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 September 30, 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 November 2, 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	34
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	71
Item 4.	Controls and Procedures	71
Part II.
OTHER INFORMATION
Item 1.	Legal Proceedings	71
Item 1A.	Risk Factors	71
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 3.	Defaults Upon Senior Securities	71
Item 4.	Mine Safety Disclosure	72
Item 5.	Other Information	72
Item 6.	Exhibits	72

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)

	September 30, 2016			December 31, 2015
Assets
Cash and cash equivalents	$	677,184		$	320,122
Restricted cash and cash equivalents	384,559			487,374
Securities, at estimated fair value	213,191			417,519
Loans, at estimated fair value	3,755,783			5,188,610
Equity investments, at estimated fair value	213,068			262,946
Oil and gas properties, net	111,631			114,868
Interests in joint ventures and partnerships, at estimated fair value	779,027			888,408
Derivative assets	32,899			40,852
Interest and principal receivable	16,672			22,196
Receivable for investments sold	135,346			19,930
Other assets	11,231			25,570
Total assets	$	6,330,591		$	7,788,395
Liabilities
Collateralized loan obligation secured notes, at estimated fair value	$	3,456,988		$	4,843,746
Collateralized loan obligation junior secured notes to affiliates, at estimated fair value	60,919			—
Senior notes	411,836			413,006
Junior subordinated notes	249,730			248,498
Payable for investments purchased	361,523			220,085
Accounts payable, accrued expenses and other liabilities	33,625			43,667
Accrued interest payable	18,715			20,619
Related party payable	3,528			3,892
Derivative liabilities	52,324			43,892
Total liabilities	4,649,188			5,837,405
Equity
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both September 30, 2016 and December 31, 2015	—			—
Common shares, no par value, 500,000,000 shares authorized and 100 shares issued and outstanding as of both September 30, 2016 and December 31, 2015	—			—
Paid-in-capital	2,764,061			2,764,061
Accumulated deficit	(1,148,413		)	(895,950		)
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity	1,615,648			1,868,111
Noncontrolling interests	65,755			82,879
Total equity	1,681,403			1,950,990
Total liabilities and equity	$	6,330,591		$	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 September 30, 2016			For the three months ended September 30, 2015			For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Revenues
Loan interest income	$	51,000		$	62,743		$	175,434		$	210,203
Securities interest income	3,795			15,297			15,751			47,146
Oil and gas revenue	2,387			3,876			8,285			13,055
Other	13,835			7,193			30,014			22,182
Total revenues	71,017			89,109			229,484			292,586
Investment costs and expenses
Interest expense	119,039			47,422			224,346			161,589
Interest expense to affiliates	5,437			—			6,446			—
Oil and gas production costs	247			248			702			498
Oil and gas depreciation, depletion and amortization	914			1,404			3,238			4,409
Other	4,956			1,278			6,912			3,959
Total investment costs and expenses	130,593			50,352			241,644			170,455
Other income (loss)
Net realized and unrealized gain (loss) on investments	74,436			(232,549		)	(33,085		)	(219,058		)
Net realized and unrealized gain (loss) on derivatives and foreign exchange	(168		)	(10,304		)	(13,564		)	(3,545		)
Net realized and unrealized gain (loss) on debt	131,712			54,860			67,737			(33,933		)
Net realized and unrealized gain (loss) on debt to affiliates	2,706			—			(278		)	—
Other income (loss)	4,680			2,544			7,620			9,958
Total other income (loss)	213,366			(185,449		)	28,430			(246,578		)
Other expenses
Related party management compensation	8,100			9,449			22,143			29,486
General, administrative and directors' expenses	8,047			1,779			25,238			9,265
Professional services	994			319			3,016			2,233
Total other expenses	17,141			11,547			50,397			40,984
Income (loss) before income taxes	136,649			(158,239		)	(34,127		)	(165,431		)
Income tax expense (benefit)	340			94			213			1,170
Net income (loss)	$	136,309		$	(158,333	)	$	(34,340	)	$	(166,601	)
Net income (loss) attributable to noncontrolling interests	1,492			(6,676		)	(15,324		)	(15,452		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	134,817			(151,657		)	(19,016		)	(151,149		)
Preferred share distributions	6,891			6,891			20,673			20,673
Net income (loss) available to common shares	$	127,926		$	(158,548	)	$	(39,689	)	$	(171,822	)

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 September 30, 2016		For the three months ended September 30, 2015			For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Net income (loss)	$	136,309	$	(158,333	)	$	(34,340	)	$	(166,601	)
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)	$	136,309	$	(158,333	)	$	(34,340	)	$	(166,601	)
Less: Comprehensive income (loss) attributable to noncontrolling interests	—		—			—			—
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	136,309	$	(158,333	)	$	(34,340	)	$	(166,601	)

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	—	—		—	—		—			1,236			1,236
Net income (loss)	—	—		—	—		(151,149		)	(15,452		)	(166,601		)
Distributions declared on preferred shares	—	—		—	—		(20,673		)	—			(20,673		)
Distributions to Parent	—	—		—	—		(141,566		)	—			(141,566		)
Balance at September 30, 2015	14,950,000	$	378,983	100	$	2,385,078	$	(691,447	)	$	85,953		$	2,158,567

	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	—	—		—	—		—			5,049			5,049
Capital distributions	—	—		—	—		—			(6,849		)	(6,849		)
Net income (loss)	—	—		—	—		(19,016		)	(15,324		)	(34,340		)
Distributions declared on preferred shares	—	—		—	—		(20,673		)	—			(20,673		)
Distributions to Parent	—	—		—	—		(212,774		)	—			(212,774		)
As of September 30, 2016	14,950,000	$	378,983	100	$	2,385,078	$	(1,148,413	)	$	65,755		$	1,681,403

See notes to condensed consolidated financial statements.

KKR Financial Holdings LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in thousands)

	For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Cash flows from operating activities
Net income (loss)	$	(34,340	)	$	(166,601	)
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	13,564			3,545
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests	(15,324		)	(15,452		)
Net realized and unrealized (gain) loss on investments	48,409			234,510
Depreciation and net amortization	40,799			22,915
Net realized and unrealized (gain) loss on debt	(67,737		)	33,933
Net realized and unrealized (gain) loss on debt to affiliates	278			—
Changes in assets and liabilities:
Interest receivable	5,554			24,170
Other assets	(11,481		)	(32,759		)
Related party payable	(364		)	(612		)
Accounts payable, accrued expenses and other liabilities	(10,048		)	28,235
Accrued interest payable	(1,904		)	3,034
Net cash provided by (used in) operating activities	(32,594		)	134,918
Cash flows from investing activities
Principal payments from corporate loans	1,068,822			1,160,687
Principal payments from securities	31,118			11,841
Proceeds from sales of corporate loans	1,860,854			1,142,796
Proceeds from sales of securities	116,259			152,707
Proceeds from equity and other investments	122,800			48,915
Purchases of corporate loans	(1,418,194		)	(1,391,722		)
Purchases of securities	(5,068		)	(9,387		)
Purchases of equity and other investments	(61,852		)	(56,171		)
Net change in proceeds, purchases and settlements of derivatives	5,562			21,643
Net change in restricted cash and cash equivalents	102,815			99,124
Net cash provided by (used in) investing activities	1,823,116			1,180,433
Cash flows from financing activities
Issuance of collateralized loan obligation secured notes	745,156			595,056
Retirement of collateralized loan obligation secured notes	(2,075,332		)	(1,445,941		)
Proceeds from collateralized loan obligation warehouse facility	62,479			216,063
Repayment of collateralized loan obligation warehouse facility	(62,479		)	(190,000		)
Distributions on common shares	(80,811		)	(141,566		)
Distributions on preferred shares	(20,673		)	(20,673		)
Capital distributions to noncontrolling interests	(6,849		)	(2,728		)
Capital contributions from noncontrolling interests	5,049			3,964
Other capitalized costs	—			(3,652		)
Net cash provided by (used in) financing activities	(1,433,460		)	(989,477		)
Net increase (decrease) in cash and cash equivalents	357,062			325,874
Cash and cash equivalents at beginning of period	320,122			163,405
Cash and cash equivalents at end of period	$	677,184		$	489,279
Supplemental cash flow information
Cash paid for interest	$	195,441		$	123,224
Net cash paid (refunded) for income taxes	$	56		$	(1,988	)
Non-cash investing and financing activities
Assets distributed to Parent	$	(131,963	)	$	—
Redemption of CLO 2007-A subordinated notes	$	(15,587	)	$	—
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, 2016 ("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 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"), KKR CLO 13, Ltd ("CLO 13"), KKR CLO 15, Ltd. ("CLO 15") and KKR 2016-1, Ltd. ("CLO 2016-1") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”) and 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 September 30, 2016, the Company’s CLOs held $3.7 billion par amount, or $3.6 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 September 30, 2016 and December 31, 2015, the aggregate par amount of CLO debt to unaffiliated and affiliated parties totaled $3.6 billion and $4.9 billion, respectively.

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.

In October 2016, the FASB issued guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its 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

9

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.

Cash Flow Classification

In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Securities, at estimated fair value	$	370,923	$	307,887	$	213,191	$	520,135	$	474,201	$	417,519
Total	$	370,923	$	307,887	$	213,191	$	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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	724		$	(3,227	)	$	4,910		$	(9,127	)
Net (increase) decrease in unrealized losses	(4,176		)	(15,523		)	(39,272		)	(20,598		)
Net realized and unrealized gains (losses)	$	(3,452	)	$	(18,750	)	$	(34,362	)	$	(29,725	)

Defaulted Securities

As of both September 30, 2016 and December 31, 2015, no corporate debt securities in the Company's portfolio was in default.

