer outstanding. If the answers to any of these questions is no, then our real estate subsidiaries would expect not to classify that particular class, or classes senior to that class, as qualifying real estate assets.

We have made or may make oil and gas and other mineral investments that are held through one or more subsidiaries and would refer to those subsidiaries as our “oil and gas subsidiaries”. Depending upon the nature of the oil and gas assets held by an oil and gas subsidiary, such oil and gas subsidiary may rely on Section 3(c)(5)(C) or Section 3(c)(9) of the Investment Company Act or may fall outside of the general definition of an investment company. An oil and gas subsidiary that does not engage primarily, propose to engage primarily or hold itself out as engaging primarily in the business of investing, reinvesting or trading in securities will be outside of the general definition of an investment company provided that it passes the 40% test. This may be the case where an oil and gas subsidiary holds a sufficient amount of oil and gas assets constituting real estate interests together with other assets that are not investment securities such as equipment. Oil and gas subsidiaries that hold oil and gas assets that constitute real property interests, but are unable to pass the 40% test, may rely on Section 3(c)(5)(C), subject to the requirements and restrictions described above. Alternately, an oil and gas subsidiary may rely on Section 3(c)(9) of the Investment Company Act if substantially all of its business consists of owning or holding oil, gas or other mineral royalties or leases, certain fractional interests, or certificates of interest or participations in or investment contracts relating to such royalties, leases or fractional interests. These various restrictions imposed on our oil and gas subsidiaries by the Investment Company Act may have the effect of limiting our freedom of action with respect to oil and gas assets (or other assets) that may be held or acquired by such subsidiary or the manner in which we may deal in such assets.

 In addition, we anticipate that one or more of our subsidiaries, will qualify for an exception from registration as an investment company under the 1940 Act pursuant to either Section 3(c)(5)(A) of the 1940 Act, which is available for entities primarily engaged in the business of purchasing or otherwise acquiring notes, drafts, acceptances, open accounts receivable, and other obligations representing part or all of the sales price of merchandise, insurance, and services, and/or Section 3(c)(5)(B) of the 1940 Act, which is available for entities primarily engaged in the business of making loans to manufacturers, wholesalers, and retailers of, and to prospective purchasers of, specified merchandise, insurance, and services and, in each case, the entities are not engaged in the business of issuing redeemable securities, face‑amount certificates of the installment type or periodic payment plan certificates. In order to rely on Sections 3(c)(5)(A) and (B) and be deemed “primarily engaged” in the applicable businesses, at least 55% of an issuer’s assets must represent investments in eligible loans and receivables under those sections. We intend to treat as qualifying assets for purposes of these exceptions the purchases of loans and leases representing part or all of the sales price of equipment and loans where the loan proceeds are specifically provided to finance equipment, services and structural improvements to properties and other facilities and maritime and infrastructure projects or improvements. We intend to rely on guidance published by the SEC or its staff in determining which assets are deemed qualifying assets.

As noted above, if the combined values of the securities issued to us by any non‑majority‑owned subsidiaries and our subsidiaries that must rely on Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act, together with any other investment securities we may own, exceed 40% of the value of our total assets (exclusive of United States government securities and cash items) on an unconsolidated basis, we may be deemed to be an investment company. If we fail to maintain an exception, exemption or other exclusion from the Investment Company Act, we could, among other things, be required either (i) to change substantially the manner in which we conduct our operations to avoid being subject to the Investment Company Act or (ii) to register as an investment company. Either of these would likely have a material adverse effect on us, the type of investments we make, our ability to service our indebtedness and to make distributions on our shares, and on the market price of our shares and any other securities we may issue. If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with certain affiliated persons (within the meaning of the Investment Company Act), portfolio composition (including restrictions with respect to diversification and industry concentration) and other matters. Additionally, our Manager would have the right to terminate our Management Agreement effective the date immediately prior to our becoming an investment company. Moreover, if we were required to register as an investment company, we would no longer be eligible to be treated as a partnership for United States federal income tax purposes. Instead, we would be classified as a corporation for tax purposes and would be able to avoid corporate taxation only to the extent that we were able to elect and qualify as a regulated investment company (“RIC”) under applicable tax rules. Because our eligibility for RIC status would depend on our assets and sources of income at the time that we were required to register as an investment company, there can be no assurance that we would be able to qualify as a RIC. If we were to lose partnership status and fail to qualify as a RIC, we would be taxed as a regular corporation. See “Partnership Tax Matters-Qualifying Income Exception”.

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We have not requested approval or guidance from the SEC or its staff with respect to our Investment Company Act determinations, including, in particular: our treatment of any subsidiary as majority‑owned; the compliance of any subsidiary with Section 3(c)(5)(A), (B), (C) or Section 3(c)(9) of, or Rule 3a‑7 under, the Investment Company Act, including any subsidiary’s determinations with respect to the consistency of its assets or operations with the requirements thereof; or whether our interests in one or more subsidiaries constitute investment securities for purposes of the 40% test. If the SEC were to disagree with our treatment of one or more subsidiaries as being majority‑ owned, excepted from the Investment Company Act pursuant to Rule 3a‑7, Section 3(c)(5)(A), (B), (C), Section 3(c)(9) or any other exception, with our determination that one or more of our other holdings do not constitute investment securities for purposes of the 40% test, or with our determinations as to the nature of the business in which we engage or the manner in which we hold ourselves out, we and/or one or more of our subsidiaries would need to adjust our operating strategies or assets in order for us to continue to pass the 40% test or register as an investment company, either of which could have a material adverse effect on us. Moreover, we may be required to adjust our operating strategy and holdings, or to effect sales of our assets in a manner that, or at a time or price at which, we would not otherwise choose, if there are changes in the laws or rules governing our Investment Company Act status or that of our subsidiaries, or if the SEC or its staff provides more specific or different guidance regarding the application of relevant provisions of, and rules under, the Investment Company Act. The SEC published on August 31, 2011 an advance notice of proposed rulemaking to potentially amend the conditions for reliance on Rule 3a‑7 and the treatment of asset‑backed issuers that rely on Rule 3a‑7 under the Investment Company Act (the “3a‑7 Release”).

The SEC, in the 3a‑7 Release, requested public comment on the nature and operation of issuers that rely on Rule 3a‑7 and indicated various steps it may consider taking in connection with Rule 3a‑7, although it did not formally propose any changes to the rule. Among the issues for which the SEC has requested comment in the 3a‑7 Release is whether Rule 3a‑7 should be modified so that parent companies of subsidiaries that rely on Rule 3a‑7 should treat their interests in such subsidiaries as investment securities for purposes of the 40% test. The SEC also published on August 31, 2011 a concept release seeking information about the nature of entities that invest in mortgages and mortgage‑related pools and public comment on how the SEC staff’s interpretive positions in connection with Section 3(c)(5)(C) affect these entities, although it did not propose any new interpretive positions or changes to existing interpretive positions in connection with Section 3(c)(5)(C). Any guidance or action from the SEC or its staff, including changes that the SEC may ultimately propose and adopt to the way Rule 3a‑7 applies to entities or new or modified interpretive positions related to Section 3(c)(5)(C), could further inhibit our ability, or the ability of a subsidiary, to pursue our current or future operating strategies, which could have a material adverse effect on us.

If the SEC or a court of competent jurisdiction were to find that we were required, but failed, to register as an investment company in violation of the Investment Company Act, we may have to cease business activities, we would breach representations and warranties and/or be in default as to certain of our contracts and obligations, civil or criminal actions could be brought against us, our contracts would be unenforceable unless a court were to require enforcement and a court could appoint a receiver to take control of us and liquidate our business, any or all of which would have a material adverse effect on our business.

OTHER REGULATORY ITEMS

In August 2012, the U.S. Commodities Futures Trading Commission (“CFTC”) adopted a series of rules to establish a new regulatory framework for swaps that may cause certain users of swaps to be deemed commodity pools or to register as commodity pool operators. In October 2012, the CFTC delayed the implementation of the relevant rules until December 31, 2012. Although we believe that KKR Financial Holdings LLC is not a commodity pool, we have requested confirmation of this conclusion from the CFTC. To the extent that any of our subsidiaries may be deemed to be a commodity pool, we believe they should satisfy certain exemptions to these rules available to privately offered entities. However, if the CFTC were to take the position that KKR Financial Holdings LLC is a commodity pool, our directors may be required to register as commodity pool operators. Such registration would add to our operating and compliance costs and could affect the manner in which we use swaps as part of our operating and hedging strategies.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risks

From time to time, we may make investments that are denominated in a foreign currency through which we may be subject to foreign currency exchange risk. As of March 31, 2016, $175.5 million estimated fair value, or 3.5%, of our corporate debt portfolio was denominated in foreign currencies, of which approximately 78.7% was denominated in Euros. In addition, as of March 31, 2016, $160.3 million estimated fair value, or 17.2%, of our interests in joint ventures and partnerships and equity

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investments had foreign exposure, including those denominated in foreign currencies, of which approximately 30.7% was denominated in Euros and 27.5% was denominated in the British pound sterling.

Based on these investments, we are exposed to movements in foreign currency exchange rates which may impact earnings if the United States dollar significantly strengthens or weakens against foreign currencies. Accordingly, we may use derivative instruments from time to time, including foreign exchange options and forward contracts, to manage the impact of fluctuations in foreign currency exchange rates. As of March 31, 2016, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $383.2 million, the majority of which related to certain of our foreign currency denominated assets. Refer to “Derivative Risk” below for further discussion on our derivatives.

Credit Spread Exposure

Our investments are subject to spread risk. Our investments in floating rate loans and securities are valued based on a market credit spread over LIBOR and for which the value is affected by changes in the market credit spreads over LIBOR. Our investments in fixed rate loans and securities are valued based on a market credit spread over the rate payable on fixed rate United States Treasuries of like maturity. Increased credit spreads, or credit spread widening, will have an adverse impact on the value of our investments while decreased credit spreads, or credit spread tightening, will have a positive impact on the value of our investments. However, tightening credit spreads will increase the likelihood that certain holdings will be refinanced at lower rates that would negatively impact our earnings.

Interest Rate Risk

Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in repricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows and the prepayment rates experienced on our investments that have embedded borrower optionality. The objective of interest rate risk management is to achieve earnings, preserve capital and achieve liquidity by minimizing the negative impacts of changing interest rates, asset and liability mix and prepayment activity.

We are exposed to basis risk between our investments and our borrowings. Interest rates on our floating rate investments and our variable rate borrowings do not reset on the same day or with the same frequency and, as a result, we are exposed to basis risk with respect to index reset frequency. Our floating rate investments may reprice on indices that are different than the indices that are used to price our variable rate borrowings and, as a result, we are exposed to basis risk with respect to repricing index. The basis risks noted above, in addition to other forms of basis risk that exist between our investments and borrowings, could have a material adverse impact on our future net interest margins.

Interest rate risk impacts our interest income, interest expense, prepayments, as well as the fair value of our investments, interest rate derivatives and liabilities. We generally fund our variable rate investments with variable rate borrowings with similar interest rate reset frequencies. Based on our variable rate investments and related variable rate borrowings as of March 31, 2016, we estimated that increases in interest rates would impact net income by approximately (amounts in thousands): 

Change in interest rates	Annual Impact
Increase of 1.0%	$	(1,759	)
Increase of 2.0%	$	12,130
Increase of 3.0%	$	26,020
Increase of 4.0%	$	39,909
Increase of 5.0%	$	53,798

As of March 31, 2016, approximately 82.4% of our floating rate corporate debt portfolio had LIBOR floors with a weighted average floor of 0.99%. Given these LIBOR floors, increases in short-term interest rates above a certain point beginning between 1% and 2% will result in a greater positive impact as yields on interest-earning assets are expected to rise faster than the cost of funding sources. The simulation above assumes that the asset and liability structure of the condensed consolidated balance sheets would not be changed as a result of the simulated changes in interest rates.

We manage our interest rate risk using various techniques ranging from the purchase of floating rate investments to the use of interest rate derivatives. The use of interest rate derivatives is a component of our interest risk management strategy. As of March 31, 2016, we had interest rate swaps with a contractual notional amount of $281.3 million, of which $156.3 million was related to a pay‑fixed, receive‑variable interest rate swap, used to hedge a portion of the interest rate risk associated with

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one of our CLOs. The remaining $125.0 million of interest rate swaps were used to hedge a portion of the interest rate risk associated with our floating rate junior subordinated notes. The objective of the interest rate swaps is to eliminate the variability of cash flows in the interest payments of these notes due to fluctuations in the indexed rate. Refer to “Derivative Risk” below for further discussion on our derivatives.

Derivative Risk

Derivative transactions including engaging in swaps and foreign currency transactions are subject to certain risks. There is no guarantee that a company can eliminate its exposure under an outstanding swap agreement by entering into an offsetting swap agreement with the same or another party. Also, there is a possibility of default of the other party to the transaction or illiquidity of the derivative instrument. Furthermore, the ability to successfully use derivative transactions depends on the ability to predict market movements which cannot be guaranteed. As such, participation in derivative instruments may result in greater losses as we would have to sell or purchase an investment at inopportune times for prices other than current market prices or may force us to hold an asset we might otherwise have sold. In addition, as certain derivative instruments are unregulated, they are difficult to value and are therefore susceptible to liquidity and credit risks.

Collateral posting requirements are individually negotiated between counterparties and there is currently no regulatory requirement concerning the amount of collateral that a counterparty must post to secure its obligations under certain derivative instruments. Currently, there is no requirement that parties to a contract be informed in advance when a credit default swap is sold. As a result, investors may have difficulty identifying the party responsible for payment of their claims. If a counterparty’s credit becomes significantly impaired, multiple requests for collateral posting in a short period of time could increase the risk that we may not receive adequate collateral. Amounts paid by us as premiums and cash or other assets held in margin accounts with respect to derivative instruments are not available for investment purposes.

The following table summarizes the aggregate notional amount and estimated net fair value of our derivative instruments held (amounts in thousands):

	As of March 31, 2016
	Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	281,333		$	(53,229	)
Foreign exchange forward contracts and options	(383,238		)	19,332
Options	—			498
Total				$	(33,399	)

For our derivatives, our credit exposure is directly with our counterparties and continues until the maturity or termination of such contracts. The following table sets forth the estimated net fair values of our primary derivative investments by remaining contractual maturity as of March 31, 2016 (amounts in thousands):

	Less than 1 year			1 - 3 years		3 - 5 years			More than 5 years			Total
Free-Standing Derivatives:
Interest rate swaps	$	(1,557	)	$	—	$	(11,746	)	$	(39,926	)	$	(53,229	)
Foreign exchange forward contracts	4,734			9,114		5,484			—			19,332
Total	$	3,177		$	9,114	$	(6,262	)	$	(39,926	)	$	(33,897	)

Counterparty Risk

We have credit risks that are generally related to the counterparties with which we do business. If a counterparty becomes bankrupt, or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, we may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. These risks of non-performance may differ from risks associated with exchange-traded transactions which are typically backed by guarantees and have daily mark-to-market and settlement positions. Transactions entered into directly between parties do not benefit from such protections and thus, are subject to counterparty default. It may be the case where any cash or collateral we pledged to the counterparty may be unrecoverable and we may be forced to unwind our derivative

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agreements at a loss. We may obtain only a limited recovery or may obtain no recovery in such circumstances, thereby reducing liquidity and earnings.

Management Estimates

The preparation of our financial statements requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Significant estimates, assumptions and judgments are applied in situations including the valuation of certain investments. We revise our estimates when appropriate. However, actual results could materially differ from management’s estimates.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See discussion of quantitative and qualitative disclosures about market risk in “Quantitative and Qualitative Disclosures About Market Risk” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4.  CONTROLS AND PROCEDURES

The Company’s management evaluated, with the participation of the Company’s principal executive and principal financial officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of March 31, 2016. Based on their evaluation, the Company’s principal executive and principal financial officer concluded that the Company’s disclosure controls and procedures as of March 31, 2016 were designed and were functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2016, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The section entitled “Contingencies” appearing in Note 10 “Commitments and Contingencies” of our condensed consolidated financial statements included elsewhere in this report is incorporated herein by reference.

ITEM 1A. RISK FACTORS

For a discussion of our potential risks and uncertainties, see the information under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 29, 2016, which is accessible on the Securities and Exchange Commission’s website at www.sec.gov.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None. 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

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On May 5, 2016, the Company's board of directors adopted an amendment (“Amendment No. 5”) to the Company’s Amended and Restated Operating Agreement, which renames one defined term. Amendment No. 5 is filed as Exhibit 3.1 to this report.

KKR & Co. periodically issues press releases, hosts calls and webcasts, publishes presentations on its website, and files reports with the Securities and Exchange Commission, including, for example, earnings releases containing financial results for its completed fiscal quarters, related conference calls and quarterly reports on Form 10‑Q or annual reports on Form 10‑K. Such presentations, reports, calls and webcasts may contain information regarding KFN, which is now a subsidiary of KKR & Co.

Additional information regarding such filings and events may be found at the Investor Center for KKR & Co. L.P. under “Events & Presentations,” “Press Releases” and “SEC Filings”, and KKR’s periodic filings with the SEC are accessible on the Securities and Exchange Commission’s website at www.sec.gov. Such presentations, reports, calls and webcasts whether published on KKR & Co.’s website or filed with the Securities and Exchange Commission are not incorporated by reference in this report and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

ITEM 6. EXHIBITS

Exhibit Number	Description
3.1	Amendment No. 5 to the Amended and Restated Operating Agreement of the Company, dated as of May 5, 2016
31.1	Chief Executive Officer Certification
31.2	Chief Financial Officer Certification
32	Certification Pursuant to 18 U.S.C. Section 1350
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, KKR Financial Holdings LLC has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	KKR Financial Holdings LLC
Signature	Title
/s/ WILLIAM J. JANETSCHEK	Chief Executive Officer (Principal Executive Officer)
William J. Janetschek
/s/ THOMAS N. MURPHY	Chief Financial Officer (Principal Financial and
Thomas N. Murphy	Accounting Officer)
Date: May 11, 2016

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EX-3.1

Exhibit 3.1

AMENDMENT NO. 5
TO THE
AMENDED AND RESTATED
OPERATING AGREEMENT OF
KKR FINANCIAL HOLDINGS LLC

This Amendment No. 5 (this “Amendment”) to the Amended and Restated Operating Agreement of KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), is made as of May 5, 2016. Capitalized terms used herein and not otherwise defined are used as defined in the Current Agreement (as defined below).

WHEREAS, the Company was formed pursuant to (i) the Certificate of Formation of the Company, dated January 17, 2007, as filed in the office of the Secretary of State of the State of Delaware on January 17, 2007, and (ii) the Operating Agreement of the Company, dated as of January 17, 2007 (the “Original Agreement”);

WHEREAS, the Original Agreement was amended and restated pursuant to the Amended and Restated Operating Agreement of the Company, dated as of May 3, 2007, as amended effective March 24, 2009, and was further amended by (i) Amendment No. 1 to the Amended and Restated Operating Agreement, dated as of February 28, 2010, (ii) Amendment No. 2 to the Amended and Restated Operating Agreement, dated as of January 10, 2013, (iii) the Share Designation of the 7.375% Series A LLC Preferred Shares, dated as of January 17, 2013, (iv) Amendment No. 3 to the Amended and Restated Operating Agreement, dated as June 27, 2014 and (v) Amendment No. 4 to the Amended and Restated Operating Agreement, dated as November 6, 2015 (as so amended, the “Current Agreement”);

WHEREAS, the board of directors of the Company (the “Board”), pursuant to Article 18 of the Current Agreement, has the authority to amend Section 1.10 and Section 5.1 of the Current Agreement as specified in this Amendment upon the affirmative vote of the majority of the Board; and

WHEREAS, the Board has deemed it advisable and in the best interests of the Company to amend the Current Agreement as fully set forth herein and has unanimously approved this Amendment.

NOW, THEREFORE, in consideration of the premises set forth in this Amendment, the Current Agreement is hereby amended as follows:

I.    AMENDMENTS.

A.Section 1.10 of the Current Agreement is hereby amended by replacing “Cash” with “Amounts” in the defined term “Cash Available for Distribution”.

B.Section 5.1 of the Current Agreement is hereby amended by replacing “Cash” with “Amounts” from the phrase “Cash Available for Distribution”.

II.    MISCELLANEOUS

A.    Full Force and Effect. Except to the extent modified hereby, the Current Agreement shall remain in full force and effect.

B.    Effectiveness. It is intended that the Amendment be effective as of June 27, 2014.

C.     Governing Law. This Amendment shall be interpreted in accordance with the laws of the State of Delaware (without regard to conflict of laws principles), all rights and remedies being governed by such laws.

D.     Severability. Each provision of this Amendment shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Amendment which are valid, enforceable and legal.

[Signature Page Follows]

IN WITNESS WHEREOF, the undersigned has caused this Amendment to be duly executed as of the day and year first above written.

MEMBERS:

All of the Members of the Company, by the Secretary, pursuant to the power of attorney granted in Section 1.4 of the Current Agreement

/s/ Nicole J. Macarchuk        

Name:     Nicole J. Macarchuk

Title:     Secretary and General Counsel

EX-31.1

Exhibit 31.1

Certification

I, William J. Janetschek, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2016 of KKR Financial Holdings LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 11, 2016
	/s/ WILLIAM J. JANETSCHEK
	William J. Janetschek
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, Thomas N. Murphy, certify that:

1. I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2016 of KKR Financial Holdings LLC;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: May 11, 2016
	/s/ THOMAS N. MURPHY
	Thomas N. Murphy
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

In connection with the Quarterly Report of KKR Financial Holdings LLC (the “Company”) on Form 10-Q for the period ended March 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), William J. Janetschek, Chief Executive Officer of the Company, and Thomas N. Murphy, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

May 11, 2016
	/s/ WILLIAM J. JANETSCHEK
	William J. Janetschek
	Chief Executive Officer
	(Principal Executive Officer)
	/s/ THOMAS N. MURPHY
	Thomas N. Murphy
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 04, 2016
Document and Entity Information
Entity Registrant Name	KKR Financial Holdings LLC
Entity Central Index Key	0001386926
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding		100

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 361,344	$ 320,122
Restricted cash and cash equivalents	377,079	487,374
Securities, at estimated fair value	336,764	417,519
Corporate loans, at estimated fair value	4,783,419	5,188,610
Equity investments, at estimated fair value ($71,976 and $82,430 pledged as collateral as of March 31, 2016 and December 31, 2015, respectively)	244,462	262,946
Oil and gas properties, net	113,802	114,868
Interests in joint ventures and partnerships, at estimated fair value	748,329	888,408
Derivative assets	26,246	40,852
Interest and principal receivable	20,980	22,196
Receivable for investments sold	55,788	19,930
Other assets	21,430	25,570
Total assets	7,089,643	7,788,395
Liabilities
Collateralized loan obligation secured notes, at estimated fair value	4,548,688	4,843,746
Senior notes	412,617	413,006
Junior subordinated notes	248,903	248,498
Payable for investments purchased	59,143	220,085
Accounts payable, accrued expenses and other liabilities	30,393	43,667
Accrued interest payable	23,800	20,619
Related party payable	2,667	3,892
Derivative liabilities	59,645	43,892
Total liabilities	5,385,856	5,837,405
Equity
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both March 31, 2016 and December 31, 2015	0	0
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both March 31, 2016 and December 31, 2015	0	0
Paid-in-capital	2,764,061	2,764,061
Accumulated deficit	(1,123,319)	(895,950)
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity	1,640,742	1,868,111
Noncontrolling interests	63,045	82,879
Total equity	1,703,787	1,950,990
Total liabilities and equity	$ 7,089,643	$ 7,788,395

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Equity investments, at estimated fair value, pledged as collateral (in dollars)	$ 71,976	$ 82,430
Preferred shares, no par value (in dollars per share)
Preferred shares, shares authorized	50,000,000	50,000,000
Preferred shares, shares issued	14,950,000	14,950,000
Preferred shares, shares outstanding	14,950,000	14,950,000
Common shares, no par value (in dollars per share)
Common shares, shares authorized	500,000,000	500,000,000
Common shares, shares issued	100	100
Common shares, shares outstanding	100	100

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues
Loan interest income	$ 66,908	$ 75,328
Securities interest income	5,064	15,591
Oil and gas revenue	2,641	2,828
Other	14,692	4,039
Total revenues	89,305	97,786
Investment costs and expenses
Interest expense	50,918	55,845
Oil and gas production costs	215	(48)
Oil and gas depreciation, depletion and amortization	1,066	1,002
Other	799	854
Total investment costs and expenses	52,998	57,653
Other income (loss)
Net realized and unrealized gain (loss) on investments	(138,032)	19,899
Net realized and unrealized gain (loss) on derivatives and foreign exchange	(10,216)	(9,100)
Net realized and unrealized gain (loss) on debt	(63,173)	(83,816)
Other income (loss)	1,539	3,853
Total other income (loss)	(209,882)	(69,164)
Other expenses
Related party management compensation	7,276	10,220
General, administrative and directors' expenses	15,776	5,812
Professional services	1,012	1,136
Total other expenses	24,064	17,168
Income (loss) before income taxes	(197,639)	(46,199)
Income tax expense (benefit)	60	347
Net income (loss)	(197,699)	(46,546)
Net income (loss) attributable to noncontrolling interests	(15,535)	(6,071)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	(182,164)	(40,475)
Preferred share distributions	6,891	6,891
Net income (loss) available to common shares	$ (189,055)	$ (47,366)

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (197,699)	$ (46,546)
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale	0	0
Unrealized gains (losses) on cash flow hedges	0	0
Total other comprehensive income (loss)	0	0
Comprehensive income (loss)	(197,699)	(46,546)
Less: Comprehensive income (loss) attributable to noncontrolling interests	0	0
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$ (197,699)	$ (46,546)

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Condensed Consolidated Statements of Changes in Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Preferred Shares	Preferred Shares Paid-In Capital	Common Shares	Common Shares Paid-In Capital	Accumulated Deficit	Noncontrolling interests
Balance at Dec. 31, 2014	$ 2,488,048		$ 378,983		$ 2,385,078	$ (376,182)	$ 100,169
Balance (in shares) at Dec. 31, 2014		14,950,000		100
Increase (Decrease) in Shareholders' Equity
Capital contributions	2,083						2,083
Net income (loss)	(46,546)					(40,475)	(6,071)
Distributions declared on preferred shares	(6,891)					(6,891)
Distributions to Parent	(55,163)					(55,163)
Balance at Mar. 31, 2015	2,379,654		378,983		2,385,078	(480,588)	96,181
Balance (in shares) at Mar. 31, 2015		14,950,000		100
Increase (Decrease) in Shareholders' Equity
Cumulative effect adjustment from adoption of accounting guidance	(1,877)					(1,877)
Balance at Dec. 31, 2015	1,950,990		378,983		2,385,078	(895,950)	82,879
Balance (in shares) at Dec. 31, 2015		14,950,000		100
Increase (Decrease) in Shareholders' Equity
Capital contributions	1,706						1,706
Capital distributions	(6,005)						(6,005)
Net income (loss)	(197,699)					(182,164)	(15,535)
Distributions declared on preferred shares	(6,891)					(6,891)
Distributions to Parent	(38,314)					(38,314)
Balance at Mar. 31, 2016	$ 1,703,787		$ 378,983		$ 2,385,078	$ (1,123,319)	$ 63,045
Balance (in shares) at Mar. 31, 2016		14,950,000		100

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Condensed Consolidated Statements of Cash Flows (Unaudited) $ in Thousands	3 Months Ended
	Mar. 31, 2016 USD ($)	Mar. 31, 2015 USD ($)
Net income (loss)	$ (197,699)	$ (46,546)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Net realized and unrealized (gain) loss on derivatives and foreign exchange	10,216	9,100
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests	(15,535)	(6,071)
Net realized and unrealized (gain) loss on investments	153,567	(13,828)
Depreciation and net amortization	18,273	5,707
Net realized and unrealized (gain) loss on debt	63,173	83,816
Changes in assets and liabilities:
Interest receivable	1,217	10,695
Other assets	(16,611)	(29,189)
Related party payable	(1,225)	2,134
Accounts payable, accrued expenses and other liabilities	(13,274)	25,160
Accrued interest payable	3,181	7,896
Net cash provided by (used in) operating activities	5,283	48,874
Cash flows from investing activities
Principal payments from corporate loans	223,558	233,002
Principal payments from securities	17,133	3,191
Proceeds from sales of corporate loans	374,229	550,568
Proceeds from sales of securities	13,024	38,262
Proceeds from equity and other investments	75,852	6,142
Purchases of corporate loans	(363,541)	(352,743)
Purchases of equity and other investments	(14,615)	(35,407)
Net change in proceeds, purchases and settlements of derivatives	11,058	(5,960)
Net change in restricted cash and cash equivalents	110,295	(58,529)
Net cash provided by (used in) investing activities	446,993	378,526
Cash flows from financing activities
Retirement of collateralized loan obligation secured notes	(361,550)	(338,197)
Distributions on common shares	(38,314)	(55,163)
Distributions on preferred shares	(6,891)	(6,891)
Capital distributions to noncontrolling interests	(6,005)	0
Capital contributions from noncontrolling interests	1,706	2,083
Other capitalized costs	0	(80)
Net cash provided by (used in) financing activities	(411,054)	(348,248)
Net increase (decrease) in cash and cash equivalents	41,222	79,152
Cash and cash equivalents at beginning of period	320,122	163,405
Cash and cash equivalents at end of period	361,344	242,557
Supplemental cash flow information
Cash paid for interest	41,104	36,364
Net cash paid (refunded) for income taxes	11	12
Non-cash investing and financing activities
Preferred share distributions declared, not yet paid	6,891	6,891
CLO Warehouse Facility
Cash flows from financing activities
Proceeds from credit facilities	$ 0	$ 50,000

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ORGANIZATION

3 Months Ended

Mar. 31, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION

ORGANIZATION

KKR Financial Holdings LLC together with its subsidiaries (the “Company” or “KFN”) is a specialty finance company with expertise in a range of asset classes. The Company’s core business strategy is to leverage the proprietary resources of KKR Financial Advisors LLC (the “Manager”) with the objective of generating current income. The Company’s holdings primarily consist of below investment grade syndicated corporate loans, also known as leveraged loans, high yield debt securities and interests in joint ventures and partnerships. The corporate loans that the Company holds are typically purchased via assignment or participation in the primary or secondary market.

The majority of the Company’s holdings consist of corporate loans and high yield debt securities held in collateralized loan obligation (“CLO”) transactions that are structured as on‑balance sheet securitizations and are used as long term financing for the Company’s investments in corporate debt. The senior secured debt issued by the CLO transactions is primarily owned by unaffiliated third party investors and the Company owns the majority of the subordinated notes in the CLO transactions. The Company executes its core business strategy through its majority‑owned subsidiaries, including CLOs.

The Company is a subsidiary of KKR & Co. L.P. (“KKR & Co.”). KKR Fund Holdings L.P. (“KKR Fund Holdings”), a subsidiary of KKR & Co., is the sole holder of all of the outstanding common shares of the Company and is the parent of the Company (the “Parent”). The Manager, a wholly‑owned subsidiary of KKR Credit Advisors (US) LLC, manages the Company pursuant to an amended and restated management agreement (as amended the “Management Agreement”). KKR Credit Advisors (US) LLC is a wholly‑owned subsidiary of Kohlberg Kravis Roberts & Co. L.P. (“KKR”), which is a subsidiary of KKR & Co.

The Company’s 7.375% Series A LLC Preferred Shares (“Series A LLC Preferred Shares”) and senior notes are traded on the New York Stock Exchange ("NYSE").

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The majority of the Company's significant accounting policies have remained unchanged from the Company's Annual Report on Form 10-K filed with the SEC on March 29, 2015 ("2015 Annual Report"). As such, in addition to the below, refer to the Company's 2015 Annual Report for further discussion.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and entities established to complete secured financing transactions that are considered to be variable interest entities (“VIEs”) and for which the Company is the primary beneficiary. Also included in the condensed consolidated financial statements are the financial results of certain entities, which are not considered VIEs, but in which the Company is presumed to have control. The ownership interests held by third parties are reflected as noncontrolling interests in the accompanying financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing its estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While the Company believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are appropriate, actual results could differ from those estimates.

Consolidation

KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”), KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”), KKR CLO 11, Ltd ("CLO 11") and KKR CLO 13, Ltd ("CLO 13") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”) and during 2015, the Company called KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and KKR Financial CLO 2006-1, Ltd ("CLO 2006-1"), whereby the Company repaid all senior and mezzanine notes outstanding. These entities are VIEs which the Company consolidates as the Company has determined it has the power to direct the activities that most significantly impact these entities’ economic performance and the Company has both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities. In CLO transactions, subordinated notes have the first risk of loss and conversely, the residual value upside of the transactions. 

The Company finances the majority of its corporate debt investments through its CLOs. As of March 31, 2016, the Company’s CLOs held $4.8 billion par amount, or $4.5 billion estimated fair value, of corporate debt investments. As of December 31, 2015, the Company's CLOs held $5.5 billion par amount, or $5.1 billion estimated fair value, of corporate debt investments. The assets in each CLO can be used only to settle the debt of the related CLO. As of March 31, 2016 and December 31, 2015, the aggregate par amount of CLO debt totaled $4.5 billion and $4.9 billion, respectively, held by unaffiliated third parties.

The Company consolidates all non‑VIEs in which it holds a greater than 50 percent voting interest. Specifically, the Company consolidates majority owned entities for which the Company is presumed to have control. The ownership interests of these entities held by third parties are reflected as noncontrolling interests in the accompanying financial statements. The Company began consolidating a majority of these non‑VIE entities as a result of the asset contributions from its Parent during the second half of 2014. For certain of these entities, the Company previously held a percentage ownership, but following the incremental contributions from its Parent, were presumed to have control.

In addition, the Company has noncontrolling interests in joint ventures and partnerships that do not qualify as VIEs and do not meet the control requirements for consolidation as defined by GAAP.

All inter‑company balances and transactions have been eliminated in consolidation. 

Recent Accounting Pronouncements

Consolidation

In February 2015, the FASB issued guidance which eliminates the presumption that a general partner should consolidate a limited partnership and also eliminates the consolidation model specific to limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicle and whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. The guidance is effective for reporting periods starting after December 15, 2015 and for interim periods within the fiscal year. Early adoption is permitted, and a full retrospective or modified retrospective approach is required. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is currently evaluating the impact on its financial statements.

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SECURITIES

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

SECURITIES

SECURITIES

The Company accounts for all of its securities, including RMBS, at estimated fair value. The following table summarizes the Company’s securities as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Securities, at estimated fair value	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519
Total	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519

Net Realized and Unrealized Gains (Losses)

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(1,593	)	$	(526	)
Net (increase) decrease in unrealized losses	(50,126		)	1,834
Net (increase) decrease in unrealized losses	$	(51,719	)	$	1,308

Defaulted Securities

As of both March 31, 2016 and December 31, 2015, the Company had no corporate debt securities in default.

Concentration Risk

The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 90% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, JC Penney Corp. Inc and Mizuho Bank, Ltd. which combined represented $159.9 million, or approximately 55% of the estimated fair value of the Company’s corporate debt securities. As of December 31, 2015, approximately 89% of the estimated fair value of the Company’s corporate debt securities portfolio was concentrated in ten issuers, with the three largest concentrations of debt securities in securities issued by LCI Helicopters Limited, Preferred Proppants LLC and JC Penney Corp. Inc, which combined represented $192.5 million, or approximately 52% of the estimated fair value of the Company’s corporate debt securities.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged securities for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	136,318	$	170,365
Total	$	136,318	$	170,365

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CORPORATE LOANS

3 Months Ended

Mar. 31, 2016

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

CORPORATE LOANS

CORPORATE LOANS

The Company accounts for all of its corporate loans at estimated fair value. The following table summarizes the Company’s corporate loans as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610

Net Realized and Unrealized Gains (Losses)

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the asset without regard to unrealized gains or losses previously recognized. Unrealized gains or losses are computed as the difference between the estimated fair value of the asset and the amortized cost basis of such asset. Unrealized gains or losses primarily reflect the change in asset values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized. The following tables present the Company’s realized and unrealized gains (losses) from corporate loans (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(30,714	)	$	(16,182	)
Net (increase) decrease in unrealized losses	44,923			82,274
Net realized and unrealized gains (losses)	$	14,209		$	66,092

For the corporate loans measured at estimated fair value under the fair value option of accounting, $6.3 million and $9.0 million of net gains were attributable to changes in instrument specific credit risk for the three months ended March 31, 2016 and March 31, 2015, respectively. Gains and losses attributable to changes in instrument specific credit risk were determined by excluding the non-credit components of gains and losses, such as those due to changes in interest rates and general market conditions. In addition, gains and losses attributable to those loans on non-accrual status or specifically identified as more volatile based on financial or operating performance, restructuring or other factors, were considered instrument specific.