Concentration Risk

10

The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2016, approximately 98% 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, Mizuho Bank, Ltd. and Preferred Proppants LLC which combined represented $114.4 million, or approximately 67% 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 assets for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	25,040	$	170,365
Total	$	25,040	$	170,365

NOTE 4. LOANS

The Company accounts for all of its loans at estimated fair value. The following table summarizes the Company’s loans as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	3,890,239	$	3,872,205	$	3,755,783	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	3,890,239	$	3,872,205	$	3,755,783	$	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 loans (amounts in thousands):

	Three Months Ended September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	(18,720	)	$	(546	)	$	(229,672	)	$	(22,807	)
Net (increase) decrease in unrealized losses	64,646			(147,107		)	300,072			(92,283		)
Net realized and unrealized gains (losses)	$	45,926		$	(147,653	)	$	70,400		$	(115,090	)

For the corporate loans measured at estimated fair value under the fair value option of accounting, $3.4 million and $122.4 million of net losses were attributable to changes in instrument specific credit risk for the three months ended September 30, 2016 and September 30, 2015, respectively. For the nine months ended September 30, 2016 and September 30, 2015, $54.9 million and $136.7 million of net losses were attributable to changes in instrument specific credit risk, 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.

11

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 September 30, 2016, the Company held a total par value and estimated fair value of $104.2 million and $35.5 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 September 30, 2016 and December 31, 2015, there were no corporate loans past due 90 or more days and still accruing.

Defaulted Loans

As of September 30, 2016, the Company held no corporate loans that were in default. 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 September 30, 2016, approximately 21% 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 RedPrairie Corp, iPayment Investors L.P. and SRS Distribution Inc., which combined represented $152.2 million, or approximately 4% 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., Texas Competitive Electric Holdings Company LLC 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 assets for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	3,573,587	$	4,917,123
Total	$	3,573,587	$	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 10 to these condensed consolidated financial statements for further discussion. As of September 30, 2016 and December 31, 2015, the Company held $779.0 million and $888.4 million, respectively, of interests in joint ventures and partnerships carried at estimated fair value.

In addition, as of September 30, 2016 and December 31, 2015, the Company held $213.1 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):

12

	Three months ended September 30, 2016						Three months ended September 30, 2015						Nine months ended September 30, 2016						Nine months ended September 30, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	—		$	(4,566	)	$	1,549		$	9,176		$	(3,771	)	$	3,008		$	2,915		$	9,176
Net (increase) decrease in unrealized losses	(5,402		)	41,930			(14,245		)	(62,630		)	(21,851		)	(46,509		)	(6,872		)	(80,103		)
Net realized and unrealized gains (losses)	$	(5,402	)	$	37,364		$	(12,696	)	$	(53,454	)	$	(25,622	)	$	(43,501	)	$	(3,957	)	$	(70,927	)

(1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016, respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 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 condensed consolidated statements of operations.

As of September 30, 2016 and December 31, 2015, the Company had equity method investments, at estimated fair value, totaling $423.3 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 Credit Corporation Ltd., 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.

Summarized Financial Information

The following table shows summarized financial information for the Company’s equity method investment(s), which were reported under the fair value option of accounting and were determined to be significant as defined by accounting guidance, assuming 100% ownership (amounts in thousands):

	Nine months ended September 30, 2016								Nine months ended September 30, 2015
	Credit			Natural Resources			Other		Credit			Natural Resources		Other
Revenues(1)	$	71,714		$	86,942		$	71,808	$	65,250		$	231,248	$	36,099
Expenses(1)	$	46,060		$	126,414		$	23,725	$	40,424		$	237,275	$	39,019
Net income (loss)	$	(6,644	)	$	(52,786	)	$	48,084	$	(25,056	)	$	32,892	$	(2,921	)

13

(1) Revenues and expenses exclude realized and unrealized gains and losses.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged assets for borrowings. The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	42,210	$	82,430
Total	$	42,210	$	82,430

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 September 30, 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 subordinated notes(3)(4)	$	134,468	$	21,155	62.74	%	1688	$	75,945
CLO 2012-1 secured notes	367,500		376,667		2.90		2998	380,108
CLO 2012-1 subordinated notes(3)	18,000		10,226		14.71		2998	18,618
CLO 2013-1 secured notes	458,500		470,021		2.40		3210	488,310
CLO 2013-2 secured notes	339,250		343,686		2.72		3402	367,020
CLO 9 secured notes	463,749		470,905		2.69		3667	460,882
CLO 9 subordinated notes(3)	15,000		9,512		15.52		3667	14,907
CLO 9 subordinated notes to affiliates(3)	25,572		16,217		8.09		3667	25,414
CLO 10 secured notes	368,000		378,010		3.07		3363	362,465
CLO 10 subordinated notes to affiliates(3)	29,948		15,472		9.51		3363	29,498
CLO 11 secured notes	507,750		510,576		2.74		3849	504,497
CLO 11 subordinated notes(3)	28,250		21,709		17.74		3849	28,069
CLO 11 subordinated notes to affiliates(3)	19,362		14,879		9.45		3849	19,238
CLO 13 secured notes	375,000		385,329		3.03		4125	375,414
CLO 13 subordinated notes(3)	4,000		2,653		24.01		4125	4,004
CLO 13 subordinated notes to affiliates(3)	21,636		14,351		18.01		4125	21,660
CLO 2016-1 secured notes	66,665		64,808		2.29		615	69,304
CLO 2016-1 subordinated notes(3)	9,971		10,097		—		615	10,366
CLO 15 secured notes	370,500		370,803		3.06		4401	372,942
CLO 15 subordinated notes(3)	12,100		10,831		—		4401	12,180
Total collateralized loan obligation secured debt	3,635,221		3,517,907					3,640,841
8.375% Senior notes(5)	258,750		288,728		8.38		9177	—
7.500% Senior notes	115,043		123,108		7.50		9302	—
Junior subordinated notes	283,517		249,730		4.01		7310	—
Total borrowings	$	4,292,531	$	4,179,473				$	3,640,841

14

(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 to unaffiliated and affiliated parties 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.

(4) As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full.

(5) On October 25, 2016, the Company announced its intention to redeem all of its outstanding 8.375% Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion.

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.

15

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 the three and nine months ended September 30, 2016 and 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 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11, CLO 13 and CLO 15 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019, January 2020 and October 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 August 2016, the Company called CLO 2007-1 and repaid all senior and mezzanine notes totaling $945.6 million par amount. During November 2015, the Company called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. In addition, during July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. Furthermore, 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 pay-fixed, receive-variable interest rate swaps to hedge interest rate risk associated with its CLOs. In connection with the repayment of CLO 2007-1 notes and CLO 2006-1 notes, the related interest rate swaps, with contractual notional amounts of $142.3 million and $84.0 million, respectively, were terminated.

During the three and nine months ended September 30, 2016, $947.6 million and $1.5 billion par amount, respectively, of original CLO 2007-1 and CLO 13 secured notes were repaid, which included the repayment in full related to the calling of CLO 2007-1. Comparatively, during the three and nine months ended September 30, 2015, $583.6 million and $1.1 billion par amount, respectively, of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 secured notes were repaid, which included the repayment in full related to the calling of CLO 2005-1. CLO 2011-1 and CLO 2016-1 do not have reinvestment periods and all principal proceeds from holdings in the respective CLOs are used to amortize the transaction. During both the three and nine months ended September 30, 2016, $280.0 million par amount of original CLO 2016-1 secured and subordinated notes were repaid. During March 2016, the Company called CLO 2011-1 and repaid all senior debt totaling $249.3 million par amount. During the three and nine months ended September 30, 2015, $119.3 million and $150.1 million par amount, respectively, of original CLO 2011-1 senior debt was repaid.

During the three and nine months ended September 30, 2016, the Company issued $7.0 million par amount of CLO 13 class F notes for proceeds of $5.9 million.    

On September 14, 2016, the Company closed CLO 15, a $410.8 million secured financing transaction maturing on October 18, 2028. The Company issued $370.5 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 2.05%. The Company also issued $12.1 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 15 collateralize the CLO 15 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

On June 7, 2016, the Company closed CLO 2016-1, a $426.4 million secured financing transaction maturing on June 7, 2018, which was funded during the third quarter of 2016. The Company issued $330.9 million par amount of senior secured notes to unaffiliated investors at a rate of three-month LIBOR plus 1.70% and $25.7 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 2016-1 collateralize the CLO 2016-1 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

During May 2016, the Company distributed an aggregate $96.5 million par amount of CLO 9, CLO 10, CLO 11 and CLO 13 subordinated notes to its Parent. These notes were previously owned by the Company and eliminated in consolidation. Following the distribution, the subordinated notes were held by an affiliate of KKR and reflected as collateralized loan obligation junior secured notes to affiliates, at estimated fair value, on the Company's condensed consolidated balance sheets.

During April 2016, the remaining $15.1 million par amount of CLO 2007-A subordinated notes owned by third parties were deemed repaid in full, whereby the Company distributed assets held as collateral in CLO 2007-A to the subordinated note holders.

16

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 par amount 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 the three months ended September 30, 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million. During the nine months ended September 30, 2015, the Company issued $30.0 million par amount of CLO 2005-2 class E notes for proceeds of $30.2 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 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 par amount 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 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	As of September 30, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	125,000		$	(47,907	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(297,947		)	24,642			(375,524		)	38,608
Common stock warrants	—			1,613			—			—
Options	—			2,227			—			95
Total				$	(19,425	)				$	(3,040	)

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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 certain of its floating rate junior subordinated notes. The Company had also previously used interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs. In conjunction with the calling of CLO 2007-1 in August 2016, the Company terminated the related interest rate swap. As of September 30, 2016 and December 31, 2015, the Company had interest rate swaps with a notional amount of $125.0 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 September 30, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $297.9 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 September 30, 2016									Three Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)		Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	10,340		$	1,024		$	—	$	(8,489	)	$	(8,489	)
Foreign exchange forward contracts and options(1)	(1,523		)	723			(800		)	12,872		(11,848		)	1,024
Common stock warrants	—			(507		)	(507		)	—		(411		)	(411		)
Options	—			115			115			—		(2,428		)	(2,428		)
Net realized and unrealized gains (losses)	$	(10,839	)	$	10,671		$	(168	)	$	12,872	$	(23,176	)	$	(10,304	)

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

18

	Nine Months Ended September 30, 2016									Nine Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	(7,325	)	$	(16,641	)	$	(5,297	)	$	5,924		$	627
Foreign exchange forward contracts and options(1)	16,089			(14,614		)	1,475			27,107			(24,571		)	2,536
Common stock warrants	142			(672		)	(530		)	—			(2,412		)	(2,412		)
Total rate of return swaps	—			—			—			304			130			434
Options	—			2,132			2,132			—			(4,730		)	(4,730		)
Net realized and unrealized gains (losses)	$	6,915		$	(20,479	)	$	(13,564	)	$	22,114		$	(25,659	)	$	(3,545	)

(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 September 30, 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) $0.1 million net asset, net of $2.6 million collateral posted, (ii) $1.6 million net asset, net of $3.0 million collateral posted and (iii) $8.2 million net asset, including $38.8 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, including $0.1 million collateral held and (iii) $9.1 million net asset, including $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 September 30, 2016 (amounts in thousands): 

	As of September 30, 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	$	1,061,743	$	1,061,743	$	1,061,743	$	—	$	—
Liabilities:
Senior notes	411,836		382,579		382,579		—		—
Junior subordinated notes	249,730		188,933		—		—		188,933

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): 

19

	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 September 30, 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 September 30, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	25,040	$	144,837	$	169,877
Residential mortgage-backed securities	—		—		43,314		43,314
Total securities	—		25,040		188,151		213,191
Loans	—		3,562,107		193,676		3,755,783
Equity investments, at estimated fair value	40,455		49,065		123,548		213,068
Interests in joint ventures and partnerships, at estimated fair value	—		—		779,027		779,027
Derivatives:
Foreign exchange forward contracts and options	—		27,552		1,507		29,059
Warrants	—		—		1,613		1,613
Options	—		—		2,227		2,227
Total derivatives	—		27,552		5,347		32,899
Total	$	40,455	$	3,663,764	$	1,289,749	$	4,993,968
Liabilities:
Collateralized loan obligation secured notes	$	—	$	3,456,988	$	—	$	3,456,988
Collateralized loan obligation secured notes to affiliates	—		60,919		—		60,919
Derivatives:
Interest rate swaps	—		47,907		—		47,907
Foreign exchange forward contracts and options	—		3,887		530		4,417
Total derivatives	—		51,794		530		52,324
Total	$	—	$	3,569,701	$	530	$	3,570,231

20

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
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 September 30, 2016 (amounts in thousands):

21

	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			Warrants			Options
Beginning balance as of July 1, 2016	$	149,372		$	45,800		$	200,841		$	123,374	$	758,321		$	1,652		$	2,120		$	2,112
Total gains or losses (for the period):
Included in earnings(1)	(4,505		)	919			1,884			174		36,668			(675		)	(507		)	115
Transfers into Level 3	—			—			—			—		—			—			—			—
Transfers out of Level 3	—			—			—			—		—			—			—			—
Purchases	—			—			3,979			—		1,574			—			—			—
Sales	—			—			(13,264		)	—		—			—			—			—
Settlements	(30		)	(3,405		)	236			—		(17,536		)	—			—			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548	$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(4,505	)	$	919		$	1,883		$	174	$	36,669		$	(675	)	$	(507	)	$	115

(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 nine months ended September 30, 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			Warrants			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)	(50,054		)	1,999			(49,886		)	(25,287		)	(43,080		)	(1,910		)	(672		)	2,132
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—			—
Purchases	—			—			7,282			—			61,397			—			—			—
Sales	—			—			(39,949		)	(5,130		)	—			—			—			—
Settlements	(95		)	(8,306		)	(22,505		)	7,317			(127,698		)	—			2,285			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548		$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(50,054	)	$	1,999		$	(49,886	)	$	(25,287	)	$	(43,080	)	$	(1,910	)	$	(672	)	$	2,132

(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 September 30, 2015 (amounts in thousands):

22

	Assets
	Corporate Debt Securities			Residential Mortgage- Backed Securities			Corporate Loans			Equity Investments, at Estimated Fair Value			Interests in Joint Ventures and Partnerships			Warrants			Options
Beginning balance as of July 1, 2015	$	225,891		$	52,389		$	341,047		$	166,879		$	739,597		$	411		$	2,910
Total gains or losses (for the period):
Included in earnings(1)	(11,727		)	2,454			(6,882		)	(8,453		)	(63,887		)	(411		)	(2,429		)
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			—			—			3,767			—			—
Sales	(9,086		)	—			—			—			—			—			—
Settlements	3,038			(4,704		)	(2,539		)	451			(23,822		)	—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(11,727	)	$	581		$	(6,882	)	$	(8,453	)	$	(63,887	)	$	(411	)	$	(2,429	)

(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 nine months ended September 30, 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)	(23,486		)	5,469			(64,930		)	(29,567		)	(84,045		)	(2,412		)	(4,731		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			12,307			—			53,133			—			—			—
Sales	(89,665		)	—			(25,511		)	—			—			—			—			—
Settlements	4,233			(10,514		)	62,683			106,725			(32,205		)	2,412			—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(26,145	)	$	758		$	(64,043	)	$	(28,871	)	$	(84,045	)	$	(2,412	)	$	(4,731	)	$	—

(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.

(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 September 30, 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 and nine months ended September 30, 2016 and 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 September 30, 2016 (dollar amounts in thousands): 

23

	Balance as  of September 30, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase  in Input(4)
Assets:
Corporate debt securities	$	144,837	Yield analysis	Yield	13%	5% - 15%	Decrease
				Net leverage	10x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1500	1500bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
Residential mortgage – backed securities	$	43,314	Discounted cash flows	Probability of default	2%	0% - 3%	Decrease
				Loss severity	43%	35% - 50%	Decrease
				Constant prepayment rate	18%	12% - 23%	(5	)
Corporate loans(6)	$	193,676	Yield Analysis	Yield	15%	3% -28%	Decrease
				Net leverage	10x	3x - 36x	Decrease
				EBITDA multiple	9x	7x - 13x	Increase
Equity investments, at estimated fair value(7)	$	123,548	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	27%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	73%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	9x	0x - 15x	Increase
				Forward EBITDA multiple	7x	3x - 13x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	6% - 14%	Decrease
				LTM EBITDA exit multiple	8x	1x - 9x	Increase
Interests in joint ventures and partnerships(11)	$	779,027	Inputs to market comparables, discounted cash flow and yield analysis	Weight ascribed to market comparables	21%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	72%	0% - 100%	(9	)
				Weight ascribed to yield analysis	7%	0% - 100%	(10	)
			Market comparables	LTM EBITDA multiple	5x	1x- 9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
				Capitalization Rate	7%	6% - 12%	Decrease
			Discounted cash flows	Weighted average cost of capital	10%	6% - 24%	Decrease
				Average price per BOE(12)	$20.45	$17.44-$23.46	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	1x	1x	Decrease
				EBITDA multiple	7x	7x	Increase
Foreign exchange options, net	$	977	Option pricing model	Forward and spot rates	11,635	6 - 13,500	(13	)
Options(14)	$	2,227	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease

24

		Weight ascribed to market comparables	50%	50%	(8	)
		Weight ascribed to discounted cash flows	50%	50%	(9	)
,	Market comparables	LTM EBITDA multiple	8x	8x	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

25

(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) Inputs exclude a single loan totaling $2.0 million, which had a yield, net leverage and EBITDA multiple of 513%, 35.6x and 11.2x, respectively.

(7) 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, $6.1 million was valued solely using a market comparables technique and $44.2 million was valued solely using a discounted cash flow technique.

(8) 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 or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach.

(9) 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 or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach.

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

(11) Inputs exclude $346.3 million of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships, $165.3 million was valued solely using a discounted cash flow technique, while $7.8 million was valued solely using a market comparables technique and $24.1 million was valued solely using a yield analysis.

(12) Natural resources assets with an estimated fair value of $120.4 million as of September 30, 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 23% liquids and 77% natural gas.

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

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

The table above excludes warrants of $1.6 million, comprised of equity-like securities in a company that were valued using an independent third party valuation firm primarily based on the contractual agreement and public disclosures of the expected sale value.

26

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. 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 September 30, 2016 and December 31, 2015, the Company had unfunded financing commitments for corporate loans totaling $4.3 million and $8.6 million, respectively. The Company did not have any significant losses as of September 30, 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

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businesses. The Company estimated these future contributions to total approximately $94.0 million as of September 30, 2016 and $163.0 million as of December 31, 2015.