Non-Accrual Loans

A loan is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. A loan may be placed on non-accrual status regardless of whether or not such loan is considered past due. As of March 31, 2016, the Company held a total par value and estimated fair value of $435.2 million and $115.6 million, respectively, of non-accrual loans carried at estimated fair value. As of December 31, 2015, the Company held a total par value and estimated fair value of $435.2 million and $127.5 million, respectively, of non-accrual loans. As of both March 31, 2016 and December 31, 2015, there were no corporate loans past due 90 or more days and still accruing.

Defaulted Loans

As of March 31, 2016, the Company held one corporate loan that was in default with a total estimated fair value of $105.1 million from one issuer. As of December 31, 2015, the Company held one corporate loan that was in default with a total estimated fair value of $113.6 million from one issuer.

Concentration Risk

The Company’s corporate loan portfolio has certain credit risk concentrated in a limited number of issuers. As of March 31, 2016, approximately 31% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., PQ Corp and Texas Competitive Electric Holdings Company LLC (“TXU”), which combined represented $390.8 million, or approximately 8% of the aggregate estimated fair value of the Company’s corporate loans. As of December 31, 2015, approximately 31% of the total estimated fair value of the Company’s corporate loan portfolio was concentrated in twenty issuers, with the three largest concentrations of corporate loans in loans issued by U.S. Foods Inc., TXU and PQ Corp, which combined represented $434.6 million, or approximately 8% of the aggregate estimated fair value of the Company’s corporate loans.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged loans for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	4,491,601	$	4,917,123
Total	$	4,491,601	$	4,917,123

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS

3 Months Ended

Mar. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS

EQUITY INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS

The Company holds interests in joint ventures and partnerships, certain of which (i) the Company participates alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to commercial real estate and specialty lending focused businesses or (ii) are held as interests in private or public funds managed by KKR and its affiliates. Refer to Note 11 to these condensed consolidated financial statements for further discussion. As of March 31, 2016 and December 31, 2015, the Company held $748.3 million and $888.4 million, respectively, of interests in joint ventures and partnerships carried at estimated fair value.

In addition, as of March 31, 2016 and December 31, 2015, the Company held $244.5 million and $262.9 million, respectively, of equity investments, which were carried at estimated fair value and comprised primarily of common and preferred stock.

Net Realized and Unrealized Gains (Losses)

The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands):

	Three months ended March 31, 2016						Three months ended March 31, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	725		$	(2,162	)	$	1,424		$	—
Net (increase) decrease in unrealized losses	(15,992		)	(83,093		)	(22,426		)	(26,499		)
Net realized and unrealized gains (losses)	$	(15,267	)	$	(85,255	)	$	(21,002	)	$	(26,499	)

(1) Includes net loss attributable to noncontrolling interests of $15.5 million and $6.1 million for the three months ended March 31, 2016 and March 31, 2015, respectively.

Equity Method Investments

The Company holds certain investments where the Company does not control the investee and where the Company is not the primary beneficiary, but can exert significant influence over the financial and operating policies of the investee. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the investee unless predominant evidence to the contrary exists.

Under the equity method of accounting, the Company records its proportionate share of net income or loss based on the investee’s financial results. Given that the Company elected the fair value option to account for these equity method investments, the Company’s share of the investee’s underlying net income or loss predominantly represents fair value adjustments in the investments. Changes in estimated fair value are recorded in net realized and unrealized gain (loss) on investments in the consolidated statements of operations.

As of March 31, 2016 and December 31, 2015, the Company had equity method investments, at estimated fair value, totaling $400.8 million and $506.5 million, respectively. The Company's equity method investments are comprised primarily of the following issuers with the respective ownership percentages: (i) Maritime Finance Company, which the Company holds approximately 31% through its ownership of KKR Nautilus Aggregator Limited, (ii) LCI Helicopters Limited, which the Company holds approximately 33% common equity interest in and (iii) Mineral Acquisition Company, which the Company holds approximately 70% through its ownership of KKR Royalty Aggregator LLC. KKR Royalty Aggregator LLC is an investment company for accounting purposes and accordingly, does not consolidate Mineral Acquisition Company, which it wholly-owns. The Company consolidates both KKR Nautilus Aggregator Limited and KKR Royalty Aggregator LLC and reflects all ownership interests held by third parties as noncontrolling interests in its financial statements.

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BORROWINGS

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

BORROWINGS

BORROWINGS

The Company accounts for its collateralized loan obligation secured notes at estimated fair value, with changes in estimated fair value recorded in the condensed consolidated statements of operations, and all of its other borrowings at amortized cost. As of January 1, 2015, the Company adopted the measurement alternative issued by the FASB whereby the financial liabilities of its consolidated CLOs were measured using the fair value of the financial assets of its consolidated CLOs, which was determined to be more observable.

Certain information with respect to the Company’s borrowings as of March 31, 2016 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,431,783	$	1,537,984	2.47	%	1871	$	1,530,018
CLO 2007-1 subordinated notes(3)	134,468		74,058		4.53		1871	143,694
CLO 2007-A subordinated notes(3)	15,096		15,640		6.59		563	43,222
CLO 2012-1 secured notes	367,500		372,968		2.70		3181	365,848
CLO 2012-1 subordinated notes(3)	18,000		8,960		14.06		3181	17,919
CLO 2013-1 secured notes	458,500		461,576		2.34		3393	481,092
CLO 2013-2 secured notes	339,250		340,151		2.80		3585	349,842
CLO 9 secured notes	463,750		460,374		2.63		3850	459,889
CLO 9 subordinated notes(3)	15,000		8,879		14.62		3850	14,875
CLO 10 secured notes	368,000		370,038		2.87		3546	381,593
CLO 11 secured notes	507,750		500,174		2.68		4032	500,785
CLO 11 subordinated notes(3)	28,250		20,623		16.84		4032	27,862
CLO 13 secured notes	370,000		374,429		2.84		4308	379,157
CLO 13 subordinated notes(3)	4,000		2,834		—		4308	4,099
Total collateralized loan obligation secured debt	4,521,347		4,548,688					4,699,895
8.375% Senior notes	258,750		289,350		8.38		9360	—
7.500% Senior notes	115,043		123,267		7.50		9485	—
Junior subordinated notes	283,517		248,903		5.57		7493	—
Total borrowings	$	5,178,657	$	5,210,208				$	4,699,895

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

Certain information with respect to the Company’s borrowings as of December 31, 2015 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,544,032	$	1,630,293	2.10	%	1962	$	1,732,855
CLO 2007-1 subordinated notes(3)	134,468		74,954		11.66		1962	150,912
CLO 2007-A subordinated notes(3)	15,096		17,060		14.49		654	48,856
CLO 2011-1 senior debt	249,301		249,301		1.67		1689	310,498
CLO 2012-1 secured notes	367,500		365,383		2.59		3272	361,684
CLO 2012-1 subordinated notes(3)	18,000		10,845		15.82		3272	17,715
CLO 2013-1 secured notes	458,500		450,280		2.05		3484	479,391
CLO 2013-2 secured notes	339,250		334,187		2.52		3676	347,989
CLO 9 secured notes	463,750		454,103		2.33		3941	463,574
CLO 9 subordinated notes(3)	15,000		9,972		15.92		3941	14,994
CLO 10 secured notes	368,000		363,977		2.75		3637	384,991
CLO 11 secured notes	507,750		491,699		2.38		4123	501,286
CLO 11 subordinated notes(3)	28,250		23,306		5.28		4123	27,890
CLO 13 secured notes	370,000		364,986		2.84		4399	323,781
CLO 13 subordinated notes(3)	4,000		3,400		—		4399	3,500
Total collateralized loan obligation secured debt	4,882,897		4,843,746					5,169,916
8.375% Senior notes	258,750		289,660		8.38		9451	—
7.500% Senior notes	115,043		123,346		7.50		9576	—
Junior subordinated notes	283,517		248,498		5.43		7584	—
Total borrowings	$	5,540,207	$	5,505,250				$	5,169,916

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

CLO Debt

For the CLO secured notes, which the Company measured based on the estimated fair value of the financial assets of its CLOs as of January 1, 2015, there were no gains (losses) attributable to changes in instrument specific credit risk for both the three months ended March 31, 2016 and March 31, 2015.

The indentures governing the Company’s CLO transactions stipulate the reinvestment period during which the collateral manager, which is an affiliate of the Company’s Manager, can generally sell or buy assets at its discretion and can reinvest principal proceeds into new assets. CLO 2007‑1 and CLO 2007‑A were no longer in their reinvestment periods as of March 31, 2016. As a result, principal proceeds from the assets held in each of these transactions are generally used to amortize the outstanding balance of senior notes outstanding. CLO 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11 and CLO 13 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019 and January 2020, respectively.

Pursuant to the terms of the indentures governing our CLO transactions, the Company has the ability to call its CLO transactions after the end of the respective non-call periods. During November 2015, the Company called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. During July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. In addition, during February 2015, the Company called CLO 2006-1 and repaid aggregate senior and mezzanine notes totaling $181.8 million par amount. As described below in Note 7 to these condensed consolidated financial statements, the Company used a pay-fixed, receive-variable interest rate swap to hedge interest rate risk associated with CLO 2006-1. In connection with the repayment of CLO 2006-1 notes, the related interest rate swap, with a contractual notional amount of $84.0 million, was terminated.

During the three months ended March 31, 2016, $112.2 million of original CLO 2007-1 senior notes were repaid. During the three months ended March 31, 2015, $169.8 million of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 senior notes were repaid. CLO 2011-1 does not have a reinvestment period and all principal proceeds from holdings in CLO 2011-1 are used to amortize the transaction. During March 2016, the Company called CLO 2011-1 and repaid all senior notes totaling $249.3 million par amount. During the three months ended March 31, 2015, $1.5 million of original CLO 2011-1 senior notes were repaid.

On December 16, 2015, the Company closed CLO 13, a $412.0 million secured financing transaction maturing on January 16, 2028. The Company issued $370.0 million par amount of senior secured notes to unaffiliated investors, $350.0 million of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.19% and $20.0 million of which was fixed rate with a weighted-average coupon of 3.83%. The Company also issued $4.0 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 13 collateralize the CLO 13 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

During June 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 million. Subsequently, in July 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million.

On May 7, 2015, the Company closed CLO 11, a $564.5 million secured financing transaction maturing on April 15, 2027. The Company issued $507.8 million par amount of senior secured notes to unaffiliated investors, all of which was floating rate with a weighted-average coupon of three-month LIBOR plus 2.06%. The Company also issued $28.3 million of subordinated notes to unaffiliated investors. The investments that are owned by CLO 11 collateralize the CLO 11 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.

CLO Warehouse Facility

On March 2, 2015, CLO 11 entered into a $570.0 million CLO warehouse facility ("CLO 11 Warehouse"), which matured upon the closing of CLO 11 on May 7, 2015. The CLO 11 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing were used to repay the CLO 11 Warehouse in full. Debt issued under the CLO 11 Warehouse was non-recourse to the Company beyond the assets of CLO 11 and bore interest at rates ranging from LIBOR plus 1.25% to 1.75%. Upon the closing of CLO 11 on May 7, 2015, the aggregate amount outstanding under the CLO 11 Warehouse was repaid.

On July 22, 2015, CLO 13 entered into a $350.0 million CLO warehouse facility ("CLO 13 Warehouse"), which matured upon the closing of CLO 13 on December 16, 2015. The CLO 13 Warehouse was used to purchase assets for the CLO transaction in advance of its closing date upon which the proceeds of the CLO closing will be used to repay the CLO 13 Warehouse in full. Debt issued under the CLO 13 Warehouse was non-recourse to the Company beyond the assets of CLO 13 and bore interest at rates ranging from LIBOR plus 1.50% to 2.25%. Upon the closing of CLO 13 on December 16, 2015, the aggregate amount outstanding under the CLO 13 Warehouse was repaid.

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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

The Company enters into derivative transactions in order to hedge its interest rate and foreign currency exposure to the effects of interest rate and foreign currency changes. Additionally, the Company enters into derivative transactions in the course of its portfolio management activities. The counterparties to the Company’s derivative agreements are major financial institutions with which the Company and its affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, the Company is potentially exposed to losses. The counterparties to the Company’s derivative agreements are major financial institutions and, as a result, the Company does not anticipate that any of the counterparties will fail to fulfill their obligations.

The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	As of March 31, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	281,333		$	(53,229	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(383,238		)	19,332			(375,524		)	38,608
Options	—			498			—			95
Total				$	(33,399	)				$	(3,040	)

Free-Standing Derivatives

Free-standing derivatives are derivatives that the Company has entered into in conjunction with its investment and risk management activities, but for which the Company has not designated the derivative contract as a hedging instrument for accounting purposes. Such derivative contracts may include interest rate swaps, commodity derivatives, credit default swaps and foreign exchange contracts and options. Free-standing derivatives also include investment financing arrangements (total rate of return swaps) whereby the Company receives the sum of all interest, fees and any positive change in fair value amounts from a reference asset with a specified notional amount and pays interest on such notional amount plus any negative change in fair value amounts from such reference asset.

Gains and losses on free-standing derivatives are reported in net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Unrealized gains (losses) represent the change in fair value of the derivative instruments and are noncash items.

Interest Rate Swaps

The Company uses interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs as well as certain of its floating rate junior subordinated notes. As of March 31, 2016 and December 31, 2015, the Company had interest rate swaps with a notional amount of $281.3 million and $297.7 million, respectively.  

Foreign Exchange Derivatives

The Company holds certain positions that are denominated in a foreign currency, whereby movements in foreign currency exchange rates may impact earnings if the United States dollar significantly strengthens or weakens against foreign currencies. In an effort to minimize the effects of these fluctuations on earnings, the Company will from time to time enter into foreign exchange options or foreign exchange forward contracts related to the assets denominated in a foreign currency. As of March 31, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $383.2 million and $375.5 million, respectively, the majority of which related to certain of our foreign currency denominated assets.

Free-Standing Derivatives Gain (Loss)

The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations (amounts in thousands):

	Three months ended March 31, 2016								Three months ended March 31, 2015
	Realized gains (losses)		Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	—	$	(11,731	)	$	(11,731	)	$	(5,297	)	$	(244	)	$	(5,541	)
Foreign exchange forward contracts and options(1)	11,212		(10,242		)	970			15			(594		)	(579		)
Common stock warrants	142		—			142			—			(1,891		)	(1,891		)
Total rate of return swaps	—		—			—			(165		)	(21		)	(186		)
Options	—		403			403			—			(903		)	(903		)
Net realized and unrealized gains (losses)	$	11,354	$	(21,570	)	$	(10,216	)	$	(5,447	)	$	(3,653	)	$	(9,100	)

(1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets.

A master netting arrangement may allow each counterparty to net settle amounts owed between the Company and the counterparty as a result of multiple, separate derivative transactions. The Company has International Swaps and Derivatives Association ("ISDA") agreements or similar agreements with certain financial institutions which contain netting provisions. While these derivative instruments are eligible to be offset in accordance with applicable accounting guidance, the Company has elected to present derivative assets and liabilities on a gross basis in its condensed consolidated balance sheets. As of March 31, 2016, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $0.4 million net liability, net of $6.9 million collateral posted, (ii) $0.7 million net asset, net of $0.1 million collateral held and (iii) $5.2 million net asset, net of $33.7 million collateral held. Comparatively, as of December 31, 2015, if the Company had elected to offset the asset and liability balances of its derivative instruments, the net positions would total the following with its respective financial institution counterparties: (i) $2.4 million net asset, net of $20.7 million collateral posted, (ii) $1.6 million net asset, net of $0.1 million collateral held and (iii) $9.1 million net asset, net of $23.6 million collateral held.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial Instruments Not Carried at Estimated Fair Value

The Company accounts for its investments, as well as its collateralized loan obligation secured notes at estimated fair value. The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of March 31, 2016 (amounts in thousands): 

	As of March 31, 2016				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	738,423	$	738,423	$	738,423	$	—	$	—
Liabilities:
Senior notes	412,617		391,250		391,250		—		—
Junior subordinated notes	248,903		200,179		—		—		200,179

The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2015 (amounts in thousands): 

	As of December 31, 2015				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	807,496	$	807,496	$	807,496	$	—	$	—
Liabilities:
Senior notes	413,006		394,390		394,390		—		—
Junior subordinated notes	248,498		216,757		—		—		216,757

Fair Value Measurements

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Balance as of March 31, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	138,982	$	150,068	$	289,050
Residential mortgage-backed securities	—		—		47,714		47,714
Total securities	—		138,982		197,782		336,764
Corporate loans	—		4,486,437		296,982		4,783,419
Equity investments, at estimated fair value	44,133		61,766		138,563		244,462
Interests in joint ventures and partnerships, at estimated fair value	—		—		748,329		748,329
Derivatives:
Foreign exchange forward contracts and options	—		23,272		2,476		25,748
Options	—		—		498		498
Total derivatives	—		23,272		2,974		26,246
Total	$	44,133	$	4,710,457	$	1,384,630	$	6,139,220
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,548,688	$	—	$	4,548,688
Derivatives:
Interest rate swaps	—		53,229		—		53,229
Foreign exchange forward contracts and options	—		5,781		635		6,416
Total derivatives	—		59,010		635		59,645
Total	$	—	$	4,607,698	$	635	$	4,608,333

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2015
Assets:
Securities:
Corporate debt securities	$	—	$	172,912	$	194,986	$	367,898
Residential mortgage-backed securities	—		—		49,621		49,621
Total securities	—		172,912		244,607		417,519
Corporate loans	—		4,889,876		298,734		5,188,610
Equity investments, at estimated fair value	40,765		75,533		146,648		262,946
Interests in joint ventures and partnerships, at estimated fair value	—		—		888,408		888,408
Derivatives:							0
Foreign exchange forward contracts and options	—		37,120		3,637		40,757
Options	—		—		95		95
Total derivatives	—		37,120		3,732		40,852
Total	$	40,765	$	5,175,441	$	1,582,129	$	6,798,335
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,843,746	$	—	$	4,843,746
Derivatives:
Interest rate swaps	—		41,743		—		41,743
Foreign exchange forward contracts and options	—		1,399		750		2,149
Total derivatives	—		43,142		750		43,892
Total	$	—	$	4,886,888	$	750	$	4,887,638

Level 3 Fair Value Rollforward

The following table presents additional information about assets and liabilities, including derivatives that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2016 (amounts in thousands):

	Assets
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Foreign Exchange Options, Net			Options
Beginning balance as of January 1, 2016	$	194,986		$	49,621		$	298,734		$	146,648		$	888,408		$	2,887		$	95
Total gains or losses (for the period):
Included in earnings(1)	(44,882		)	332			(6,827		)	(8,085		)	(80,695		)	(1,046		)	403
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			2,306			—			14,067			—			—
Sales				—			—			—			—			—			—
Settlements	(36		)	(2,239		)	2,769			—			(73,451		)	—			—
Ending balance as of March 31, 2016	$	150,068		$	47,714		$	296,982		$	138,563		$	748,329		$	1,841		$	498
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(44,882	)	$	329		$	(6,827	)	$	(8,085	)	$	(80,695	)	$	(1,046	)	$	403

(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.