Guarantees

The Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.3 billion as of September 30, 2016 and $1.6 billion as of December 31, 2015. 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 10. 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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Base management fees, net	$	2,005	$	2,633	$	3,593	$	8,096
CLO management fees	6,095		6,816		18,550		21,390
Incentive fees	—		—		—		—
Total related party management compensation	$	8,100	$	9,449	$	22,143	$	29,486

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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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Base management fees, gross	$	5,527		$	7,702		$	16,312		$	24,029
CLO management fees credit(1)	(3,522		)	(5,069		)	(12,719		)	(15,933		)
Total base management fees, net	$	2,005		$	2,633		$	3,593		$	8,096

(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 $0.4 million and $1.5 million for CLO 2005-2 during the three and nine months ended September 30, 2015, respectively. 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 the three and nine months ended September 30, 2016 and 2015. The Manager credited the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLOs including CLO 2007-1, CLO 2012-1, CLO 9, CLO 10, CLO 11 and CLO 13 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 affiliated and unaffiliated 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 CLOs including CLO 2013-1 and CLO 2013-2 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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Charged and retained CLO management fees(1)	$	2,573	$	1,747	$	5,831	$	5,457
CLO management fees credit	3,522		5,069		12,719		15,933
Total CLO management fees	$	6,095	$	6,816	$	18,550	$	21,390

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(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 receives quarterly incentive compensation from the Company based on its achievement of specified levels of net income pursuant to the Management Agreement. The Manager waived incentive fees of $16.1 million for the three and nine months ended September 30, 2016, which was attributable to a non-cash item. Comparatively, the Manager earned incentive fees totaling zero for the three and nine months ended September 30, 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 $1.1 million and $3.0 million for the three and nine months ended September 30, 2016, respectively. The Company incurred reimbursable general and administrative expenses to its Manager totaling $0.7 million and $4.2 million for the three and nine months ended September 30, 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 cash distributions to its Parent, as the sole holder of its common shares. The Company distributed $17.9 million and $80.8 million during the three and nine months ended September 30, 2016, respectively. The Company distributed $52.1 million and $141.6 million for the three and nine months ended September 30, 2015, respectively.

During the nine months ended September 30, 2016, certain assets were distributed to the Parent, including CLO subordinated notes, which were previously held by the Company. As the CLO subordinated notes are held by an affiliate of our Parent, refer to Note 6 in these condensed consolidated financial statements for additional details around these notes to affiliates. The table below summarizes the estimated fair value of distributions at the time of transfer (amounts in thousands):

	Nine months ended September 30, 2016
Loans	$	45,225
Equity investments, at estimated fair value	26,098
CLO subordinated notes	60,640
Total distributions to Parent	$	131,963

Affiliated Investments

The Company has invested in corporate loans, debt securities and other investments of entities that are affiliates of KKR. As of September 30, 2016, the aggregate par amount of these affiliated investments totaled $20.4 million, or less than 1% of the total investment portfolio, and consisted of 2 issuers. The total affiliated investments was comprised of $20.1 million of equity investments and $0.3 million of corporate debt securities. 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 September 30, 2016 and December 31, 2015, the estimated fair value of these interests in joint ventures and partnerships totaled $670.9 million and $805.5 million, respectively.

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NOTE 11. 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, if any, 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 tables present the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands):

	Three months ended September 30,
	Credit					Natural Resources					Other					Reconciling Items(1)					Total Consolidated
	2016		2015			2016		2015			2016			2015		2016		2015			2016		2015
Total revenues	$	65,416	$	79,698		$	2,387	$	3,876		$	3,214		$	5,535	$	—	$	—		$	71,017	$	89,109
Total investment costs and expenses	128,549		47,948			1,594		2,016			450			388		—		—			130,593		50,352
Total other income (loss)	192,435		(149,952		)	21,974		(36,236		)	(1,043		)	739		—		—			213,366		(185,449		)
Total other expenses	16,815		11,285			192		114			134			99		—		49			17,141		11,547
Income tax expense (benefit)	126		64			—		—			214			30		—		—			340		94
Net income (loss)	$	112,361	$	(129,551	)	$	22,575	$	(34,490	)	$	1,373		$	5,757	$	—	$	(49	)	$	136,309	$	(158,333	)
Net income (loss) attributable to noncontrolling interests	1,492		(2,727		)	—		(3,949		)	—			—		—		—			1,492		(6,676		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	110,869	$	(126,824	)	$	22,575	$	(30,541	)	$	1,373		$	5,757	$	—	$	(49	)	$	134,817	$	(151,657	)

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

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	Nine months ended September 30,
	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	2016			2015			2016			2015			2016			2015		2016		2015			2016			2015
Total revenues	$	208,716		$	265,176		$	8,285		$	13,055		$	12,483		$	14,355	$	—	$	—		$	229,484		$	292,586
Total investment costs and expenses	235,198			163,246			5,102			6,062			1,344			1,147		—		—			241,644			170,455
Total other income (loss)	37,245			(216,786		)	3,366			(50,337		)	(12,181		)	20,545		—		—			28,430			(246,578		)
Total other expenses	49,665			39,702			449			800			283			333		—		149			50,397			40,984
Income tax expense (benefit)	122			126			—			—			91			1,044		—		—			213			1,170
Net income (loss)	$	(39,024	)	$	(154,684	)	$	6,100		$	(44,144	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(34,340	)	$	(166,601	)
Net income (loss) attributable to noncontrolling interests	(10,167		)	(8,403		)	(5,157		)	(7,049		)	—			—		—		—			(15,324		)	(15,452		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(28,857	)	$	(146,281	)	$	11,257		$	(37,095	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(19,016	)	$	(151,149	)

(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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
Total assets	$	5,874,168	$	7,303,305	$	233,925	$	230,815	$	222,498	$	254,275	$	—	$	—	$	6,330,591	$	7,788,395

(1) Total consolidated assets as of September 30, 2016 included $65.8 million of noncontrolling interests, of which $37.5 million was related to the Credit segment and $28.3 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 12. SUBSEQUENT EVENTS

On September 22, 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 October 17, 2016 to preferred shareholders of record as of the close of business on October 10, 2016.

On October 25, 2016, the Company announced its intention to redeem all of its outstanding Notes due 2041 on November 15, 2016 in accordance with the optional redemption provisions provided in the documents governing the Notes due 2041. As of October 25, 2016, there was $258.8 million aggregate principal amount of the Notes due 2041 outstanding. The redemption price will equal 100% of the principal amount of the Notes due 2041 plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the Notes due 2041. The Company intends to use cash on hand to fund the redemption.

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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 and our subsequent quarterly reports. 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 September 30, 2016, our CLO transactions consisted of 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”), KKR CLO 13, Ltd. (“CLO 13”), KKR CLO 15, Ltd. (“CLO 15”) and KKR 2016-1, Ltd. (“CLO 2016-1”) (collectively the “Cash Flow CLOs”). During August 2016 and March 2016, we called KKR Financial CLO 2007-1, Ltd. ("CLO 2007-1") and KKR Financial CLO 2011‑1, Ltd. (“CLO 2011‑1”), respectively, 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"). On October 25, 2016, we announced that we will redeem all of our outstanding 8.375% Senior Notes due 2041 (the “Notes due 2041”) on November 15, 2016 in accordance with the optional redemption provisions provided in the documents governing the Notes due 2041.

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Consolidated Summary of Results

Our net income available to common shares for the three months ended September 30, 2016 totaled $127.9 million, while our net loss available to common shares for the three months ended September 30, 2015 totaled $39.7 million. Our net loss available to common shares for the nine months ended September 30, 2016 and 2015 totaled $158.5 million and $171.8 million, respectively. 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

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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 our condensed consolidated financial statements.

In October 2016, the FASB issued further guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact on our 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.

Cash Flow Classification

In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. 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 and nine months ended September 30, 2016 and 2015 (amounts in thousands):

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	Three months ended September 30,
	Credit					Natural Resources					Commercial Real Estate					Reconciling Items(1)					Total Consolidated
	2016		2015			2016		2015			2016			2015		2016		2015			2016		2015
Total revenues	$	65,416	$	79,698		$	2,387	$	3,876		$	3,214		$	5,535	$	—	$	—		$	71,017	$	89,109
Total investment costs and expenses	128,549		47,948			1,594		2,016			450			388		—		—			130,593		50,352
Total other income (loss)	192,435		(149,952		)	21,974		(36,236		)	(1,043		)	739		—		—			213,366		(185,449		)
Total other expenses	16,815		11,285			192		114			134			99		—		49			17,141		11,547
Income tax expense (benefit)	126		64			—		—			214			30		—		—			340		94
Net income (loss)	$	112,361	$	(129,551	)	$	22,575	$	(34,490	)	$	1,373		$	5,757	$	—	$	(49	)	$	136,309	$	(158,333	)
Net income (loss) attributable to noncontrolling interests	1,492		(2,727		)	—		(3,949		)	—			—		—		—			1,492		(6,676		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	110,869	$	(126,824	)	$	22,575	$	(30,541	)	$	1,373		$	5,757	$	—	$	(49	)	$	134,817	$	(151,657	)

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

	Nine months ended September 30,
	Credit						Natural Resources						Commercial Real Estate					Reconciling Items(1)					Total Consolidated
	2016			2015			2016			2015			2016			2015		2016		2015			2016			2015
Total revenues	$	208,716		$	265,176		$	8,285		$	13,055		$	12,483		$	14,355	$	—	$	—		$	229,484		$	292,586
Total investment costs and expenses	235,198			163,246			5,102			6,062			1,344			1,147		—		—			241,644			170,455
Total other income (loss)	37,245			(216,786		)	3,366			(50,337		)	(12,181		)	20,545		—		—			28,430			(246,578		)
Total other expenses	49,665			39,702			449			800			283			333		—		149			50,397			40,984
Income tax expense (benefit)	122			126			—			—			91			1,044		—		—			213			1,170
Net income (loss)	$	(39,024	)	$	(154,684	)	$	6,100		$	(44,144	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(34,340	)	$	(166,601	)
Net income (loss) attributable to noncontrolling interests	(10,167		)	(8,403		)	(5,157		)	(7,049		)	—			—		—		—			(15,324		)	(15,452		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(28,857	)	$	(146,281	)	$	11,257		$	(37,095	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(19,016	)	$	(151,149	)

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

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 September 30, 2016 compared to the three months ended September 30, 2015

Revenues decreased $18.1 million in the third quarter of 2016 compared to the third quarter of 2015. This was primarily due to a $23.2 million decline in interest income earned from our corporate debt portfolio partially offset by a $6.6 million increase in other income.