The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2015 (amounts in thousands):

	Assets																					Liabilities
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Warrants			Options			Collateralized Loan Obligation Secured Notes
Beginning balance as of January 1, 2015	$	317,034		$	55,184		$	347,077		$	81,719		$	718,772		$	—		$	5,212		$	5,501,099
Total gains or losses (for the period):
Included in earnings(1)	(3,996		)	1,776			(55,770		)	(23,327		)	(32,362		)	(1,891		)	(903		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			1,308			—			35,537			—			—			—
Sales	(4,213		)	—			(25,511		)	—			—			—			—			—
Settlements	(914		)	(3,025		)	69,082			44,927			(2,657		)	2,412			—			—
Ending balance as of March 31, 2015	$	307,911		$	53,935		$	336,186		$	103,319		$	719,290		$	521		$	4,309		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(9,354	)	$	153		$	(55,026	)	$	(22,961	)	$	(32,362	)	$	(1,891	)	$	(903	)	$	—

(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized loss on debt in the condensed consolidated statements of operations.

(2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of March 31, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statements for further discussion.

There were no transfers between Level 1 and Level 2 for the Company’s financial assets and liabilities measured at fair value on a recurring and non-recurring basis for the three months ended March 31, 2016 and March 31, 2015.

Valuation Techniques and Inputs for Level 3 Fair Value Measurements

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of March 31, 2016 (dollar amounts in thousands): 

	Balance as of March 31, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	150,068	Yield analysis	Yield	12%	7% - 13%	Decrease
				Net leverage	9x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1050	1050bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	12x	12x	Increase
Residential mortgage – backed securities	$	47,714	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	296,982	Yield Analysis	Yield	13%	4% - 24%	Decrease
				Net leverage	8x	1x - 14x	Decrease
				EBITDA multiple	9x	6x - 13x	Increase
Equity investments, at estimated fair value(6)	$	138,563	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	59%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	41%	0% - 50%	(8	)
			Market comparables	LTM EBITDA multiple	9x	4x - 15x	Increase
				Forward EBITDA multiple	8x	4x - 12x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	9x	3x - 11x	Increase
Interests in joint ventures and partnerships(9)	$	748,329	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	34%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	66%	0% - 100%	(8	)
			Market comparables	Control Premium	7%	4% - 11%	Decrease
				LTM EBITDA multiple	5x	1x - 9x	Increase
			Discounted cash flows	Weighted average cost of capital	10%	7% - 24%	Decrease
				Average price per BOE(10)	$18.80	$12.56 - $21.70	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	6x	6x	Increase
Foreign exchange options, net	$	1,841	Option pricing model	Forward and spot rates	12,000	6 - 13,500	(11	)
Options(12)	$	498	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	7x	7x	Increase
				Forward EBITDA multiple	7x	7x	Increase
			Discounted cash flows	Weighted average cost of capital	15%	15%	Decrease
				LTM EBITDA exit multiple	6x	6x	Increase

(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $14.2 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach.

(9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $162.0 million was valued solely using a discounted cash flow technique, while $44.6 million was valued solely using a market comparables technique and $18.1 million was valued solely using a yield analysis.

(10) Natural resources assets with an estimated fair value of $92.6 million as of March 31, 2016 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 26% liquids and 74% natural gas.

(11) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(12) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2015 (dollar amounts in thousands):

	Balance as of December 31, 2015		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	194,986	Yield analysis	Yield	23%	6% - 31%	Decrease
				Net leverage	10x	10x-12x	Decrease
				EBITDA multiple	7x	7x - 10x	Increase
				Discount margin	750	750bps	Decrease
Residential mortgage – backed securities	$	49,621	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	298,734	Yield Analysis	Yield	11%	3% - 18%	Decrease
				Net leverage	7x	1x - 19x	Decrease
				EBITDA multiple	9x	6x - 15x	Increase
Equity investments, at estimated fair value(6)	$	146,648	Inputs to market comparables, discounted cash flow and broker quotes	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	52%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	42%	0% - 100%	(8	)
				Weight ascribed to broker quotes	6%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	8x	4x - 13x	Increase
				Forward EBITDA multiple	8x	3x - 11x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	8x	0x - 9x	Increase
			Broker quotes	Offered quotes	4	0 - 5	Increase
Interests in joint ventures and partnerships(10)	$	888,408	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	43%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	57%	0% - 100%	(8	)
			Market comparables	LTM EBITDA multiple	5x	1x - 9x	Decrease
			Discounted cash flows	Weighted average cost of capital	8%	6% - 20%	Decrease
				Average price per BOE(11)	$20.61	$14.33 - $23.22	Increase
			Yield analysis	Yield	16%	16%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	8x	8x	Increase
Foreign exchange options, net	$	2,887	Option pricing model	Forward and spot rates	11,500	6 -14,000	(12	)
Options(13)	$	95	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
			Discounted cash flows	Weighted average cost of capital	14%	14%	Decrease
				LTM EBITDA exit multiple	8x	8x	Increase

(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $6.4 million was valued solely using broker quotes, while $11.3 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable.

(9) The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable.

(10) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $164.4 million was valued solely using a discounted cash flow technique, while $98.9 million was valued solely using a market comparables technique and $17.5 million was valued solely using a yield analysis.

(11) Natural resources assets with an estimated fair value of $114.1 million as of December 31, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas.

(12) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(13) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

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SHAREHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2016

Equity [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS’ EQUITY

Preferred Shares

The Company has 14.95 million of Series A LLC Preferred Shares issued and outstanding, which trade on the NYSE under the ticker symbol “KFN.PR”. Distributions on the Series A LLC Preferred Shares are cumulative and are payable, when, as, and if declared by the Company's board of directors, quarterly on January 15, April 15, July 15 and October 15 of each year at a rate per annum equal to 7.375%.

Common Shares

On May 4, 2007, the Company adopted an amended and restated share incentive plan (the “2007 Share Incentive Plan”) that provided for the grant of qualified incentive common share options and other share‑based awards to the Manager, directors, officers and any key employees of the Manager and to any other individual or entity performing services for the Company. The 2007 Share Incentive Plan was terminated in May 2015, but continued to govern unvested awards with respect to 37,214 restricted KKR common units as of December 31, 2015, which were converted from KFN shares in connection with the merger transaction. All such remaining outstanding awards vested on March 1, 2016.

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Commitments

The Company participates in certain contingent financing arrangements, whereby the Company is committed to provide funding of up to a specific predetermined amount at the discretion of the borrower or has entered into an agreement to acquire interests in certain assets. As of March 31, 2016 and December 31, 2015, the Company had unfunded financing commitments for corporate loans totaling $7.4 million and $8.6 million, respectively. The Company did not have any significant losses as of March 31, 2016, nor does it expect any significant losses related to those assets for which it committed to fund.

The Company participates in joint ventures and partnerships alongside KKR and its affiliates through which the Company contributes capital for assets, including development projects related to the Company’s interests in joint ventures and partnerships that hold commercial real estate and natural resources investments, as well as specialty lending focused businesses. The Company estimated these future contributions to total approximately $121.0 million as of March 31, 2016 and $163.0 million as of December 31, 2015.

Guarantees

As of March 31, 2016 and December 31, 2015, the Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.4 billion and $1.6 billion, respectively. Under non-recourse debt, the lender generally does not have recourse against any other assets owned by the borrower or any related parties of the borrower, except for certain specified exceptions listed in the respective loan documents including customary “bad boy” acts and environmental losses. In connection with certain of these investments, joint and several non-recourse carve-out guarantees and environmental indemnities were provided, pursuant to which KFN guarantees losses or the full amount of the applicable loan in the event of specified bad acts or environmental matters. In addition, completion guarantees were provided for certain properties to complete all or portions of development projects, and partial payment guarantees were provided for certain investments. The Company's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against it that have not yet occurred. However, based on prior experience, the Company expects the risk of material loss to be low.

Contingencies

From time to time, the Company is involved in various legal proceedings, lawsuits and claims incidental to the conduct of the Company’s business. The Company’s business is also subject to extensive regulation, which may result in regulatory proceedings against it. It is inherently difficult to predict the ultimate outcome, particularly in cases in which claimants seek substantial or unspecified damages, or where investigations or proceedings are at an early stage and the Company cannot predict with certainty the loss or range of loss that may be incurred; however, it is possible that an adverse outcome in certain matters could, from time to time, have a material effect on the Company’s financial results in any particular period. Based on current discussion and consultation with counsel, management believes that the final resolution of these matters would not have a material impact on the Company’s consolidated financial statements.

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS

MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS

The Manager manages the Company’s day-to-day operations, subject to the direction and oversight of the Company’s board of directors. The Management Agreement expires on December 31 of each year, but is automatically renewed for a 1 year term each December 31 unless terminated upon the affirmative vote of at least two-thirds of the Company’s independent directors, or by a vote of the holders of a majority of the Company’s outstanding common shares, based upon (1) unsatisfactory performance by the Manager that is materially detrimental to the Company or (2) a determination that the management fee payable to the Manager is not fair, subject to the Manager’s right to prevent such a termination under this clause (2) by accepting a mutually acceptable reduction of management fees. The Manager must be provided 180 days prior notice of any such termination and will be paid a termination fee equal to four times the sum of the average annual base management fee and the average annual incentive fee for the two12-month periods immediately preceding the date of termination, calculated as of the end of the most recently completed fiscal quarter prior to the date of termination.

The Management Agreement contains certain provisions requiring the Company to indemnify the Manager with respect to all losses or damages arising from acts not constituting bad faith, willful misconduct, or gross negligence. The Company has evaluated the impact of these guarantees on its condensed consolidated financial statements and determined that they are not material.

The following table summarizes the components of related party management compensation on the Company’s condensed consolidated statements of operations, which are described in further detail below (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Base management fees, net	$	1,029	$	4,053
CLO management fees	6,247		6,167
Incentive fees	—		—
Total related party management compensation	$	7,276	$	10,220

Base Management Fees

The Company pays its Manager a base management fee quarterly in arrears. During 2016 and 2015, certain related party fees received by affiliates of the Manager were credited to the Company via an offset to the base management fee (“Fee Credits”). Specifically, as described in further detail under “CLO Management Fees” below, a portion of the CLO management fees received by an affiliate of the Manager for certain of the Company’s CLOs were credited to the Company via an offset to the base management fee.

The table below summarizes the aggregate base management fees (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Base management fees, gross	$	5,783		$	8,491
CLO management fees credit(1)	(4,754		)	(4,438		)
Total base management fees, net	$	1,029		$	4,053

(1) See “CLO Management Fees” for further discussion.

CLO Management Fees

An affiliate of the Manager entered into separate management agreements with the respective investment vehicles for all of the Company’s Cash Flow CLOs pursuant to which it is entitled to receive fees for the services it performs as collateral manager for all of these CLOs, except for CLO 2011-1. The collateral manager has the option to waive the fees it earns for providing management services for the CLO.

Fees Waived

The collateral manager waived CLO management fees totaling of $0.5 million for CLO 2005-2 during the three months ended March 31, 2015. The Company called CLO 2005-2 in November 2015.

Fees Charged and Fee Credits

The Company recorded management fees expense for the majority of its CLOs during both the three months ended March 31, 2016 and 2015. The Manager credits the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLO 2007-1, CLO 2007-A, CLO 2012-1, CLO 9 and CLO 11 via an offset to the base management fees payable to the Manager. As the Company owns less than 100% of the subordinated notes of these CLOs (with the remaining subordinated notes held by third parties), the Company received a Fee Credit equal only to the Company’s pro rata share of the aggregate CLO management fees paid by these CLOs. Specifically, the amount of the reimbursement for each of these CLOs was calculated by taking the product of (x) the total CLO management fees received by an affiliate of the Manager during the period for such CLO multiplied by (y) the percentage of the subordinated notes of such CLO held by the Company. The remaining portion of the CLO management fees paid by each of these CLOs was not credited to the Company, but instead resulted in a dollar-for-dollar reduction in the interest expense paid by the Company to the third party holder of the CLO’s subordinated notes. Similarly, the Manager credited the Company the CLO management fees from CLO 2013-1, CLO 2013-2 and CLO 10 based on the Company’s 100% ownership of the subordinated notes in the CLO.

The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Charged and retained CLO management fees(1)	$	1,493	$	1,729
CLO management fees credit	4,754		4,438
Total CLO management fees	$	6,247	$	6,167

(1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO.

Subordinated note holders in CLOs have the first risk of loss and conversely, the residual value upside of the transactions. When CLO management fees are paid by a CLO, the residual economic interests in the CLO transaction are reduced by an amount commensurate with the CLO management fees paid. The Company records any residual proceeds due to subordinated note holders as interest expense on the condensed consolidated statements of operations. Accordingly, the increase in CLO management fees is directly offset by a decrease in interest expense.

Incentive Fees

The Manager earned incentive fees totaling zero for both of the three months ended March 31, 2016 and March 31, 2015.

Reimbursable General and Administrative Expenses

Certain general and administrative expenses are incurred by the Company’s Manager on its behalf that are reimbursable to the Manager pursuant to the Management Agreement. The Company incurred reimbursable general and administrative expenses to its Manager totaling $1.0 million and $2.3 million for the three months ended March 31, 2016 and March 31, 2015, respectively. Expenses incurred by the Manager and reimbursed by the Company are reflected in general, administrative and directors expenses on the condensed consolidated statements of operations.

Contributions and Distributions

The Company has made certain distributions to its Parent, as the sole holder of its common shares. The Company distributed $38.3 million and $55.2 million during the three months ended March 31, 2016 and March 31, 2015, respectively.

Affiliated Investments

The Company has invested in corporate loans, debt securities and other investments of entities that are affiliates of KKR. As of March 31, 2016, the aggregate par amount of these affiliated investments totaled $655.4 million, or approximately 11% of the total investment portfolio, and consisted of 6 issuers. Of the total affiliated investments, $644.4 million of corporate loans and $11.0 million of equity investments. As of December 31, 2015, the aggregate par amount of these affiliated investments totaled $734.3 million, or approximately 11% of the total investment portfolio, and consisted of 8 issuers. The total $734.3 million in affiliated investments was comprised of $723.3 million of corporate loans and $11.0 million of equity investments.

In addition, the Company has invested in certain joint ventures and partnerships alongside KKR and its affiliates. As of March 31, 2016 and December 31, 2015, the estimated fair value of these interests in joint ventures and partnerships totaled $685.3 million and $805.5 million, respectively.

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SEGMENT REPORTING

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

Operating segments are defined as components of a company that engage in business activities that may earn revenues and incur expenses for which separate financial information is available and reviewed by the chief operating decision maker or group in determining how to allocate resources and assessing performance. The Company operates its business through the following reportable segments: credit (“Credit”), natural resources (“Natural Resources”) and other (“Other”).

The Company’s reportable segments are differentiated primarily by their investment focuses. The Credit segment consists primarily of below investment grade corporate debt comprised of senior secured and unsecured loans, mezzanine loans, high yield bonds, private and public equity investments, and distressed and stressed debt securities. The Natural Resources segment consists of non-operated working and overriding royalty interests in oil and natural gas properties, as well as interests in joint ventures and partnerships focused on the oil and gas sector. The Other segment includes all other portfolio holdings, consisting solely of commercial real estate. The segments currently reported are consistent with the way decisions regarding the allocation of resources are made, as well as how operating results are reviewed by the Company.

The Company evaluates the performance of its reportable segments based on several net income (loss) components. Net income (loss) includes (i) revenues, (ii) related investment costs and expenses, (iii) other income (loss), which is comprised primarily of unrealized and realized gains and losses on investments, debt and derivatives, and (iv) other expenses, including related party management compensation and general and administrative expenses. Certain corporate assets and expenses that are not directly related to the individual segments, including interest expense and related costs on borrowings, base management fees and professional services are allocated to individual segments based on the investment portfolio balance in each respective segment as of the most recent period-end. Certain other corporate assets and expenses, including prepaid insurance, incentive fees, insurance expenses and directors’ expenses are not allocated to individual segments in the Company’s assessment of segment performance. Collectively, these items are included as reconciling items between reported segment amounts and consolidated totals.

The following table presents the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations (amounts in thousands):

	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015		Three months ended March 31, 2016		Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015
Total revenues	$	77,395		$	94,958		$	2,641		$	2,828		$	9,269		$	—	$	—	$	—		$	89,305		$	97,786
Total investment costs and expenses	50,984			55,967			1,614			1,340			400			346		—		—			52,998			57,653
Total other income (loss)	(173,946		)	(65,992		)	(27,242		)	(7,753		)	(8,694		)	4,581		—		—			(209,882		)	(69,164		)
Total other expenses	23,864			16,403			130			510			70			155		—		100			24,064			17,168
Income tax expense (benefit)	23			48			—			—			37			299		—		—			60			347
Net income (loss)	$	(171,422	)	$	(43,452	)	$	(26,345	)	$	(6,775	)	$	68		$	3,781	$	—	$	(100	)	$	(197,699	)	$	(46,546	)
Net income (loss) attributable to noncontrolling interests	(9,711		)	(5,858		)	(5,824		)	(213		)	—			—		—		—			(15,535		)	(6,071		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(161,711	)	$	(37,594	)	$	(20,521	)	$	(6,562	)	$	68		$	3,781	$	—	$	(100	)	$	(182,164	)	$	(40,475	)

(1) Consists of insurance and directors’ expenses which are not allocated to individual segments.

The following table shows total assets of our reportable segments reconciled to amounts reflected in the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Total assets	$	6,663,815	$	7,303,305	$	208,161	$	230,815	$	217,667	$	254,275	$	—	$	—	$	7,089,643	$	7,788,395

(1) Total consolidated assets as of March 31, 2016 included $63.0 million of noncontrolling interests, of which $34.5 million was related to the Credit segment and $28.5 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included $82.9 million of noncontrolling interests, of which $50.3 million was related to the Credit segment and $32.6 million was related to the Natural Resources segment.

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On March 24, 2016, the Company's board of directors declared a cash distribution on its Series A LLC Preferred Shares totaling $6.9 million, or $0.460938 per share. The distribution was paid on April 15, 2016 to preferred shareholders of record as of the close of business on April 8, 2016.

On May 9, 2016, the Company's board of directors declared a cash distribution for the quarter ended March 31, 2016 on its common shares totaling $24.6 million, or $245,741 per common share. The distribution was paid on May 10, 2016 to common shareholders of record as of the close of business on May 9, 2016.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The condensed consolidated financial statements include the accounts of the Company and entities established to complete secured financing transactions that are considered to be variable interest entities (“VIEs”) and for which the Company is the primary beneficiary. Also included in the condensed consolidated financial statements are the financial results of certain entities, which are not considered VIEs, but in which the Company is presumed to have control. The ownership interests held by third parties are reflected as noncontrolling interests in the accompanying financial statements.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses historical experience and various other assumptions and information that are believed to be reasonable under the circumstances in developing its estimates and judgments. Estimates and assumptions about future events and their effects cannot be predicted with certainty and, accordingly, these estimates may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. While the Company believes that the estimates and assumptions used in the preparation of the condensed consolidated financial statements are appropriate, actual results could differ from those estimates.

Consolidation

Consolidation

KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”), KKR Financial CLO 2007‑A, Ltd. (“CLO 2007‑A”), KKR Financial CLO 2012‑1, Ltd. (“CLO 2012‑1”), KKR Financial CLO 2013‑1, Ltd. (“CLO 2013‑1”), KKR Financial CLO 2013‑2, Ltd. (“CLO 2013‑2”), KKR CLO 9, Ltd. (“CLO 9”), KKR CLO 10, Ltd. (“CLO 10”), KKR CLO 11, Ltd ("CLO 11") and KKR CLO 13, Ltd ("CLO 13") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”) and during 2015, the Company called KKR Financial CLO 2005‑2, Ltd. (“CLO 2005‑2”), KKR Financial CLO 2005‑1, Ltd. (“CLO 2005‑1”) and KKR Financial CLO 2006-1, Ltd ("CLO 2006-1"), whereby the Company repaid all senior and mezzanine notes outstanding. These entities are VIEs which the Company consolidates as the Company has determined it has the power to direct the activities that most significantly impact these entities’ economic performance and the Company has both the obligation to absorb losses of these entities and the right to receive benefits from these entities that could potentially be significant to these entities. In CLO transactions, subordinated notes have the first risk of loss and conversely, the residual value upside of the transactions. 

The Company finances the majority of its corporate debt investments through its CLOs. As of March 31, 2016, the Company’s CLOs held $4.8 billion par amount, or $4.5 billion estimated fair value, of corporate debt investments. As of December 31, 2015, the Company's CLOs held $5.5 billion par amount, or $5.1 billion estimated fair value, of corporate debt investments. The assets in each CLO can be used only to settle the debt of the related CLO. As of March 31, 2016 and December 31, 2015, the aggregate par amount of CLO debt totaled $4.5 billion and $4.9 billion, respectively, held by unaffiliated third parties.

The Company consolidates all non‑VIEs in which it holds a greater than 50 percent voting interest. Specifically, the Company consolidates majority owned entities for which the Company is presumed to have control. The ownership interests of these entities held by third parties are reflected as noncontrolling interests in the accompanying financial statements. The Company began consolidating a majority of these non‑VIE entities as a result of the asset contributions from its Parent during the second half of 2014. For certain of these entities, the Company previously held a percentage ownership, but following the incremental contributions from its Parent, were presumed to have control.

In addition, the Company has noncontrolling interests in joint ventures and partnerships that do not qualify as VIEs and do not meet the control requirements for consolidation as defined by GAAP.

All inter‑company balances and transactions have been eliminated in consolidation. 

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Consolidation

In February 2015, the FASB issued guidance which eliminates the presumption that a general partner should consolidate a limited partnership and also eliminates the consolidation model specific to limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicle and whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. The guidance is effective for reporting periods starting after December 15, 2015 and for interim periods within the fiscal year. Early adoption is permitted, and a full retrospective or modified retrospective approach is required. The adoption of this guidance did not have a material impact on the Company's condensed consolidated financial statements.

Financial Instruments

In January 2016, the FASB issued amended guidance that (i) requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and (iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. This guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including the disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. The Company is currently evaluating the impact on its financial statements.

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SECURITIES (Tables)

3 Months Ended

Mar. 31, 2016

Investments, Debt and Equity Securities [Abstract]

Summary of the company's securities which are carried at estimated fair value

The following table summarizes the Company’s securities as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Securities, at estimated fair value	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519
Total	$	495,548	$	442,325	$	336,764	$	520,135	$	474,201	$	417,519

Schedule of realized and unrealized gains from securities

The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(1,593	)	$	(526	)
Net (increase) decrease in unrealized losses	(50,126		)	1,834
Net (increase) decrease in unrealized losses	$	(51,719	)	$	1,308

The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands):

	Three months ended March 31, 2016						Three months ended March 31, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	725		$	(2,162	)	$	1,424		$	—
Net (increase) decrease in unrealized losses	(15,992		)	(83,093		)	(22,426		)	(26,499		)
Net realized and unrealized gains (losses)	$	(15,267	)	$	(85,255	)	$	(21,002	)	$	(26,499	)

(1) Includes net loss attributable to noncontrolling interests of $15.5 million and $6.1 million for the three months ended March 31, 2016 and March 31, 2015, respectively.

Schedule of estimated fair value of securities pledged as collateral

The following table summarizes the estimated fair value of securities pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	136,318	$	170,365
Total	$	136,318	$	170,365

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CORPORATE LOANS (Tables)

3 Months Ended

Mar. 31, 2016

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Schedule of corporate loans

The following table summarizes the Company’s corporate loans as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	5,275,132	$	5,164,654	$	4,783,419	$	5,722,646	$	5,619,815	$	5,188,610

Schedule of realized and unrealized (losses) gains from corporate loans

The following tables present the Company’s realized and unrealized gains (losses) from corporate loans (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(30,714	)	$	(16,182	)
Net (increase) decrease in unrealized losses	44,923			82,274
Net realized and unrealized gains (losses)	$	14,209		$	66,092

Schedule of corporate loans pledged as collateral

The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	March 31, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	4,491,601	$	4,917,123
Total	$	4,491,601	$	4,917,123

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Tables)

3 Months Ended

Mar. 31, 2016

Equity Method Investments and Joint Ventures [Abstract]

Schedule of realized and unrealized gains (losses) from investments

The following table presents the Company’s realized and unrealized gains (losses) from securities (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Net realized gains (losses)	$	(1,593	)	$	(526	)
Net (increase) decrease in unrealized losses	(50,126		)	1,834
Net (increase) decrease in unrealized losses	$	(51,719	)	$	1,308

The following tables present the Company’s realized and unrealized gains (losses), which are accounted for similarly to securities and loans, from equity investments and interests in joint ventures and partnerships (amounts in thousands):

	Three months ended March 31, 2016						Three months ended March 31, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	725		$	(2,162	)	$	1,424		$	—
Net (increase) decrease in unrealized losses	(15,992		)	(83,093		)	(22,426		)	(26,499		)
Net realized and unrealized gains (losses)	$	(15,267	)	$	(85,255	)	$	(21,002	)	$	(26,499	)

(1) Includes net loss attributable to noncontrolling interests of $15.5 million and $6.1 million for the three months ended March 31, 2016 and March 31, 2015, respectively.

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BORROWINGS (Tables)

3 Months Ended

Mar. 31, 2016

Debt Disclosure [Abstract]

Schedule of Company's borrowings

Certain information with respect to the Company’s borrowings as of March 31, 2016 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,431,783	$	1,537,984	2.47	%	1871	$	1,530,018
CLO 2007-1 subordinated notes(3)	134,468		74,058		4.53		1871	143,694
CLO 2007-A subordinated notes(3)	15,096		15,640		6.59		563	43,222
CLO 2012-1 secured notes	367,500		372,968		2.70		3181	365,848
CLO 2012-1 subordinated notes(3)	18,000		8,960		14.06		3181	17,919
CLO 2013-1 secured notes	458,500		461,576		2.34		3393	481,092
CLO 2013-2 secured notes	339,250		340,151		2.80		3585	349,842
CLO 9 secured notes	463,750		460,374		2.63		3850	459,889
CLO 9 subordinated notes(3)	15,000		8,879		14.62		3850	14,875
CLO 10 secured notes	368,000		370,038		2.87		3546	381,593
CLO 11 secured notes	507,750		500,174		2.68		4032	500,785
CLO 11 subordinated notes(3)	28,250		20,623		16.84		4032	27,862
CLO 13 secured notes	370,000		374,429		2.84		4308	379,157
CLO 13 subordinated notes(3)	4,000		2,834		—		4308	4,099
Total collateralized loan obligation secured debt	4,521,347		4,548,688					4,699,895
8.375% Senior notes	258,750		289,350		8.38		9360	—
7.500% Senior notes	115,043		123,267		7.50		9485	—
Junior subordinated notes	283,517		248,903		5.57		7493	—
Total borrowings	$	5,178,657	$	5,210,208				$	4,699,895

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

Certain information with respect to the Company’s borrowings as of December 31, 2015 is summarized in the following table (dollar amounts in thousands):

	Par		Carrying Value(1)		Weighted Average Borrowing Rate		Weighted Average Remaining Maturity (in days)	Collateral(2)
CLO 2007-1 secured notes	$	1,544,032	$	1,630,293	2.10	%	1962	$	1,732,855
CLO 2007-1 subordinated notes(3)	134,468		74,954		11.66		1962	150,912
CLO 2007-A subordinated notes(3)	15,096		17,060		14.49		654	48,856
CLO 2011-1 senior debt	249,301		249,301		1.67		1689	310,498
CLO 2012-1 secured notes	367,500		365,383		2.59		3272	361,684
CLO 2012-1 subordinated notes(3)	18,000		10,845		15.82		3272	17,715
CLO 2013-1 secured notes	458,500		450,280		2.05		3484	479,391
CLO 2013-2 secured notes	339,250		334,187		2.52		3676	347,989
CLO 9 secured notes	463,750		454,103		2.33		3941	463,574
CLO 9 subordinated notes(3)	15,000		9,972		15.92		3941	14,994
CLO 10 secured notes	368,000		363,977		2.75		3637	384,991
CLO 11 secured notes	507,750		491,699		2.38		4123	501,286
CLO 11 subordinated notes(3)	28,250		23,306		5.28		4123	27,890
CLO 13 secured notes	370,000		364,986		2.84		4399	323,781
CLO 13 subordinated notes(3)	4,000		3,400		—		4399	3,500
Total collateralized loan obligation secured debt	4,882,897		4,843,746					5,169,916
8.375% Senior notes	258,750		289,660		8.38		9451	—
7.500% Senior notes	115,043		123,346		7.50		9576	—
Junior subordinated notes	283,517		248,498		5.43		7584	—
Total borrowings	$	5,540,207	$	5,505,250				$	5,169,916

(1) Carrying value represents estimated fair value for the collateralized loan obligation secured debt and amortized cost for all other borrowings.

(2) Collateral for borrowings consists of the estimated fair value of certain corporate loans, securities and equity investments at estimated fair value. For purposes of this table, collateral for CLO secured and subordinated notes are calculated pro rata based on the par amount for each respective CLO.

(3) Subordinated notes do not have a contractual coupon rate, but instead receive a pro rata amount of the net distributions from each respective CLO. Accordingly, weighted average borrowing rates for the subordinated notes were calculated based on annualized cash distributions during the year, if any.

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DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of aggregate notional amount and estimated net fair value of the derivative instruments

The table below summarizes the aggregate notional amount and estimated net fair value of the derivative instruments as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	As of March 31, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	281,333		$	(53,229	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(383,238		)	19,332			(375,524		)	38,608
Options	—			498			—			95
Total				$	(33,399	)				$	(3,040	)

Schedule of net realized and unrealized gain (loss) on derivatives and foreign exchange

The following table presents the amounts recorded in net realized and unrealized gain (loss) on derivatives and foreign exchange on the condensed consolidated statements of operations (amounts in thousands):

	Three months ended March 31, 2016								Three months ended March 31, 2015
	Realized gains (losses)		Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	—	$	(11,731	)	$	(11,731	)	$	(5,297	)	$	(244	)	$	(5,541	)
Foreign exchange forward contracts and options(1)	11,212		(10,242		)	970			15			(594		)	(579		)
Common stock warrants	142		—			142			—			(1,891		)	(1,891		)
Total rate of return swaps	—		—			—			(165		)	(21		)	(186		)
Options	—		403			403			—			(903		)	(903		)
Net realized and unrealized gains (losses)	$	11,354	$	(21,570	)	$	(10,216	)	$	(5,447	)	$	(3,653	)	$	(9,100	)

(1) Net of foreign exchange remeasurement gain or loss on foreign denominated assets.

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of carrying value and estimated fair value, as well as the respective hierarchy classifications, of the financial assets and liabilities that are not carried at estimated fair value

The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of March 31, 2016 (amounts in thousands): 

	As of March 31, 2016				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	738,423	$	738,423	$	738,423	$	—	$	—
Liabilities:
Senior notes	412,617		391,250		391,250		—		—
Junior subordinated notes	248,903		200,179		—		—		200,179

The following table presents the carrying value and estimated fair value, as well as the respective hierarchy classifications, of the Company’s financial assets and liabilities that are not carried at estimated fair value on a recurring basis as of December 31, 2015 (amounts in thousands): 

	As of December 31, 2015				Fair Value Hierarchy
	Carrying Amount		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	$	807,496	$	807,496	$	807,496	$	—	$	—
Liabilities:
Senior notes	413,006		394,390		394,390		—		—
Junior subordinated notes	248,498		216,757		—		—		216,757

Schedule of fair value of financial assets and liabilities measured on a recurring basis

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of March 31, 2016, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)		Balance as of March 31, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	138,982	$	150,068	$	289,050
Residential mortgage-backed securities	—		—		47,714		47,714
Total securities	—		138,982		197,782		336,764
Corporate loans	—		4,486,437		296,982		4,783,419
Equity investments, at estimated fair value	44,133		61,766		138,563		244,462
Interests in joint ventures and partnerships, at estimated fair value	—		—		748,329		748,329
Derivatives:
Foreign exchange forward contracts and options	—		23,272		2,476		25,748
Options	—		—		498		498
Total derivatives	—		23,272		2,974		26,246
Total	$	44,133	$	4,710,457	$	1,384,630	$	6,139,220
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,548,688	$	—	$	4,548,688
Derivatives:
Interest rate swaps	—		53,229		—		53,229
Foreign exchange forward contracts and options	—		5,781		635		6,416
Total derivatives	—		59,010		635		59,645
Total	$	—	$	4,607,698	$	635	$	4,608,333

The following table presents information about the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2015, and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (amounts in thousands):

	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2015
Assets:
Securities:
Corporate debt securities	$	—	$	172,912	$	194,986	$	367,898
Residential mortgage-backed securities	—		—		49,621		49,621
Total securities	—		172,912		244,607		417,519
Corporate loans	—		4,889,876		298,734		5,188,610
Equity investments, at estimated fair value	40,765		75,533		146,648		262,946
Interests in joint ventures and partnerships, at estimated fair value	—		—		888,408		888,408
Derivatives:							0
Foreign exchange forward contracts and options	—		37,120		3,637		40,757
Options	—		—		95		95
Total derivatives	—		37,120		3,732		40,852
Total	$	40,765	$	5,175,441	$	1,582,129	$	6,798,335
Liabilities:
Collateralized loan obligation secured notes	$	—	$	4,843,746	$	—	$	4,843,746
Derivatives:
Interest rate swaps	—		41,743		—		41,743
Foreign exchange forward contracts and options	—		1,399		750		2,149
Total derivatives	—		43,142		750		43,892
Total	$	—	$	4,886,888	$	750	$	4,887,638

Schedule of additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis

The following table presents additional information about assets and liabilities, including derivatives that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2016 (amounts in thousands):

	Assets
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Foreign Exchange Options, Net			Options
Beginning balance as of January 1, 2016	$	194,986		$	49,621		$	298,734		$	146,648		$	888,408		$	2,887		$	95
Total gains or losses (for the period):
Included in earnings(1)	(44,882		)	332			(6,827		)	(8,085		)	(80,695		)	(1,046		)	403
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			2,306			—			14,067			—			—
Sales				—			—			—			—			—			—
Settlements	(36		)	(2,239		)	2,769			—			(73,451		)	—			—
Ending balance as of March 31, 2016	$	150,068		$	47,714		$	296,982		$	138,563		$	748,329		$	1,841		$	498
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(44,882	)	$	329		$	(6,827	)	$	(8,085	)	$	(80,695	)	$	(1,046	)	$	403

(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations.

The following table presents additional information about assets and liabilities, including derivatives, that are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value, for the three months ended March 31, 2015 (amounts in thousands):

	Assets																					Liabilities
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Warrants			Options			Collateralized Loan Obligation Secured Notes
Beginning balance as of January 1, 2015	$	317,034		$	55,184		$	347,077		$	81,719		$	718,772		$	—		$	5,212		$	5,501,099
Total gains or losses (for the period):
Included in earnings(1)	(3,996		)	1,776			(55,770		)	(23,327		)	(32,362		)	(1,891		)	(903		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			1,308			—			35,537			—			—			—
Sales	(4,213		)	—			(25,511		)	—			—			—			—			—
Settlements	(914		)	(3,025		)	69,082			44,927			(2,657		)	2,412			—			—
Ending balance as of March 31, 2015	$	307,911		$	53,935		$	336,186		$	103,319		$	719,290		$	521		$	4,309		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(9,354	)	$	153		$	(55,026	)	$	(22,961	)	$	(32,362	)	$	(1,891	)	$	(903	)	$	—

(1) Amounts are included in net realized and unrealized gain (loss) on investments or net realized and unrealized gain (loss) on derivatives and foreign exchange in the condensed consolidated statements of operations. Amounts for collateralized loan obligation secured notes, which represent liabilities measured at fair value, are included in net realized and unrealized loss on debt in the condensed consolidated statements of operations.