The decline in interest income was largely due to a smaller portfolio generating recurring income. Specifically, as of September 30, 2016 and 2015, the aggregate par value of our corporate debt portfolio totaled $4.2 billion and $6.3 billion, respectively. This decline was primarily due to the calling of CLO 2005-1, CLO 2005-2, CLO 2007-1 and CLO 2011-1 during the second half of 2015 and first nine months of 2016 and the sale of assets held within these CLOs to repay the CLO notes outstanding. From September 30, 2015 to September 30, 2016, we repaid approximately $2.0 billion of notes from the sale proceeds of assets held within the CLOs that we issued prior to 2012 ("legacy CLOs"). Refer to "Segment Results-Credit Segment-Revenues" for further discussion.

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Partially offsetting the decline in interest income was a $6.6 million increase in other revenues in the third quarter of 2016 compared to the third quarter of 2015. Other revenues was primarily comprised of dividend income, largely from our interests in joint ventures and partnerships and equity investments. In particular, the third quarter of 2016 included $10.2 million of dividend payments from certain of our assets in the Credit segment, the majority of which was due to a one-time dividend from a single issuer. This compared to $1.5 million of dividends received in the third quarter of 2015 from two issuers in the publishing and diversified financial services sectors.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Revenues decreased $63.1 million in the first nine months of 2016 compared to the first nine months of 2015 primarily due to a $66.2 million decline in interest income earned from our corporate debt portfolio. The decline in interest income was largely due to a smaller portfolio generating recurring income. Specifically, as of September 30, 2016 and 2015, the aggregate par value of our corporate debt portfolio totaled $4.2 billion and $6.3 billion, respectively. This decline was primarily due to the calling of CLO 2005-1, CLO 2005-2, CLO 2006-1, CLO 2007-1 and CLO 2011-1 during 2015 and the first nine months of 2016 and the sale of assets held within these CLOs to repay the CLO notes outstanding. From September 30, 2015 to September 30, 2016, we repaid approximately $2.0 billion of notes from the sale proceeds of assets held within the legacy CLOs. Refer to "Segment Results-Credit Segment-Revenues" for further discussion.

Partially offsetting the decline in interest income was a $7.8 million increase in other revenues in the first nine months of 2016 compared to the first nine months of 2015. Other revenues was primarily comprised of dividend income, the majority of which was from our interests in joint ventures and partnerships and equity investments. In particular, the first nine months of 2016 included $16.6 million of dividend payments from certain of our assets in the Credit segment, a portion of which was due to a one-time dividend from a single issuer. This compared to $7.6 million of dividends received in the first nine months of 2015 from two issuers in the publishing and diversified financial services sectors.

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 September 30, 2016 compared to the three months ended September 30, 2015

Total investment costs and expenses increased $80.2 million in the third quarter of 2016 compared to the third quarter of 2015 largely driven by an increase in interest expense, specifically on our secured and junior secured collateralized loan obligation notes. Interest expense on our secured CLO notes increased $73.8 million in the third quarter of 2016 compared to the prior year period primarily due to the calling of CLO 2007-1 in August 2016. We recorded $68.6 million of interest expense, including incremental accelerated accretion of debt discounts, during the third quarter of 2016 as a result of calling CLO 2007-1. In addition, interest expense on our junior secured CLO notes to affiliates increased $5.4 million in the third quarter of 2016 compared to the third quarter of 2015. Beginning in the second quarter of 2016, as a result of the distribution of $96.5 million par amount of certain subordinated notes to our Parent, we incurred interest expense on these CLO junior secured notes held by an affiliate of KKR. These notes were previously owned by us and eliminated in consolidation. Refer to "Segment Results-Credit Segment-Investment Costs and Expenses" for further discussion.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total investment costs and expenses increased $71.2 million in the first nine months of 2016 compared to the first nine months of 2015 largely driven by an increase in interest expense, specifically on our secured and junior secured CLO notes.Interest expense on our secured CLO notes increased $67.5 million in the first nine months of 2016 compared to the prior year period primarily due to the calling of CLO 2007-1 in August 2016. We recorded $68.7 million of interest expense, including incremental accelerated accretion of debt discounts, during the first nine months of 2016 as a result of calling CLO 2007-1. In addition, interest expense on our junior secured CLO notes to affiliates increased $6.4 million for the first nine months of 2016 compared to the same prior year period. Beginning in the second quarter of 2016, as a result of the distribution of $96.5 million par amount of certain subordinated notes to our Parent, we incurred interest expense on these CLO junior secured notes held by an affiliate of KKR. These notes were previously owned by us and eliminated in consolidation. Refer to "Segment Results-Credit Segment-Investment Costs and Expenses" for further discussion.

Other Income (Loss)

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

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Other income (loss) favorably changed $398.8 million in the third quarter of 2016 compared to the third quarter of 2015 due to the following factors.

First, net realized and unrealized gain (loss) on investments favorably changed $307.0 million from a net realized and unrealized loss of $232.5 million in the third quarter of 2015 to a net realized and unrealized gain of $74.4 million in the third quarter of 2016. A majority of this favorable change was related to our corporate debt portfolio and interests in joint ventures in the Credit segment spanning the homebuilding, education, alternative credit and marine sectors which increased in value largely attributable to general market conditions. For example, the S&P/LSTA Loan Index returned 3.07% for the three months ended September 30, 2016 compared to (1.35)% for the same period in the prior year. Additionally, we recorded net unrealized gains on our investments in the Natural Resources segment for the third quarter of 2016 compared to net unrealized losses for the same prior year period largely as a result of the less volatile change in commodity prices in 2016 compared to 2015. For example, as of June 30, 2015 and September 30, 2015, the long-term price of WTI crude was approximately $64 per barrel and $53 per barrel, respectively, compared to approximately $54 per barrel and $55 per barrel as of June 30, 2016 and September 30, 2016, respectively. In addition, the long-term price of natural gas was $3.36 per mcf and $2.98 per mcf as of June 30, 2015 and September 30, 2015, respectively, compared to approximately $3.00 per mcf and $2.80 per mcf as of June 30, 2016 and September 30, 2016, respectively. Refer to "Segment Results-Natural Resources Segment-Other Income (Loss)" for further discussion.

Second, net realized and unrealized gain on debt increased $76.9 million in the third quarter of 2016 compared to the third quarter of 2015, from $54.9 million to $131.7 million in the third quarter of 2015 and 2016, respectively. Of the $131.7 million net realized and unrealized gain, approximately $107.8 million represented the reversal of previously recorded unrealized losses as a direct result of calling and repaying in full CLO 2007-1 secured notes during the third quarter of 2016. 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. Refer to "Segment Results-Credit Segment-Other Income (Loss)" for further discussion.

Third, net realized and unrealized loss on derivatives and foreign exchange favorably changed $10.1 million during the third quarter of 2016 compared to the same prior year period. A majority of the change was related to a $9.5 million change in net realized and unrealized gain (loss) on interest rate swaps which was driven by relatively smaller quarter over quarter declines in the 30-year swap rate, which declined 41 bps from June 30, 2015 to September 30, 2015 compared to 8 bps from June 30, 2016 to September 30, 2016. Refer to "Segment Results-Credit Segment-Other Income (Loss)" for further discussion.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Other income (loss) favorably changed $275.0 million in the first nine months of 2016 compared to the first nine months of 2015 due to the following factors.

First, net realized and unrealized loss on investments favorably changed $186.0 million from $219.1 million in the first nine months of 2015 to $33.1 million in the first nine months of 2016. A majority of this favorable change was related to our corporate loans portfolio and interests in joint ventures in the Credit segment spanning the education and home building sectors and was largely attributable to general market conditions. For example, overall, the S&P/LSTA Loan Index returned 7.72% for the nine months ended September 30, 2016 compared to (0.67)% for the nine months ended September 30, 2015. Additionally, we recorded net unrealized gains on our investments in the Natural Resources segment for the first nine months of 2016 compared to net unrealized losses for the same prior year period largely as a result of the less volatile change in commodity prices during 2016 compared to 2015. For example, as of December 31, 2014 and September 30, 2015, the long-term price of WTI crude oil was approximately $67 per barrel and $53 per barrel, respectively, compared to approximately $50 per barrel and $55 per barrel as of December 31, 2015 and September 30, 2016, respectively. In addition, the long-term price of natural gas was $3.77 per mcf and $2.98 per mcf as of December 31, 2014 and September 30, 2015, respectively, compared to $2.90 per mcf and approximately $2.80 per mcf as of December 31, 2015 and September 30, 2016, respectively.