(2) CLO secured notes were transferred out of Level 3 due to the adoption of accounting guidance effective January 1, 2015, whereby the debt obligations of the Company's consolidated CLOs were measured on the basis of the estimated fair value of the financial assets of the CLOs. As such, as of March 31, 2015, these debt obligations were classified as Level 2. Refer to Note 2 to these condensed consolidated financial statements for further discussion.

Summary of valuation techniques used for assets and liabilities, measured at fair value and categorized within level 3

The following table presents additional information about valuation techniques and inputs used for assets and liabilities, including derivatives, that are measured at fair value and categorized within Level 3 as of March 31, 2016 (dollar amounts in thousands): 

	Balance as of March 31, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	150,068	Yield analysis	Yield	12%	7% - 13%	Decrease
				Net leverage	9x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1050	1050bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	12x	12x	Increase
Residential mortgage – backed securities	$	47,714	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	296,982	Yield Analysis	Yield	13%	4% - 24%	Decrease
				Net leverage	8x	1x - 14x	Decrease
				EBITDA multiple	9x	6x - 13x	Increase
Equity investments, at estimated fair value(6)	$	138,563	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	59%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	41%	0% - 50%	(8	)
			Market comparables	LTM EBITDA multiple	9x	4x - 15x	Increase
				Forward EBITDA multiple	8x	4x - 12x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	9x	3x - 11x	Increase
Interests in joint ventures and partnerships(9)	$	748,329	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	34%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	66%	0% - 100%	(8	)
			Market comparables	Control Premium	7%	4% - 11%	Decrease
				LTM EBITDA multiple	5x	1x - 9x	Increase
			Discounted cash flows	Weighted average cost of capital	10%	7% - 24%	Decrease
				Average price per BOE(10)	$18.80	$12.56 - $21.70	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	6x	6x	Increase
Foreign exchange options, net	$	1,841	Option pricing model	Forward and spot rates	12,000	6 - 13,500	(11	)
Options(12)	$	498	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	7x	7x	Increase
				Forward EBITDA multiple	7x	7x	Increase
			Discounted cash flows	Weighted average cost of capital	15%	15%	Decrease
				LTM EBITDA exit multiple	6x	6x	Increase

(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $14.2 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach.

(9) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $162.0 million was valued solely using a discounted cash flow technique, while $44.6 million was valued solely using a market comparables technique and $18.1 million was valued solely using a yield analysis.

(10) Natural resources assets with an estimated fair value of $92.6 million as of March 31, 2016 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 26% liquids and 74% natural gas.

(11) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(12) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

The following table presents additional information about valuation techniques and inputs used for assets, including derivatives, that are measured at fair value and categorized within Level 3 as of December 31, 2015 (dollar amounts in thousands):

	Balance as of December 31, 2015		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase in Input(4)
Assets:
Corporate debt securities	$	194,986	Yield analysis	Yield	23%	6% - 31%	Decrease
				Net leverage	10x	10x-12x	Decrease
				EBITDA multiple	7x	7x - 10x	Increase
				Discount margin	750	750bps	Decrease
Residential mortgage – backed securities	$	49,621	Discounted cash flows	Probability of default	1%	0% - 3%	Decrease
				Loss severity	40%	35% - 45%	Decrease
				Constant prepayment rate	15%	12% - 18%	(5	)
Corporate loans	$	298,734	Yield Analysis	Yield	11%	3% - 18%	Decrease
				Net leverage	7x	1x - 19x	Decrease
				EBITDA multiple	9x	6x - 15x	Increase
Equity investments, at estimated fair value(6)	$	146,648	Inputs to market comparables, discounted cash flow and broker quotes	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	52%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	42%	0% - 100%	(8	)
				Weight ascribed to broker quotes	6%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	8x	4x - 13x	Increase
				Forward EBITDA multiple	8x	3x - 11x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	7% - 14%	Decrease
				LTM EBITDA exit multiple	8x	0x - 9x	Increase
			Broker quotes	Offered quotes	4	0 - 5	Increase
Interests in joint ventures and partnerships(10)	$	888,408	Inputs to both market comparables and discounted cash flow	Weight ascribed to market comparables	43%	0% - 100%	(7	)
				Weight ascribed to discounted cash flows	57%	0% - 100%	(8	)
			Market comparables	LTM EBITDA multiple	5x	1x - 9x	Decrease
			Discounted cash flows	Weighted average cost of capital	8%	6% - 20%	Decrease
				Average price per BOE(11)	$20.61	$14.33 - $23.22	Increase
			Yield analysis	Yield	16%	16%	Decrease
				Net leverage	2x	2x	Decrease
				EBITDA multiple	8x	8x	Increase
Foreign exchange options, net	$	2,887	Option pricing model	Forward and spot rates	11,500	6 -14,000	(12	)
Options(13)	$	95	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease
				Weight ascribed to market comparables	50%	50%	(7	)
				Weight ascribed to discounted cash flows	50%	50%	(8	)
	,		Market comparables	LTM EBITDA multiple	9x	9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
			Discounted cash flows	Weighted average cost of capital	14%	14%	Decrease
				LTM EBITDA exit multiple	8x	8x	Increase

(1) For the assets that have more than one valuation technique, the Company may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0-100%. When determining the weighting ascribed to each valuation methodology, the Company considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100% weighting to a single methodology. Broker quotes obtained for valuation purposes are reviewed by the Company through other valuation techniques.

(2) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments; market valuations of comparable companies; and company specific developments including exit strategies and realization opportunities.

(3) Weighted average amounts are based on the estimated fair values.

(4) Unless otherwise noted, this column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(5) The impact of changes in prepayment speeds may have differing impacts depending on the seniority of the instrument. Generally, an increase in the constant prepayment speed will positively impact the overall valuation of traditional mortgage assets. In contrast, an increase in the constant prepayment rate will negatively impact the overall valuation of interest-only strips.

(6) When determining the illiquidity discount to be applied to equity investments, at estimated fair value, the Company seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to all private equity investments carried at estimated fair value. The Company then evaluates such investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include the salability of the investment, whether the issuer is undergoing significant restructuring activity or similar factors, as well as characteristics about the issuer including its size and/or whether it is experiencing, or expected to experience, a significant decline in earnings. Depending on the applicability of these factors, the Company determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time the Company holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that estimated by the Company in its valuations. Of the total equity investments, at estimated fair value, $6.4 million was valued solely using broker quotes, while $11.3 million was valued solely using a market comparables technique.

(7) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level 3 investments if the market comparables approach results in a higher valuation than the discounted cash flow approach and broker quotes, if applicable. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and broker quotes, if applicable.

(8) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level 3 investments if the discounted cash flow approach results in a higher valuation than the market comparables approach and broker quotes, if applicable. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach and broker quotes, if applicable.

(9) The directional change from an increase in the weight ascribed to broker quotes would increase the fair value of the Level 3 investments if the broker quotes results in a higher valuation than the market comparables and discounted cash flow approaches, if applicable. The opposite would be true if the broker quotes results in a lower valuation than the market comparables and discounted cash flow approaches, if applicable.

(10) Inputs exclude an asset that was valued using an independent third party valuation firm. Of the total interest in joint ventures and partnerships, $164.4 million was valued solely using a discounted cash flow technique, while $98.9 million was valued solely using a market comparables technique and $17.5 million was valued solely using a yield analysis.

(11) Natural resources assets with an estimated fair value of $114.1 million as of December 31, 2015 were valued using commodity prices. Commodity prices may be measured using a common volumetric equivalent where one barrel of oil equivalent (‘‘BOE’’) is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregate of all price inputs for these investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 25% liquids and 75% natural gas.

(12) Inputs include forward rates for investments in Chinese Yuan and Indian Rupees.

(13) The total options were valued using 50% a discount cash flow technique and 50% a market comparables technique.

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Tables)

3 Months Ended

Mar. 31, 2016

Management Agreement and Related Party Transactions

Summary of components of related party management compensation

The following table summarizes the components of related party management compensation on the Company’s condensed consolidated statements of operations, which are described in further detail below (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Base management fees, net	$	1,029	$	4,053
CLO management fees	6,247		6,167
Incentive fees	—		—
Total related party management compensation	$	7,276	$	10,220

Base Management Fees

Management Agreement and Related Party Transactions

Summary of components of related party management compensation

The table below summarizes the aggregate base management fees (amounts in thousands):

	Three months ended March 31, 2016			Three months ended March 31, 2015
Base management fees, gross	$	5,783		$	8,491
CLO management fees credit(1)	(4,754		)	(4,438		)
Total base management fees, net	$	1,029		$	4,053

(1) See “CLO Management Fees” for further discussion.

CLO Management Fees

Management Agreement and Related Party Transactions

Summary of components of related party management compensation

The table below summarizes the aggregate CLO management fees, including the Fee Credits (amounts in thousands):

	Three months ended March 31, 2016		Three months ended March 31, 2015
Charged and retained CLO management fees(1)	$	1,493	$	1,729
CLO management fees credit	4,754		4,438
Total CLO management fees	$	6,247	$	6,167

(1) Represents management fees incurred by the senior and subordinated note holders of a CLO, excluding the Fee Credits received by the Company based on its ownership percentage in the CLO.

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SEGMENT REPORTING (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Schedule showing net income (loss) components and total assets of reportable segments reconciled to amounts reflected in the condensed consolidated financial statements

The following table presents the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations (amounts in thousands):

	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015		Three months ended March 31, 2016		Three months ended March 31, 2015			Three months ended March 31, 2016			Three months ended March 31, 2015
Total revenues	$	77,395		$	94,958		$	2,641		$	2,828		$	9,269		$	—	$	—	$	—		$	89,305		$	97,786
Total investment costs and expenses	50,984			55,967			1,614			1,340			400			346		—		—			52,998			57,653
Total other income (loss)	(173,946		)	(65,992		)	(27,242		)	(7,753		)	(8,694		)	4,581		—		—			(209,882		)	(69,164		)
Total other expenses	23,864			16,403			130			510			70			155		—		100			24,064			17,168
Income tax expense (benefit)	23			48			—			—			37			299		—		—			60			347
Net income (loss)	$	(171,422	)	$	(43,452	)	$	(26,345	)	$	(6,775	)	$	68		$	3,781	$	—	$	(100	)	$	(197,699	)	$	(46,546	)
Net income (loss) attributable to noncontrolling interests	(9,711		)	(5,858		)	(5,824		)	(213		)	—			—		—		—			(15,535		)	(6,071		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(161,711	)	$	(37,594	)	$	(20,521	)	$	(6,562	)	$	68		$	3,781	$	—	$	(100	)	$	(182,164	)	$	(40,475	)

(1) Consists of insurance and directors’ expenses which are not allocated to individual segments.

The following table shows total assets of our reportable segments reconciled to amounts reflected in the condensed consolidated balance sheets as of March 31, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Total assets	$	6,663,815	$	7,303,305	$	208,161	$	230,815	$	217,667	$	254,275	$	—	$	—	$	7,089,643	$	7,788,395

(1) Total consolidated assets as of March 31, 2016 included $63.0 million of noncontrolling interests, of which $34.5 million was related to the Credit segment and $28.5 million was related to the Natural Resources segment. Total consolidated assets as of December 31, 2015 included $82.9 million of noncontrolling interests, of which $50.3 million was related to the Credit segment and $32.6 million was related to the Natural Resources segment.

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ORGANIZATION (Details)	3 Months Ended
	Mar. 31, 2016
Series A LLC Preferred Shares
Definitive merger agreement
Preferred shares, dividend rate (as a percent)	7.375%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Collateralized Debt Obligation disclosures
Collateralized loan obligation secured notes	$ 5,178,657	$ 5,540,207
Minimum percentage of voting interest required to consolidate non-VIEs	50.00%
Collateralized Debt Obligation (CLOs) VIEs
Collateralized Debt Obligation disclosures
Corporate debt investment, par amount	$ 4,800,000	5,500,000
Estimated fair value of corporate debt investments	4,500,000	5,100,000
Collateralized Debt Obligation (CLOs) VIEs | Nonaffiliates
Collateralized Debt Obligation disclosures
Collateralized loan obligation secured notes	$ 4,500,000	$ 4,900,000

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SECURITIES (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Securities Available-for-Sale
Par	$ 495,548		$ 520,135
Amortized Cost	442,325		474,201
Estimated Fair Value	336,764		417,519
Net realized and unrealized gains
Net realized gains (losses)	(1,593)	$ (526)
Net (increase) decrease in unrealized losses	(50,126)	1,834
Net (increase) decrease in unrealized losses	(51,719)	$ 1,308
Securities, at estimated fair value
Securities Available-for-Sale
Par	495,548		520,135
Amortized Cost	442,325		474,201
Estimated Fair Value	$ 336,764		$ 417,519

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SECURITIES (Details 2) - security	Mar. 31, 2016	Dec. 31, 2015
Corporate Debt Securities
Gross unrealized losses and estimated fair value of available-for-sale securities
Number of corporate debt securities in default	0	0

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SECURITIES (Details 3) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016 USD ($) issuer	Dec. 31, 2015 USD ($) issuer
Concentration risk
Number of issuers with whom a specified percentage of estimated fair value of corporate debt securities is concentrated (in issuers) | issuer	10	10
Number of largest issuers with whom a specified percentage of estimated fair value of debt securities is concentrated (in issuers) | issuer	3	3
Securities	$ 336,764	$ 417,519
Estimated fair value of securities pledged as collateral
Pledged as collateral for collateralized loan obligation secured debt	136,318	170,365
Total	$ 136,318	$ 170,365
Corporate Debt Securities | Percent to total investment in corporate loans, debt securities and other investments | Top three largest
Concentration risk
Concentration risk of total fair value (as a percent)	55.00%	52.00%
Securities	$ 159,900	$ 192,500
Corporate Debt Securities | Percent to total investment in corporate loans, debt securities and other investments | Ten issuers
Concentration risk
Concentration risk of total fair value (as a percent)	90.00%	89.00%

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CORPORATE LOANS (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Summary of corporate loans
Par	$ 5,275,132	$ 5,722,646
Amortized Cost	5,164,654	5,619,815
Estimated Fair Value	4,783,419	5,188,610
Corporate loans, at estimated fair value
Summary of corporate loans
Par	5,275,132	5,722,646
Amortized Cost	5,164,654	5,619,815
Estimated Fair Value	$ 4,783,419	$ 5,188,610

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CORPORATE LOANS (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Corporate loans
Net realized and unrealized (losses) gains
Credit risk, gain (loss)	$ 6,300	$ 9,000
Corporate loans, at estimated fair value
Net realized and unrealized (losses) gains
Net realized gains (losses)	(30,714)	(16,182)
Net (increase) decrease in unrealized losses	44,923	82,274
Net realized and unrealized gains (losses)	$ 14,209	$ 66,092

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CORPORATE LOANS (Details 3) $ in Millions	Mar. 31, 2016 USD ($) issuer loan	Dec. 31, 2015 USD ($) issuer loan
Recorded investment in impaired loans and related allowances for credit losses
Number of loans in default | loan	1	1
Estimated fair value of corporate loans in default	$ 105.1	$ 113.6
Number of issuers in default | issuer	1	1
Corporate loans, at estimated fair value
Recorded investment in impaired loans and related allowances for credit losses
Par amount of non-accrual loans	$ 435.2	$ 435.2
Estimated fair value of non-accrual loans	$ 115.6	$ 127.5

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CORPORATE LOANS (Details 4) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016 USD ($) issuer	Dec. 31, 2015 USD ($) issuer
Concentration risk
Estimated fair value of corporate loans | $	$ 4,783,419	$ 5,188,610
Corporate Loans
Concentration risk
Number of issuers with whom a specified percentage of estimated fair value or amortized cost of corporate loans is concentrated | issuer	20	20
Number of issuers with the largest concentration of corporate loans | issuer	3	3
Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top Twenty Issuers
Concentration risk
Concentration risk (as a percent)	31.00%	31.00%
Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top three largest
Concentration risk
Concentration risk (as a percent)	8.00%	8.00%
Estimated fair value of corporate loans | $	$ 390,800	$ 434,600

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CORPORATE LOANS (Details 5) - Estimated Fair Value - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Pledged assets
Pledged as collateral for collateralized loan obligation secured debt	$ 4,491,601	$ 4,917,123
Total loans pledged as collateral	$ 4,491,601	$ 4,917,123

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Equity Method Investments and Joint Ventures [Abstract]
Interests in joint ventures and partnerships, at estimated fair value	$ 748,329	$ 888,408
Equity investments, at estimated fair value	244,462	262,946
Estimated fair value of equity method investments	$ 400,800	$ 506,500
Maritime Finance Company
Schedule of Equity Method Investments [Line Items]
Ownership percentage	31.00%
LCI Helicopters Limited
Schedule of Equity Method Investments [Line Items]
Ownership percentage	33.00%
Mineral Acquisition Company
Schedule of Equity Method Investments [Line Items]
Ownership percentage	70.00%

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 2) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Gain (Loss) on Investments [Line Items]
Gain (Loss) on Investments	$ (138,032)	$ 19,899
Net income (loss) attributable to noncontrolling interests	15,535	6,071
Equity Method Investments
Gain (Loss) on Investments [Line Items]
Net realized gains (losses)	725	1,424
Net (increase) decrease in unrealized losses	(15,992)	(22,426)
Gain (Loss) on Investments	(15,267)	(21,002)
Interests in Joint Ventures and Partnerships
Gain (Loss) on Investments [Line Items]
Net realized gains (losses)	(2,162)	0
Net (increase) decrease in unrealized losses	(83,093)	(26,499)
Gain (Loss) on Investments	$ (85,255)	$ (26,499)

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BORROWINGS (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Details of Company's borrowings
Total borrowings	$ 5,178,657	$ 5,540,207
Carrying value	4,548,688	4,843,746
Total borrowings, carrying value	5,210,208	5,505,250
Collateral amount	4,699,895	5,169,916
CLO 2007-1 secured notes
Details of Company's borrowings
Par	1,431,783	1,544,032
Carrying value	$ 1,537,984	$ 1,630,293
Weighted Average Borrowing Rate (as a percent)	2.47%	2.10%
Weighted Average Remaining Maturity (in days)	1871 days	1962 days
Collateral amount	$ 1,530,018	$ 1,732,855
CLO 2007-1 subordinated notes
Details of Company's borrowings
Par	134,468	134,468
Carrying value	$ 74,058	$ 74,954
Weighted Average Borrowing Rate (as a percent)	4.53%	11.66%
Weighted Average Remaining Maturity (in days)	1871 days	1962 days
Collateral amount	$ 143,694	$ 150,912
CLO 2007-A subordinated notes
Details of Company's borrowings
Par	15,096	15,096
Carrying value	$ 15,640	$ 17,060
Weighted Average Borrowing Rate (as a percent)	6.59%	14.49%
Weighted Average Remaining Maturity (in days)	563 days	654 days
Collateral amount	$ 43,222	$ 48,856
CLO 2011-1 senior debt
Details of Company's borrowings
Par		249,301
Carrying value		$ 249,301
Weighted Average Borrowing Rate (as a percent)		1.67%
Weighted Average Remaining Maturity (in days)		1689 days
Collateral amount		$ 310,498
CLO 2012-1 secured notes
Details of Company's borrowings
Par	367,500	367,500
Carrying value	$ 372,968	$ 365,383
Weighted Average Borrowing Rate (as a percent)	2.70%	2.59%
Weighted Average Remaining Maturity (in days)	3181 days	3272 days
Collateral amount	$ 365,848	$ 361,684
CLO 2012-1 subordinated notes
Details of Company's borrowings
Par	18,000	18,000
Carrying value	$ 8,960	$ 10,845
Weighted Average Borrowing Rate (as a percent)	14.06%	15.82%
Weighted Average Remaining Maturity (in days)	3181 days	3272 days
Collateral amount	$ 17,919	$ 17,715
CLO 2013-1 secured notes
Details of Company's borrowings
Par	458,500	458,500
Carrying value	$ 461,576	$ 450,280
Weighted Average Borrowing Rate (as a percent)	2.34%	2.05%
Weighted Average Remaining Maturity (in days)	3393 days	3484 days
Collateral amount	$ 481,092	$ 479,391
CLO 2013-2 secured notes
Details of Company's borrowings
Par	339,250	339,250
Carrying value	$ 340,151	$ 334,187
Weighted Average Borrowing Rate (as a percent)	2.80%	2.52%
Weighted Average Remaining Maturity (in days)	3585 days	3676 days
Collateral amount	$ 349,842	$ 347,989
CLO 9 secured notes
Details of Company's borrowings
Par	463,750	463,750
Carrying value	$ 460,374	$ 454,103
Weighted Average Borrowing Rate (as a percent)	2.63%	2.33%
Weighted Average Remaining Maturity (in days)	3850 days	3941 days
Collateral amount	$ 459,889	$ 463,574
CLO 9 subordinated notes
Details of Company's borrowings
Par	15,000	15,000
Carrying value	$ 8,879	$ 9,972
Weighted Average Borrowing Rate (as a percent)	14.62%	15.92%
Weighted Average Remaining Maturity (in days)	3850 days	3941 days
Collateral amount	$ 14,875	$ 14,994
CLO 10 secured notes
Details of Company's borrowings
Par	368,000	368,000
Carrying value	$ 370,038	$ 363,977
Weighted Average Borrowing Rate (as a percent)	2.87%	2.75%
Weighted Average Remaining Maturity (in days)	3546 days	3637 days
Collateral amount	$ 381,593	$ 384,991
CLO 11 secured notes
Details of Company's borrowings
Par	507,750	507,750
Carrying value	$ 500,174	$ 491,699
Weighted Average Borrowing Rate (as a percent)	2.68%	2.38%
Weighted Average Remaining Maturity (in days)	4032 days	4123 days
Collateral amount	$ 500,785	$ 501,286
CLO 11 subordinated notes
Details of Company's borrowings
Par	28,250	28,250
Carrying value	$ 20,623	$ 23,306
Weighted Average Borrowing Rate (as a percent)	16.84%	5.28%
Weighted Average Remaining Maturity (in days)	4032 days	4123 days
Collateral amount	$ 27,862	$ 27,890
CLO 13 secured notes
Details of Company's borrowings
Par	370,000	370,000
Carrying value	$ 374,429	$ 364,986
Weighted Average Borrowing Rate (as a percent)	2.84%	2.84%
Weighted Average Remaining Maturity (in days)	4308 days	4399 days
Collateral amount	$ 379,157	$ 323,781
CLO 13 secured notes
Details of Company's borrowings
Par	4,000	4,000
Carrying value	$ 2,834	$ 3,400
Weighted Average Borrowing Rate (as a percent)	0.00%	0.00%
Weighted Average Remaining Maturity (in days)	4308 days	4399 days
Collateral amount	$ 4,099	$ 3,500
Total collateralized loan obligation secured debt
Details of Company's borrowings
Par	4,521,347	4,882,897
Carrying value	4,548,688	4,843,746
Collateral amount	4,699,895	5,169,916
8.375% Senior notes
Details of Company's borrowings
Par	258,750	258,750
Carrying value	$ 289,350	$ 289,660
Weighted Average Borrowing Rate (as a percent)	8.38%	8.38%
Weighted Average Remaining Maturity (in days)	9360 days	9451 days
7.500% Senior notes
Details of Company's borrowings
Par	$ 115,043	$ 115,043
Carrying value	$ 123,267	$ 123,346
Weighted Average Borrowing Rate (as a percent)	7.50%	7.50%
Weighted Average Remaining Maturity (in days)	9485 days	9576 days
Junior subordinated notes
Details of Company's borrowings
Par	$ 283,517	$ 283,517
Carrying value	$ 248,903	$ 248,498
Weighted Average Borrowing Rate (as a percent)	5.57%	5.43%
Weighted Average Remaining Maturity (in days)	7493 days	7584 days

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BORROWINGS (Details 2) - USD ($)			1 Months Ended					3 Months Ended
	Dec. 16, 2015	May. 07, 2015	Mar. 31, 2016	Nov. 30, 2015	Jul. 31, 2015	Jun. 30, 2015	Feb. 28, 2015	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Details of Company's borrowings
Collateralized loan obligation secured debt repaid								$ 361,550,000	$ 338,197,000
Collateralized Loan Obligation Secured Notes
Details of Company's borrowings
Fair value, option, credit risk, gains (losses) on liabilities								0	0
CLO 2005-2 Senior Secured Notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid				$ 140,200,000
CLO 2005-1 secured notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid					$ 142,400,000
CLO 2006-1 senior secured notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid							$ 181,800,000
Contractual notional amount terminated							$ 84,000,000
CLO 2007-1 secured notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid								112,200,000
Par amount of notes issued			$ 1,431,783,000					1,431,783,000		$ 1,544,032,000
Senior Notes Legacy CLO
Details of Company's borrowings
Collateralized loan obligation secured debt repaid									169,800,000
CLO 2011-1 senior debt
Details of Company's borrowings
Collateralized loan obligation secured debt repaid			249,300,000						$ 1,500,000
Par amount of notes issued										249,301,000
Notes C L O13
Details of Company's borrowings
Par amount of notes issued	$ 412,000,000
CLO 13 secured notes
Details of Company's borrowings
Par amount of notes issued			370,000,000					370,000,000		370,000,000
CLO 13 secured notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued	370,000,000
Floating rate senior secured note	350,000,000
Fixed rate senior secured note	$ 20,000,000
Fixed rate (as a percent)	3.83%
CLO 13 secured notes | Nonaffiliates | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)	2.19%
CLO 2007-1 Class D and E secured notes
Details of Company's borrowings
Par amount of notes issued						$ 35,000,000
Proceeds from senior notes						35,100,000
CLO 2005-2 Class E Secured Notes
Details of Company's borrowings
Par amount of notes issued					15,000,000	15,000,000
Proceeds from senior notes					$ 15,100,000	$ 15,100,000
CLO 2013-2 secured notes
Details of Company's borrowings
Par amount of notes issued			339,250,000					339,250,000		339,250,000
CLO 13 secured notes
Details of Company's borrowings
Par amount of notes issued			4,000,000					4,000,000		4,000,000
CLO 13 secured notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued	$ 4,000,000
CLO 11 Notes
Details of Company's borrowings
Par amount of notes issued		$ 564,500,000
CLO 11 secured notes
Details of Company's borrowings
Par amount of notes issued			507,750,000					507,750,000		507,750,000
CLO 11 secured notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued		$ 507,800,000
CLO 11 secured notes | Nonaffiliates | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)		2.06%
CLO 11 subordinated notes
Details of Company's borrowings
Par amount of notes issued			$ 28,250,000					$ 28,250,000		$ 28,250,000
CLO 11 subordinated notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued		$ 28,300,000.0

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BORROWINGS (Details 3) - USD ($)	Jul. 22, 2015	Mar. 02, 2015
CLO 11 Warehouse Facility
Details of Company's borrowings
Maximum borrowing capacity		$ 570,000,000
CLO 11 Warehouse Facility | LIBOR
Details of Company's borrowings
Debt, variable interest rate basis		LIBOR
CLO 13 Warehouse Facility
Details of Company's borrowings
Maximum borrowing capacity	$ 350,000,000
CLO 13 Warehouse Facility | LIBOR
Details of Company's borrowings
Debt, variable interest rate basis	LIBOR
Minimum | CLO 11 Warehouse Facility | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)		1.25%
Minimum | CLO 13 Warehouse Facility | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)	1.50%
Maximum | CLO 11 Warehouse Facility | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)		1.75%
Maximum | CLO 13 Warehouse Facility | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)	2.25%

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DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Estimated Fair Value	$ (33,399)	$ (3,040)
Free-Standing Derivatives: | Interest rate swaps
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Derivative asset, notional amount	281,333	297,667
Estimated Fair Value	(53,229)	(41,743)
Free-Standing Derivatives: | Foreign exchange forward contracts and options
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Derivative liability, notional amount	(383,238)	(375,524)
Estimated Fair Value	19,332	38,608
Free-Standing Derivatives: | Options
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Estimated Fair Value	$ 498	$ 95

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DERIVATIVE INSTRUMENTS (Details 2) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Counterparty One
Notional amount
Net liability	$ 400
Net asset		$ 2,400
Collateral posted	6,900	20,700
Counterparty Two
Notional amount
Net asset	700	1,600
Collateral held	100	100
Counterparty Three
Notional amount
Net asset	5,200	9,100
Collateral held	33,700	23,600
Free-Standing Derivatives: | Interest rate swaps
Notional amount
Notional	281,300	297,700
Free-Standing Derivatives: | Foreign exchange forward contracts and options
Notional amount
Notional amount of liability	$ 383,238	$ 375,524

XML

DERIVATIVE INSTRUMENTS (Details 3) - Free-Standing Derivatives: - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Effect on income from free-standing derivatives
Realized gains (losses)	$ 11,354	$ (5,447)
Unrealized gains (losses)	(21,570)	(3,653)
Total	(10,216)	(9,100)
Interest rate swaps
Effect on income from free-standing derivatives
Realized gains (losses)	0	(5,297)
Unrealized gains (losses)	(11,731)	(244)
Total	(11,731)	(5,541)
Foreign exchange forward contracts and options
Effect on income from free-standing derivatives
Realized gains (losses)	11,212	15
Unrealized gains (losses)	(10,242)	(594)
Total	970	(579)
Common stock warrants
Effect on income from free-standing derivatives
Realized gains (losses)	142	0
Unrealized gains (losses)	0	(1,891)
Total	142	(1,891)
Total rate of return swaps
Effect on income from free-standing derivatives
Realized gains (losses)	0	(165)
Unrealized gains (losses)	0	(21)
Total	0	(186)
Options
Effect on income from free-standing derivatives
Realized gains (losses)	0	0
Unrealized gains (losses)	403	(903)
Total	$ 403	$ (903)

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Liabilities:
Senior notes	$ 412,617	$ 413,006
Junior subordinated notes	248,903	248,498
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash, restricted cash, and cash equivalents	738,423	807,496
Liabilities:
Senior notes	391,250	394,390
Junior subordinated notes	0	0
Significant Other Observable Inputs (Level 2)
Assets:
Cash, restricted cash, and cash equivalents	0	0
Liabilities:
Senior notes	0	0
Junior subordinated notes	0	0
Significant Unobservable Inputs (Level 3)
Assets:
Cash, restricted cash, and cash equivalents	0	0
Liabilities:
Senior notes	0	0
Junior subordinated notes	200,179	216,757
Carrying Amount
Assets:
Cash, restricted cash, and cash equivalents	738,423	807,496
Liabilities:
Senior notes	412,617	413,006
Junior subordinated notes	248,903	248,498
Estimated Fair Value
Assets:
Cash, restricted cash, and cash equivalents	738,423	807,496
Liabilities:
Senior notes	391,250	394,390
Junior subordinated notes	$ 200,179	$ 216,757

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Assets:
Corporate debt securities	$ 336,764	$ 417,519
Total securities	336,764	417,519
Corporate loans	4,783,419	5,188,610
Equity investments, at estimated fair value	244,462	262,946
Interests in joint ventures and partnerships, at estimated fair value	748,329	888,408
Derivatives:
Total derivative assets	26,246	40,852
Liabilities:
Collateralized loan obligation secured notes	5,178,657	5,540,207
Derivatives:
Total derivative liabilities	59,645	43,892
Recurring basis | Estimated Fair Value
Assets:
Total securities	336,764	417,519
Corporate loans	4,783,419	5,188,610
Equity investments, at estimated fair value	244,462	262,946
Interests in joint ventures and partnerships, at estimated fair value	748,329	888,408
Derivatives:
Total derivative assets	26,246	40,852
Total	6,139,220	6,798,335
Liabilities:
Collateralized loan obligation secured notes	4,548,688	4,843,746
Derivatives:
Total derivative liabilities	59,645	43,892
Total	4,608,333	4,887,638
Recurring basis | Estimated Fair Value | Corporate Debt Securities
Assets:
Corporate debt securities	289,050	367,898
Recurring basis | Estimated Fair Value | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	47,714	49,621
Recurring basis | Estimated Fair Value | Interest rate swaps
Derivatives:
Derivative liabilities	53,229	41,743
Recurring basis | Estimated Fair Value | Foreign exchange forward contracts
Derivatives:
Derivative assets	25,748	40,757
Derivatives:
Derivative liabilities	6,416	2,149
Recurring basis | Estimated Fair Value | Options
Derivatives:
Derivative assets	498	95
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total securities	0	0
Corporate loans	0	0
Equity investments, at estimated fair value	44,133	40,765
Interests in joint ventures and partnerships, at estimated fair value	0	0
Derivatives:
Total derivative assets	0	0
Total	44,133	40,765
Liabilities:
Collateralized loan obligation secured notes	0	0
Derivatives:
Total derivative liabilities	0	0
Total	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Corporate Debt Securities
Assets:
Corporate debt securities	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swaps
Derivatives:
Derivative liabilities	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Foreign exchange forward contracts
Derivatives:
Derivative assets	0	0
Derivatives:
Derivative liabilities	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Options
Derivatives:
Derivative assets	0	0
Recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Total securities	138,982	172,912
Corporate loans	4,486,437	4,889,876
Equity investments, at estimated fair value	61,766	75,533
Interests in joint ventures and partnerships, at estimated fair value	0	0
Derivatives:
Total derivative assets	23,272	37,120
Total	4,710,457	5,175,441
Liabilities:
Collateralized loan obligation secured notes	4,548,688	4,843,746
Derivatives:
Total derivative liabilities	59,010	43,142
Total	4,607,698	4,886,888
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Debt Securities
Assets:
Corporate debt securities	138,982	172,912
Recurring basis | Significant Other Observable Inputs (Level 2) | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	0	0
Recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate swaps
Derivatives:
Derivative liabilities	53,229	41,743
Recurring basis | Significant Other Observable Inputs (Level 2) | Foreign exchange forward contracts
Derivatives:
Derivative assets	23,272	37,120
Derivatives:
Derivative liabilities	5,781	1,399
Recurring basis | Significant Other Observable Inputs (Level 2) | Options
Derivatives:
Derivative assets	0	0
Recurring basis | Significant Unobservable Inputs (Level 3)
Assets:
Total securities	197,782	244,607
Corporate loans	296,982	298,734
Equity investments, at estimated fair value	138,563	146,648
Interests in joint ventures and partnerships, at estimated fair value	748,329	888,408
Derivatives:
Total derivative assets	2,974	3,732
Total	1,384,630	1,582,129
Liabilities:
Collateralized loan obligation secured notes	0	0
Derivatives:
Total derivative liabilities	635	750
Total	635	750
Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate Debt Securities
Assets:
Corporate debt securities	150,068	194,986
Recurring basis | Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	47,714	49,621
Recurring basis | Significant Unobservable Inputs (Level 3) | Interest rate swaps
Derivatives:
Derivative liabilities	0	0
Recurring basis | Significant Unobservable Inputs (Level 3) | Foreign exchange forward contracts
Derivatives:
Derivative assets	2,476	3,637
Derivatives:
Derivative liabilities	635	750
Recurring basis | Significant Unobservable Inputs (Level 3) | Options
Derivatives:
Derivative assets	$ 498	$ 95