Second, net realized and unrealized gain (loss) on debt favorably changed $101.7 million in the first nine months of 2016 compared to the first nine months of 2015, largely attributable to the reversal of previously recorded unrealized losses totaling approximately $107.8 million as a direct result of calling and repaying in full CLO 2007-1 secured notes during the first nine months of 2016. 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

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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.

The favorable changes described above were partially offset by (i) a $21.7 million unfavorable change related to our equity investments spanning the education, energy and financial services sectors and (ii) a $31.9 million unfavorable change related to the commercial real estate assets in our Other segment. Refer to "Segment Results-Other Segment-Other Income (Loss)" for further discussion. In addition, there was a $10.0 million unfavorable change in net realized and unrealized loss on derivatives and foreign exchange in the first nine months of 2016 compared to the first nine months of 2015, of which a majority was related to a $17.3 million unfavorable change in realized and unrealized gain (loss) on interest rate swaps which are directly impacted by the 30-year swap rate. For example, the 30-year swap rate declined 17 bps from 2.70% to 2.53% as of December 31, 2014 and September 30, 2015, respectively, compared to an 84 bps decline from 2.61% to 1.77% as of December 31, 2015 and September 30, 2016, respectively. The unfavorable change in realized and unrealized gain (loss) on interest rate swaps was partially offset by a $6.9 million favorable change in realized and unrealized gain (loss) on options.

Other Expenses

Other expenses include related party management compensation, general, administrative and directors’ expenses and professional services, if any. 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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Base management fees, gross	$	5,527		$	7,702		$	16,312		$	24,029
CLO management fees credit(1)	(3,522		)	(5,069		)	(12,719		)	(15,933		)
Total base management fees, net	$	2,005		$	2,633		$	3,593		$	8,096

(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 CLOs including CLO 2007-1, CLO 2012-1, CLO 9, CLO 10, CLO 11 and CLO 13 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 affiliated and unaffiliated 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 CLOs including CLO 2013-1 and CLO 2013-2 based on our 100% ownership of the subordinated notes in the CLO.

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

	Three months ended September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Charged and retained CLO management fees(1)	$	2,573	$	1,747	$	5,831	$	5,457
CLO management fees credit	3,522		5,069		12,719		15,933
Total CLO management fees	$	6,095	$	6,816	$	18,550	$	21,390

(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 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.

Incentive Fees

The Manager receives quarterly incentive compensation from us based on our achievement of specified levels of net income pursuant to the Management Agreement. The Manager waived incentive fees of $16.1 million for the three and nine months ended September 30, 2016, which was attributable to a non-cash item. Comparatively, the Manager earned incentive fees totaling zero for the three and nine months ended September 30, 2015.

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Other expenses increased $5.6 million in the third quarter of 2016 compared to the third quarter of 2015. The increase was primarily attributable to a $6.3 million increase in other general, administrative and directors' expenses, of which $6.0 million was due to debt issuance costs related to the setup of CLO 2016-1 and CLO 15, which both funded in the third quarter of 2016. The increase was partially offset by a $1.3 million decrease in related party compensation, which includes base management fees and CLO management fees.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Other expenses increased $9.4 million in the first nine months of 2016 compared to the first nine months of 2015. This was primarily due to a $16.0 million increase in general, administrative and directors' expenses during the first nine months of 2016 compared to the same prior year period as a result of the write-off of costs associated with our CLOs coupled with $6.0 million of debt issuance costs related to the setup of CLO 2016-1 and CLO 15. The increase in other general expenses was partially offset by a $7.3 million decrease in related party management compensation, which includes base management fees and CLO management fees. Base management fees declined $4.5 million, while CLO management fees declined $2.8 million in the first nine months of 2016 compared to the prior year period. Base management fees, which are based on our "equity," as defined in the Management Agreement, declined from 2015 primarily due to lower overall retained earnings and cash distributions made on our preferred and common shares. In addition, CLO management fees, which are based on the size of the CLO declined as all of our legacy CLOs were called and paid down. Our legacy CLOs were larger in total transaction size compared to those that were issued subsequently.

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.

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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, if any, 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 11. 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 September 30, 2016			For the three months ended September 30, 2015			For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Revenues
Corporate loans and securities interest income	$	51,920		$	74,956		$	185,203		$	249,601
Residential mortgage-backed securities interest income	860			965			2,466			2,824
Net discount accretion	2,017			2,119			3,517			4,924
Dividend income	10,243			1,545			16,551			7,603
Other	376			113			979			224
Total revenues	65,416			79,698			208,716			265,176
Investment costs and expenses
Interest expense:
Collateralized loan obligation secured notes	106,268			32,468			183,207			115,741
Collateralized loan obligation junior secured notes to affiliates	5,437			—			6,446			—
Credit facilities	367			—			367			—
Senior notes	6,586			6,725			19,931			20,157
Junior subordinated notes	3,162			4,002			10,885			11,930
Interest rate swaps	1,773			3,478			7,452			11,473
Total interest expense	123,593			46,673			228,288			159,301
Other	4,956			1,275			6,910			3,945
Total investment costs and expenses	128,549			47,948			235,198			163,246
Other income (loss)
Realized and unrealized gain (loss) on derivatives and foreign exchange:
Interest rate swap	1,024			(8,489		)	(16,641		)	627
Total rate of return swaps	—			—			—			434
Common stock warrants	(507		)	(411		)	(530		)	(2,412		)
Foreign exchange(1)	(604		)	1,225			1,809			2,059
Options	115			(2,428		)	2,132			(4,730		)
Total realized and unrealized gain (loss) on derivatives and foreign exchange	28			(10,103		)	(13,230		)	(4,022		)
Net realized and unrealized gain (loss) on investments	53,309			(197,253		)	(24,604		)	(188,789		)
Net realized and unrealized gain (loss) on debt	131,712			54,860			67,737			(33,933		)
Net realized and unrealized gain (loss) on debt to affiliates	2,706			—			(278		)	—
Other income	4,680			2,544			7,620			9,958
Total other income (loss)	192,435			(149,952		)	37,245			(216,786		)
Other expenses
Related party management compensation:
Base management fees	1,838			2,461			3,316			7,565
CLO management fees	6,095			6,816			18,550			21,390
Total related party management compensation	7,933			9,277			21,866			28,955
Professional services	912			299			2,790			2,086
Other general and administrative	7,970			1,709			25,009			8,661
Total other expenses	16,815			11,285			49,665			39,702
Income (loss) before income taxes	112,487			(129,487		)	(38,902		)	(154,558		)
Income tax expense (benefit)	126			64			122			126
Net income (loss)	$	112,361		$	(129,551	)	$	(39,024	)	$	(154,684	)

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

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Revenues

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Revenues decreased $14.3 million in the third quarter of 2016 compared to the third quarter of 2015. The decrease was primarily attributable to a $23.0 million decrease in corporate loans and securities interest income. Specifically, interest income related to our corporate loans decreased $14.1 million and interest income related to our corporate debt securities decreased $8.9 million in the third quarter of 2016 compared to the same prior year period.

A large driver of the decrease in corporate loan and security interest income was a decline in the aggregate par value of our corporate loan and debt security portfolios as of September 30, 2016 compared to 2015, slightly offset by an increase in the weighted average interest rates earned on the assets. The decline in the aggregate par value of our corporate debt portfolio was attributable to the calling of CLO 2005-1, CLO 2005-2, CLO 2007-1 and CLO 2011-1 during the second half of 2015 and first nine months of 2016 and the sale of assets held within these CLOs to repay the CLO notes outstanding. From September 30, 2015 to September 30, 2016, we repaid approximately $2.0 billion of notes from the sale proceeds of assets held within the legacy CLOs.

Since April 30, 2014, the date we became a subsidiary of KKR & Co., the size of our corporate loan and debt securities portfolio has declined largely due to the calling of our CLOs. As of September 30, 2016, all of our legacy CLOs have been called for redemption. These legacy CLOs, which were issued prior to 2012, were larger in total transaction size relative to those that were issued subsequently. The size of new CLOs and the frequency of CLO issuances will depend on market conditions. CLO

issuances typically increase when the spread between the value of CLO assets and liabilities generates an attractive return to

subordinated note holders. In the case where demand for loans leads to tighter spreads or if interest rates for the liabilities increase, the return to subordinated note holders would be less attractive, and the issuance of CLOs would be expected to generally decline. Consequently, since April 30, 2014, the amount of corporate loan and security interest income and interest expense on our CLO notes has declined along with the volatility in our interest income and interest expense. While the size of our CLO portfolio may continue to decline in the near term, along with the levels of associated corporate loan and security interest income and interest expense on our CLO notes, as we have called for redemption all notes issued by all six legacy CLOs, we do not expect the rate of decline in the near term to be as significant as in recent quarters. Based on the above factors combined with alternative investment opportunities, we may selectively redeploy capital to other assets outside of CLOs.  

We also closed CLO 13, CLO 2016-1 and CLO 15 subsequent to the third quarter of 2015; however, total new assets only partially offset the decline in portfolio from the amortization of legacy CLOs. As of September 30, 2016, our corporate loan portfolio had an aggregate par value of $3.9 billion with a weighted average coupon of 5.2%, while our corporate debt securities portfolio had an aggregate par value of $308.5 million with a weighted average coupon of 12.2%. In comparison, as of September 30, 2015, our corporate loan portfolio had an aggregate par value of $5.9 billion with a weighted average coupon of 4.8%, while our corporate debt securities portfolio had an aggregate par value of $456.2 million with a weighted average coupon of 10.0%.

Partially offsetting the above decrease in corporate loans and securities interest income was an $8.7 million increase in dividend income in the third quarter of 2016 compared to the third quarter of 2015. A majority of the $10.2 million dividend income in the third quarter of 2016 was related to two issuers in the publishing and diversified financial services sectors, one of which made a one-time dividend.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Revenues decreased $56.5 million in the first nine months of 2016 compared to the first nine months of 2015. The decrease was primarily attributable to a $64.4 million decrease in corporate loans and securities interest income. Specifically, interest income related to our corporate loans decreased $38.8 million and interest income related to our corporate debt securities decreased $25.6 million in the first nine months of 2016 compared to the same prior year period.

A large driver of the decrease in corporate loan and security interest income was a decline in the aggregate par value of our corporate loan and debt security portfolios as of September 30, 2016 compared to 2015, slightly offset by an increase in the weighted average interest rates earned on the assets. The decline in the aggregate par value of our corporate debt portfolio was attributable to the calling of CLO 2005-1, CLO 2005-2, CLO 2006-1, CLO 2007-1 and CLO 2011-1 during 2015 and the first nine months of 2016 and the sale of assets held within these CLOs to repay the CLO notes outstanding. From September 30, 2015 to September 30, 2016, we repaid approximately $2.0 billion of notes from the sale proceeds of assets held within the

44

legacy CLOs. For further information, refer to "Credit Segment - Revenues - For the three months ended September 30, 2016 compared to the three months ended September 30, 2015."

We also closed CLO 13, CLO 2016-1 and CLO 15 subsequent to the third quarter 2015; however, total new assets only partially offset the decline in portfolio from the amortization of legacy CLOs. As of September 30, 2016, our corporate loan portfolio had an aggregate par value of $3.9 billion with a weighted average coupon of 5.2%, while our corporate debt securities portfolio had an aggregate par value of $308.5 million with a weighted average coupon of 12.2%. In comparison, as of September 30, 2015, our corporate loan portfolio had an aggregate par value of $5.9 billion with a weighted average coupon of 4.8%, while our corporate debt securities portfolio had an aggregate par value of $456.2 million with a weighted average coupon of 10.0%.

Partially offsetting the above decrease in corporate loans and securities interest income was an $8.9 million increase in dividend income in the first nine months of 2016 compared to the first nine months of 2015. A majority of the $16.6 million dividend income in the first nine months of 2016 was related to two issuers in the publishing and diversified financial services sectors.

Investment Costs and Expenses

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Total investment costs and expenses increased $80.6 million in the third quarter of 2016 compared to the third quarter of 2015 primarily as a result of a $76.9 million increase in total interest expense. The increase in total interest expense was primarily driven by a $79.2 million increase in interest expense on our secured and junior secured CLO notes, partially offset by a $1.7 million decrease in interest expense related to our interest rate swaps.

Interest expense on our secured CLO notes increased $73.8 million in the third quarter of 2016 compared to the third quarter of 2015 primarily due to the calling of CLO 2007-1 in August 2016. CLO subordinated note holders receive the residual interest after all other payments have been made and as a result of the paydown made in August 2016, we recorded interest expense on the CLO 2007-1 subordinated notes of $59.9 million during the third quarter of 2016. We also recorded an incremental $8.7 million of accelerated accretion of debt discount in connection with the calling of CLO 2007-1. Further, interest expense on our junior secured CLO notes to affiliates increased $5.4 million in the third quarter of 2016 compared to the third quarter of 2015. Beginning in the second quarter of 2016, as a result of the distribution of $96.5 million par amount of certain subordinated notes to our Parent, we incurred interest expense on these CLO junior secured notes held by an affiliate of KKR. These notes were previously owned by us and eliminated in consolidation. For further information, refer to "Part I-Item1. Financial Statements-Note 6. Borrowings" and "Credit Segment - Revenues - For the three months ended September 30, 2016 compared to the three months ended September 30, 2015."

Partially offsetting the above increases in interest expense on our secured and junior secured CLO notes was a $1.7 million decrease in interest expense related to our interest rate swaps during the third quarter of 2016 compared to the same prior year period. In conjunction with the calling of CLO 2007-1 in August 2016, we terminated the related interest rate swap and ceased incurring the associated interest expense. For further information, refer to "Part I-Item1. Financial Statements-Note 6. Borrowings."

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total investment costs and expenses increased $72.0 million in the first nine months of 2016 compared to the first nine months of 2015 primarily as a result of a $69.0 million increase in total interest expense. The increase was largely attributable to a $73.9 million increase in interest expense on our secured and junior secured CLO notes, partially offset by a $4.0 million decrease in interest expense related to our interest rate swaps.

Interest expense on our secured CLO notes increased $67.5 million in the first nine months of 2016 compared to the first nine months of 2015 primarily due to the calling of CLO 2007-1 in August 2016. CLO subordinated note holders receive the residual interest after all other payments have been made and as a result, we recorded interest expense on the CLO 2007-1 subordinated notes of $59.9 million during August 2016. We also recorded an incremental $8.8 million of accelerated accretion of debt discounts as a result of the calling of CLO 2007-1. Further, interest expense on our junior secured CLO notes to affiliates increased $6.4 million in the first nine months of 2016 compared to the same prior year period. Beginning in the second quarter of 2016, as a result of the distribution of $96.5 million par amount of certain subordinated notes to our Parent, we incurred interest expense on these CLO junior secured notes held by affiliates of KKR. These notes were previously owned by us and eliminated in consolidation. For further information, refer to "Part I-Item1. Financial Statements-Note 6. Borrowings" and

45

"Credit Segment - Revenues - For the three months ended September 30, 2016 compared to the three months ended September 30, 2015."

Partially offsetting the above increases in interest expense on our secured and junior secured CLO notes was a $4.0 million decrease in interest expense related to our interest rate swaps during the first nine months of 2016 compared to the same prior year period. In conjunction with the calling of CLO 2006-1 and CLO 2007-1 in February 2015 and August 2016, respectively, we terminated the related interest rate swaps and ceased incurring the associated interest expense. For further information, refer to "Part I-Item1. Financial Statements-Note 6. Borrowings."

Other Income (Loss)

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 September 30, 2016 compared to the three months ended September 30, 2015

Total other income (loss) favorably changed $342.4 million in the third quarter of 2016 compared to the third quarter of 2015 largely attributable to the following factors.

Net realized and unrealized gain (loss) on investments favorably changed $250.6 million in the third quarter of 2016 compared to the same prior year period from a net realized and unrealized loss of $197.3 million to a net realized and unrealized gain of $53.3 million in the third quarter of 2015 and 2016, respectively. The most significant changes were in our corporate debt portfolio and interests in joint ventures and partnerships.

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 September 30, 2016 and 2015 (amounts in thousands):

	For the three months ended September 30, 2016									For the three months ended September 30, 2015
	Unrealized gains (losses)			Realized gains (losses)			Total			Unrealized gains (losses)			Realized gains (losses)			Total
Corporate loans	$	64,646		$	(18,720	)	$	45,926		$	(147,107	)	$	(546	)	$	(147,653	)
Corporate debt securities	(4,010		)	(66		)	(4,076		)	(16,094		)	(2,402		)	(18,496		)
RMBS	(166		)	790			624			572			(824		)	(252		)
Equity investments, at estimated fair value	(5,402		)	—			(5,402		)	(14,245		)	1,549			(12,696		)
Interests in joint ventures and partnerships, at estimated fair value and other	20,803			(4,566		)	16,237			(19,632		)	1,476			(18,156		)
Total	$	75,871		$	(22,562	)	$	53,309		$	(196,506	)	$	(747	)	$	(197,253	)

Net realized and unrealized gains (losses) on our corporate loans favorably changed $193.6 million in the third quarter of 2016 compared to the same prior year period, from net realized and unrealized losses of $147.7 million in the third quarter of 2015 to net realized and unrealized gains of $46.0 million in the third quarter of 2016. The favorable change in net realized and unrealized gains (losses) on corporate loans was largely attributable to two factors. First, the third quarter of 2016 saw an upturn in general market conditions. For example, overall, the S&P/LSTA Loan Index returned 3.07% for the three months ended September 30, 2016 compared to (1.35)% for the three months ended September 30, 2015. Second, a majority of the net realized and unrealized losses in the third quarter of 2015 were concentrated in three issuers, one of which was Texas Competitive Electric Holding Company LLC ("TXU"), and had unrealized losses of $69.9 million in the third quarter of 2015 largely due to the decline in commodity prices. We sold our entire position in TXU during the third quarter of 2016, which resulted in realized losses of less than $0.1 million, net of the reversal of previously recorded unrealized losses. The remaining two issuers were in the homebuilding and education sectors and had net unrealized losses totaling $22.4 million in the third quarter of 2015 compared to net unrealized gains of $0.3 million in the third quarter of 2016.

Net realized and unrealized gains (losses) on our interests in joint ventures and partnerships favorably changed $34.4 million in the third quarter of 2016 compared to the same prior year period from unrealized losses of $18.2 million in the third quarter of 2015 to unrealized gains of $16.2 million in the third quarter of 2016. The favorable change was largely attributable to two factors. First, net realized and unrealized gains in the third quarter of 2016 included a $9.4 million unrealized gain from one investment acquired in October 2015 in the alternative credit sector. Second, one investment focused in the marine sector had

46

unrealized losses of $7.1 million compared to unrealized gains of $4.4 million in the third quarter of 2015 and 2016, respectively.

Net realized and unrealized losses on our corporate debt securities favorably changed $14.4 million in the third quarter of 2016 compared to the same prior year period, from $18.5 million in the third quarter of 2015 to $4.1 million in the third quarter of 2016. A majority of the favorable change was related to one issuer in the oil and gas industry which was negatively impacted during 2015 by the decline in commodity prices relative to 2016 and had unrealized losses of $13.1 million in the third quarter of 2015, compared to $6.9 million unrealized gains in the third quarter of 2016.