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Reconciliation of liabilities measured on Level 3 basis
Transfers from Level 1 into Level 2	$ 0	$ 0
Transfers from Level 2 into Level 1	0	0
Collateralized Loan Obligation Secured Notes
Reconciliation of liabilities measured on Level 3 basis
Balance at the beginning of the period		5,501,099,000
Included in earnings		0
Transfers into Level 3		0
Transfers out of level 3		(5,501,099,000)
Purchases		0
Sales		0
Settlements		0
Balance at the end of the period		0
Change in unrealized gains or losses for the period included in earnings for liabilities held at the end of the reporting period		0
Corporate Debt Securities
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	194,986,000	317,034,000
Included in earnings	(44,882,000)	(3,996,000)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	$ 0	0
Sales		(4,213,000)
Settlements	$ (36,000)	(914,000)
Balance at the end of the period	150,068,000	307,911,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(44,882,000)	(9,354,000)
Residential Mortgage- Backed Securities
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	49,621,000	55,184,000
Included in earnings	332,000	1,776,000
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	0	0
Sales	0	0
Settlements	(2,239,000)	(3,025,000)
Balance at the end of the period	47,714,000	53,935,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	329,000	153,000
Corporate loans, at estimated fair value
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	298,734,000	347,077,000
Included in earnings	(6,827,000)	(55,770,000)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	2,306,000	1,308,000
Sales	0	(25,511,000)
Settlements	2,769,000	69,082,000
Balance at the end of the period	296,982,000	336,186,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(6,827,000)	(55,026,000)
Equity Investments, at Estimated Fair Value
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	146,648,000	81,719,000
Included in earnings	(8,085,000)	(23,327,000)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	0	0
Sales	0	0
Settlements	0	44,927,000
Balance at the end of the period	138,563,000	103,319,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(8,085,000)	(22,961,000)
Interests in Joint Ventures and Partnerships
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	888,408,000	718,772,000
Included in earnings	(80,695,000)	(32,362,000)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	14,067,000	35,537,000
Sales	0	0
Settlements	(73,451,000)	(2,657,000)
Balance at the end of the period	748,329,000	719,290,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(80,695,000)	(32,362,000)
Foreign Exchange Options, Net
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	2,887,000
Included in earnings	(1,046,000)
Transfers into Level 3	0
Transfers out of Level 3	0
Purchases	0
Sales	0
Settlements	0
Balance at the end of the period	1,841,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(1,046,000)
Common stock warrants
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period		0
Included in earnings		(1,891,000)
Transfers into Level 3		0
Transfers out of Level 3		0
Purchases		0
Sales		0
Settlements		2,412,000
Balance at the end of the period		521,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		(1,891,000)
Options
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	95,000	5,212,000
Included in earnings	403,000	(903,000)
Transfers into Level 3	0	0
Transfers out of Level 3	0	0
Purchases	0	0
Sales	0	0
Settlements	0	0
Balance at the end of the period	498,000	4,309,000
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$ 403,000	$ (903,000)

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) $ / shares in Units, $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) $ / barrel	Mar. 31, 2015	Dec. 31, 2015 USD ($) $ / shares $ / barrel
Minimum
Valuation techniques used for assets, measured at fair value
Weight ascribed to each valuation technique	0.00%	0.00%
Maximum
Valuation techniques used for assets, measured at fair value
Weight ascribed to each valuation technique	100.00%	100.00%
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 150,068		$ 194,986
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities
Valuation techniques used for assets, measured at fair value
Assets, fair value	47,714		49,621
Significant Unobservable Inputs (Level 3) | Corporate loans, at estimated fair value
Valuation techniques used for assets, measured at fair value
Assets, fair value	296,982		298,734
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 138,563		$ 146,648
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
Illiquidity discount	5.00%		5.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 748,329		$ 888,408
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net
Valuation techniques used for assets, measured at fair value
Assets, fair value	1,841		2,887
Significant Unobservable Inputs (Level 3) | Options
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 498		$ 95
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	12.00%		23.00%
Net leverage	9		10
EBITDA multiple	8		7
Discount margin	10.50%		7.50%
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Minimum
Valuation techniques used for assets, measured at fair value
Yield	7.00%		6.00%
Net leverage	9		10
EBITDA multiple	7		7
Discount margin	10.50%		7.50%
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate Debt Securities | Maximum
Valuation techniques used for assets, measured at fair value
Yield	13.00%		31.00%
Net leverage	10		12
EBITDA multiple	9		10
Discount margin	10.50%		7.50%
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	13.00%		11.00%
Net leverage	8		7
EBITDA multiple	9		9
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Minimum
Valuation techniques used for assets, measured at fair value
Yield	4.00%		3.00%
Net leverage	1		1
EBITDA multiple	6		6
Significant Unobservable Inputs (Level 3) | Yield analysis | Corporate loans, at estimated fair value | Maximum
Valuation techniques used for assets, measured at fair value
Yield	24.00%		18.00%
Net leverage	14		19
EBITDA multiple	13		15
Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 18,100		$ 17,500
Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	14.00%		16.00%
Net leverage	2		2
EBITDA multiple	6		8
Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Minimum
Valuation techniques used for assets, measured at fair value
Yield	14.00%		16.00%
Net leverage	2		2
EBITDA multiple	6		8
Significant Unobservable Inputs (Level 3) | Yield analysis | Interests in Joint Ventures and Partnerships | Maximum
Valuation techniques used for assets, measured at fair value
Yield	14.00%		16.00%
Net leverage	2		2
EBITDA multiple	6		8
Significant Unobservable Inputs (Level 3) | Option pricing model | Foreign Exchange Options, Net | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets	12,000
Significant Unobservable Inputs (Level 3) | Option pricing model | Foreign Exchange Options, Net | Minimum
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets	6
Significant Unobservable Inputs (Level 3) | Option pricing model | Foreign Exchange Options, Net | Maximum
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets	13,500
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Weighted Average
Valuation techniques used for assets, measured at fair value
Probability of default	1.00%		1.00%
Loss severity	40.00%		40.00%
Constant prepayment rate	15.00%		15.00%
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Minimum
Valuation techniques used for assets, measured at fair value
Probability of default	0.00%		0.00%
Loss severity	35.00%		35.00%
Constant prepayment rate	12.00%		12.00%
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Residential Mortgage- Backed Securities | Maximum
Valuation techniques used for assets, measured at fair value
Probability of default	3.00%		3.00%
Loss severity	45.00%		45.00%
Constant prepayment rate	18.00%		18.00%
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	9.00%		9.00%
LTM EBITDA exit multiple	9		8
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	7.00%		7.00%
LTM EBITDA exit multiple	3		0
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Equity Investments, at Estimated Fair Value | Maximum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	14.00%		14.00%
LTM EBITDA exit multiple	11		9
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 162,000		$ 164,400
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	10.00%		8.00%
Average Price Per B O E | $ / barrel	18.80		20.61
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Minimum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	7.00%		6.00%
Average Price Per B O E | $ / barrel	12.56		14.33
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Interests in Joint Ventures and Partnerships | Maximum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	24.00%		20.00%
Average Price Per B O E | $ / barrel	21.70		23.22
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Options | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	15.00%		14.00%
LTM EBITDA exit multiple	6		8
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Options | Minimum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	15.00%		14.00%
LTM EBITDA exit multiple	6		8
Significant Unobservable Inputs (Level 3) | Discounted cash flows | Options | Maximum
Valuation techniques used for assets, measured at fair value
Forward EBITDA multiple	15.00%		14.00%
LTM EBITDA exit multiple	6		8
Significant Unobservable Inputs (Level 3) | Broker quotes | Equity Investments, at Estimated Fair Value
Valuation techniques used for assets, measured at fair value
Assets, fair value			$ 6,400
Significant Unobservable Inputs (Level 3) | Broker quotes | Equity Investments, at Estimated Fair Value | Weighted Average
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares			$ 4.00
Significant Unobservable Inputs (Level 3) | Broker quotes | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares			0
Significant Unobservable Inputs (Level 3) | Broker quotes | Equity Investments, at Estimated Fair Value | Maximum
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares			$ 5
Significant Unobservable Inputs (Level 3) | Market comparables | Corporate Debt Securities | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Forward EBITDA multiple	12
Significant Unobservable Inputs (Level 3) | Market comparables | Corporate Debt Securities | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Forward EBITDA multiple	12
Significant Unobservable Inputs (Level 3) | Market comparables | Corporate Debt Securities | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Forward EBITDA multiple	12
Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 14,200		$ 11,300
Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9		8
Forward EBITDA multiple	8		8
Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	4		4
Forward EBITDA multiple	4		3
Significant Unobservable Inputs (Level 3) | Market comparables | Equity Investments, at Estimated Fair Value | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	15		13
Forward EBITDA multiple	12		11
Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 44,600		$ 98,900
Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	5		5
Control Premium	7.00%
Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	1		1
Control Premium	4.00%
Significant Unobservable Inputs (Level 3) | Market comparables | Interests in Joint Ventures and Partnerships | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9		9
Control Premium	11.00%
Significant Unobservable Inputs (Level 3) | Market comparables | Options | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	7		9
Forward EBITDA multiple	7		8
Significant Unobservable Inputs (Level 3) | Market comparables | Options | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	7		9
Forward EBITDA multiple	7		8
Significant Unobservable Inputs (Level 3) | Market comparables | Options | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	7		9
Forward EBITDA multiple	7		8
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Weighted Average
Valuation techniques used for assets, measured at fair value
Illiquidity discount	11.00%
Weight ascribed to market comparables	59.00%
Weight ascribed to discounted cash flows	41.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
Illiquidity discount	0.00%
Weight ascribed to market comparables	0.00%
Weight ascribed to discounted cash flows	0.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Equity Investments, at Estimated Fair Value | Maximum
Valuation techniques used for assets, measured at fair value
Illiquidity discount	15.00%
Weight ascribed to market comparables	100.00%
Weight ascribed to discounted cash flows	50.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Weighted Average
Valuation techniques used for assets, measured at fair value
Weight ascribed to market comparables	34.00%		43.00%
Weight ascribed to discounted cash flows	66.00%		57.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Minimum
Valuation techniques used for assets, measured at fair value
Weight ascribed to market comparables	0.00%		0.00%
Weight ascribed to discounted cash flows	0.00%		0.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Interests in Joint Ventures and Partnerships | Maximum
Valuation techniques used for assets, measured at fair value
Weight ascribed to market comparables	100.00%		100.00%
Weight ascribed to discounted cash flows	100.00%		100.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options
Valuation techniques used for assets, measured at fair value
Weight ascribed to market comparables	50.00%		50.00%
Weight ascribed to discounted cash flows	50.00%		50.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options | Weighted Average
Valuation techniques used for assets, measured at fair value
Illiquidity discount	10.00%		10.00%
Weight ascribed to market comparables	50.00%		50.00%
Weight ascribed to discounted cash flows	50.00%		50.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options | Minimum
Valuation techniques used for assets, measured at fair value
Illiquidity discount	10.00%		10.00%
Weight ascribed to market comparables	50.00%		50.00%
Weight ascribed to discounted cash flows	50.00%		50.00%
Significant Unobservable Inputs (Level 3) | Inputs to both market comparables and discounted cash flow | Options | Maximum
Valuation techniques used for assets, measured at fair value
Illiquidity discount	10.00%		10.00%
Weight ascribed to market comparables	50.00%		50.00%
Weight ascribed to discounted cash flows	50.00%		50.00%
Significant Unobservable Inputs (Level 3) | Inputs to market comparables, discounted cash flow and broker quotes | Equity Investments, at Estimated Fair Value | Weighted Average
Valuation techniques used for assets, measured at fair value
Illiquidity discount			11.00%
Weight ascribed to market comparables			52.00%
Weight ascribed to discounted cash flows			42.00%
Weight ascribed to broker quotes			6.00%
Significant Unobservable Inputs (Level 3) | Inputs to market comparables, discounted cash flow and broker quotes | Equity Investments, at Estimated Fair Value | Minimum
Valuation techniques used for assets, measured at fair value
Illiquidity discount			0.00%
Weight ascribed to market comparables			0.00%
Weight ascribed to discounted cash flows			0.00%
Weight ascribed to broker quotes			0.00%
Significant Unobservable Inputs (Level 3) | Inputs to market comparables, discounted cash flow and broker quotes | Equity Investments, at Estimated Fair Value | Maximum
Valuation techniques used for assets, measured at fair value
Illiquidity discount			15.00%
Weight ascribed to market comparables			100.00%
Weight ascribed to discounted cash flows			100.00%
Weight ascribed to broker quotes			100.00%
Crude Oil
Valuation techniques used for assets, measured at fair value
Percentage of share in total revenue	26.00%		25.00%
Natural Gas
Valuation techniques used for assets, measured at fair value
Percentage of share in total revenue	74.00%		75.00%
Natural Resources
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 92,600		$ 114,100
Foreign Exchange Options, Net | Significant Unobservable Inputs (Level 3) | Option pricing model | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets			11,500
Foreign Exchange Options, Net | Significant Unobservable Inputs (Level 3) | Option pricing model | Minimum
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets			6
Foreign Exchange Options, Net | Significant Unobservable Inputs (Level 3) | Option pricing model | Maximum
Valuation techniques used for assets, measured at fair value
Forward and Spot Rates, Assets			14,000

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SHAREHOLDERS' EQUITY (Details) - shares	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Stock-based compensation
Preferred shares, shares issued	14,950,000	14,950,000
Preferred shares, shares outstanding	14,950,000	14,950,000
Series A LLC Preferred Shares
Stock-based compensation
Preferred shares, shares issued	14,950,000.00
Preferred shares, shares outstanding	14,950,000
Preferred shares, dividend rate (as a percent)	7.375%
Restricted common shares
Stock-based compensation
Unvested awards (in shares)		37,214

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions	Mar. 31, 2016	Dec. 31, 2015
Debt Instrument
Estimated future contributions for interests in joint ventures and partnerships	$ 121.0	$ 163.0
Guarantees
Non-recourse debt	1,400.0	1,600.0
Corporate loans, at estimated fair value
Debt Instrument
Unfunded financing commitments for corporate loans	$ 7.4	$ 8.6

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2016 USD ($) issuer period	Mar. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) issuer
Management Agreement and Related Party Transactions
Related party transaction expense	$ 7,276,000	$ 10,220,000
Distribution to parent	$ 38,314,000	55,163,000
CLO Management Fees | Maximum
Management Agreement and Related Party Transactions
Entity's percentage in subordinated notes	100.00%
CLO Management Fees | CLO 2013-1, CLO 2013-2, and CLO 10
Management Agreement and Related Party Transactions
Entity's percentage in subordinated notes	100.00%
Manager
Management Agreement and Related Party Transactions
Renewal period (in years)	1 year
Votes for termination, minimum (as a percent)	66.70%
Notice period for termination (in days)	180 days
Multiplier used to determine termination fee	4
Number of 12 month periods considered for calculation of termination fee (in periods) | period	2
Specified period for which average annual incentive fee to be considered (in months)	12 months
Manager | Base Management Fees
Management Agreement and Related Party Transactions
Related party transaction expense	$ 1,029,000	4,053,000
Manager | Incentive Fees
Management Agreement and Related Party Transactions
Related party transaction expense	0	0
Manager | Reimbursable General And Administrative Expenses
Management Agreement and Related Party Transactions
Related party transaction expense	1,000,000	2,300,000
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Fees, waived		500,000
Related party transaction expense	$ 6,247,000	$ 6,167,000
Affiliated Entity
Management Agreement and Related Party Transactions
Investment in affiliates, number of issuers | issuer	6		8
Estimated fair value	$ 655,400,000		$ 734,300,000
Percent to total investment in corporate loans, debt securities and other investments | Affiliated Investments | Affiliated Entity
Management Agreement and Related Party Transactions
Concentration risk (as a percent)	11.00%		11.00%
Corporate loans, at estimated fair value | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	$ 644,400,000
Equity Investments, at Estimated Fair Value | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	11,000,000		$ 11,000,000
Corporate loans | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value			723,300,000
Joint Ventures And Partnerships | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	$ 685,300,000		$ 805,500,000

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 2) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 7,276,000	$ 10,220,000
Manager | Base Management Fees
Management Agreement and Related Party Transactions
Total CLO management fees	1,029,000	4,053,000
Manager | Incentive Fees
Management Agreement and Related Party Transactions
Total CLO management fees	0	0
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Total CLO management fees	$ 6,247,000	$ 6,167,000

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 3) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 7,276	$ 10,220
Manager | Base Management Fees
Management Agreement and Related Party Transactions
Base management fees, gross	5,783	8,491
CLO management fees credit	(4,754)	(4,438)
Total CLO management fees	$ 1,029	$ 4,053

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 4) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 7,276	$ 10,220
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Base management fees, gross	1,493	1,729
CLO management fees credit	4,754	4,438
Total CLO management fees	$ 6,247	$ 6,167

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SEGMENT REPORTING (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Segment Reporting Information
Total revenues	$ 89,305	$ 97,786
Total investment costs and expenses	52,998	57,653
Total other income (loss)	(209,882)	(69,164)
Total other expenses	24,064	17,168
Income tax expense (benefit)	60	347
Net income (loss)	(197,699)	(46,546)
Net income (loss) attributable to noncontrolling interests	(15,535)	(6,071)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	(182,164)	(40,475)
Total assets	7,089,643		$ 7,788,395
Reportable Segments | Credit
Segment Reporting Information
Total revenues	77,395	94,958
Total investment costs and expenses	50,984	55,967
Total other income (loss)	(173,946)	(65,992)
Total other expenses	23,864	16,403
Income tax expense (benefit)	23	48
Net income (loss)	(171,422)	(43,452)
Net income (loss) attributable to noncontrolling interests	(9,711)	(5,858)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	(161,711)	(37,594)
Total assets	6,663,815		7,303,305
Reportable Segments | Natural Resources
Segment Reporting Information
Total revenues	2,641	2,828
Total investment costs and expenses	1,614	1,340
Total other income (loss)	(27,242)	(7,753)
Total other expenses	130	510
Income tax expense (benefit)	0	0
Net income (loss)	(26,345)	(6,775)
Net income (loss) attributable to noncontrolling interests	(5,824)	(213)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	(20,521)	(6,562)
Total assets	208,161		230,815
Reportable Segments | Other
Segment Reporting Information
Total revenues	9,269	0
Total investment costs and expenses	400	346
Total other income (loss)	(8,694)	4,581
Total other expenses	70	155
Income tax expense (benefit)	37	299
Net income (loss)	68	3,781
Net income (loss) attributable to noncontrolling interests	0	0
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	68	3,781
Total assets	217,667		254,275
Reconciling Items
Segment Reporting Information
Total revenues	0	0
Total investment costs and expenses	0	0
Total other income (loss)	0	0
Total other expenses	0	100
Income tax expense (benefit)	0	0
Net income (loss)	0	(100)
Net income (loss) attributable to noncontrolling interests	0	0
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	0	(100)
Total assets	0		0
Noncontrolling interests
Segment Reporting Information
Net income (loss)	(15,535)	$ (6,071)
Total assets	63,000		82,900
Noncontrolling interests | Reportable Segments | Credit
Segment Reporting Information
Total assets	34,500		50,300
Noncontrolling interests | Reportable Segments | Natural Resources
Segment Reporting Information
Total assets	$ 28,500		$ 32,600

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SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	May. 09, 2016	Mar. 24, 2016	Mar. 31, 2016	Mar. 31, 2015
Subsequent events
Dividends, preferred stock			$ 6,891	$ 6,891
Series A LLC Preferred Shares
Subsequent events
Dividends, preferred stock		$ 6,900
Cash distribution declared (in dollars per share)		$ 0.460938
Subsequent Event | Common Shares
Subsequent events
Cash distribution declared (in dollars per share)	$ 245,741
Dividends, common stock	$ 24,600