In addition, net realized and unrealized gain on debt increased $76.9 million in the third quarter of 2016 compared to the same prior year period, from $54.9 million in the third quarter of 2015 to $131.7 million in the third quarter of 2016. Of the $131.7 million net realized and unrealized gain on debt, approximately $107.8 million represented the reversal of previously recorded unrealized losses as a result of calling and repaying in full CLO 2007-1 secured notes during the third quarter of 2016. 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.

Lastly, total realized and unrealized gain (loss) on derivatives and foreign exchange favorably changed $10.1 million from the third quarter of 2016 compared to the third quarter of 2015. A majority of the change was related to realized and unrealized gain (loss) on interest rate swaps which favorably changed $9.5 million, driven by relatively smaller quarter over quarter declines in the 30-year swap rate. We use pay-fixed, receive variable interest rate swaps to hedge the interest rate risk associated with a portion of our borrowings which are indexed to the 30-year swap rate; as such, movements in the 30-year swap rate impact total realized and unrealized gain (loss) on derivatives and foreign exchange. For example, the 30-year swap rate declined 41 bps from 2.94% to 2.53% as of June 30, 2015 and September 30, 2015, respectively, compared to an 8 bps decline from 1.85% to 1.77% as of June 30, 2016 to September 30, 2016, respectively. During the third quarter of 2016, we also terminated the interest rate swap related to CLO 2007-1, resulting in a $0.2 million net realized and unrealized gain in the third quarter of 2016.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total other income (loss) favorably changed $254.0 million in the first nine months of 2016 compared to the first nine months of 2015 largely attributable to the following factors.

Net realized and unrealized loss on investments favorably changed $164.2 million in the first nine months of 2016 compared to the same prior year period from $188.8 million to $24.6 million in the first nine months of 2015 and 2016, respectively. The most significant changes were in our corporate loans portfolio and equity investments.

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 nine months ended September 30, 2016 and 2015 (amounts in thousands):

	For the nine months ended September 30, 2016									For the nine months ended September 30, 2015
	Unrealized gains (losses)			Realized gains (losses)			Total			Unrealized gains (losses)			Realized gains (losses)			Total
Corporate loans	$	300,072		$	(229,672	)	$	70,400		$	(92,283	)	$	(22,807	)	$	(115,090	)
Corporate debt securities	(39,177		)	3,191			(35,986		)	(21,370		)	(7,133		)	(28,503		)
RMBS	(95		)	1,719			1,624			773			(1,994		)	(1,221		)
Equity investments, at estimated fair value	(21,851		)	(3,771		)	(25,622		)	(6,872		)	2,915			(3,957		)
Interests in joint ventures and partnerships, at estimated fair value and other	(40,020		)	5,000			(35,020		)	(42,182		)	2,164			(40,018		)
Total	$	198,929		$	(223,533	)	$	(24,604	)	$	(161,934	)	$	(26,855	)	$	(188,789	)

Net realized and unrealized gains (losses) on our corporate loans favorably changed $185.5 million in the first nine months of 2016 compared to the same prior year period. The favorable change was largely attributable to two factors. First, there was an upturn in general market conditions during the first nine months of 2016. For example, overall, the S&P/LSTA Loan Index returned 7.72% for the nine months ended September 30, 2016 compared to (0.67)% for the nine months ended September

47

30, 2015. Second, a majority of the net realized and unrealized losses in the first nine months of 2015 were concentrated in three issuers, one of which was TXU, and had unrealized losses of $95.9 million in the first nine months of 2015 largely due to a decline in commodity prices, compared to net realized and unrealized losses of $7.7 million in first nine months of 2016. The remaining two issuers were in the homebuilding and education sectors and had net unrealized losses totaling $34.5 million in the first nine months of 2015 compared to net unrealized gains of $11.8 million.

Net realized and unrealized losses on equity investments unfavorably changed $21.7 million in the first nine months of 2016 compared to the same prior year period, from net realized and unrealized losses of $4.0 million in the first nine months of 2015 to net realized and unrealized losses of $25.6 million in the first nine months of 2016. A majority of the unfavorable change was due to our equity investments in the education, energy and financial services sectors.

Net realized and unrealized gain (loss) on debt favorably changed $101.7 million in the first nine months of 2016 compared to the same prior year period, from net realized and unrealized losses of $33.9 million in the first nine months of 2015 to net realized and unrealized gains of $67.7 million in the first nine months of 2016. A majority of the favorable change was related to CLO 2007-1. CLO 2007-1 was called in August 2016, whereby all CLO 2007-1 secured notes were repaid. 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.

The favorable changes described above were partially offset by a $9.2 million unfavorable change in total realized and unrealized loss on derivatives and foreign exchange from total realized and unrealized losses of $4.0 million to $13.2 million in the first nine months of 2015 and 2016, respectively. A majority of the change was related to realized and unrealized gain (loss) on interest rate swaps which unfavorably changed $17.3 million due to relatively larger year over year declines in the 30-year swap rate. We use pay-fixed, receive variable interest rate swaps to hedge the interest rate risk associated with a portion of our borrowings which are indexed to the 30-year swap rate; as such, movements in the 30-year swap rate impact total realized and unrealized gain (loss) on derivatives and foreign exchange. For example, the 30-year swap rate declined 17 bps from 2.70% to 2.53% as of December 31, 2014 and September 30, 2015, respectively, compared to an 84 bps decline from 2.61% to 1.77% as of December 31, 2015 to September 30, 2016, respectively. The unfavorable change in realized and unrealized gain (loss) on interest rate swaps was partially offset by a favorable change in realized and unrealized gain (loss) on options of $6.9 million.

Other Expenses

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Other expenses increased $5.5 million in the third quarter of 2016 compared to the third quarter of 2015. The increase was primarily attributable to a $6.3 million increase in other general and administrative expenses, of which $6.0 million was due to debt issuance costs related to the setup of CLO 2016-1 and CLO 15, which both funded in the third quarter of 2016. The increase was partially offset by a $1.3 million decrease in related party compensation, which includes base management fees and CLO management fees. Refer to “Consolidated Results-Other Expenses” above for further discussion around CLO management fees.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Other expenses increased $10.0 million in the first nine months of 2016 compared to the first nine months of 2015 primarily due to a $16.3 million increase in other general and administrative expenses during the first nine months of 2016 as a result of the write-off of costs associated with our CLOs coupled with $6.0 million of debt issuance costs related to the setup of CLO 2016-1 and CLO 15, which both funded in the third quarter of 2016.

The increase in other general and administrative expenses was partially offset by a $7.1 million decrease in related party management compensation. Related party management compensation includes base management fees and CLO management fees. Base management fees declined $4.2 million and CLO management fees declined $2.8 million in the first nine months of 2016 compared to the prior year periods. Refer to “Consolidated Results-Other Expenses” 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 September 30, 2016			For the three months ended September 30, 2015			For the nine months ended September 30, 2016		For the nine months ended September 30, 2015
Revenues
Oil and gas revenue:
Natural gas sales	$	308		$	437		$	931	$	1,289
Oil sales	2,168			3,225			7,226		10,409
Natural gas liquids sales	(89		)	214			128		1,357
Total revenues	2,387			3,876			8,285		13,055
Investment costs and expenses
Oil and gas production costs:
Severance and ad valorem taxes	247			248			702		498
Total oil and gas production costs	247			248			702		498
Oil and gas depreciation, depletion and amortization	914			1,404			3,238		4,409
Interest expense:
Senior notes	293			228			755		725
Junior subordinated notes	140			136			407		430
Total interest expense	433			364			1,162		1,155
Total investment costs and expenses	1,594			2,016			5,102		6,062
Other income (loss)
Net realized and unrealized gain (loss) on investments	21,974			(36,236		)	3,366		(50,337		)
Total other income (loss)	21,974			(36,236		)	3,366		(50,337		)
Other expenses
Related party management compensation:
Base management fees	82			84			132		271
Total related party management compensation	82			84			132		271
Professional services	40			9			105		74
Other general and administrative	70			21			212		455
Total other expenses	192			114			449		800
Income (loss) before income taxes	22,575			(34,490		)	6,100		(44,144		)
Income tax expense (benefit)	—			—			—		—
Net income (loss)	$	22,575		$	(34,490	)	$	6,100	$	(44,144	)

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 September 30, 2016 compared to the three months ended September 30, 2015

Revenues, which represented sales from oil and gas production on our overriding royalty interest properties, decreased $1.5 million in the third quarter of 2016 compared to the third quarter of 2015, primarily due to a decrease in revenue from oil sales from lower production. As of September 30, 2016 and 2015, our oil and natural gas properties had carrying amounts of $111.6 million and $115.9 million, respectively.

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For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Revenues, which represented sales from oil and gas production on our overriding royalty interest properties, decreased $4.8 million in the first nine months of 2016 compared to the first nine months of 2015, primarily due to a decrease in revenue from oil sales due to lower production and comparatively lower commodity prices. As of September 30, 2016 and 2015, our oil and natural gas properties had carrying amounts of $111.6 million and $115.9 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.

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Total investment costs and expenses decreased $0.4 million in the third quarter of 2016 compared to the third quarter of 2015, primarily due to a $0.5 million decrease in DD&A on our oil and natural gas properties.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total investment costs and expenses decreased $1.0 million in the first nine months of 2016 compared to the first nine months of 2015. The decrease in total investment costs and expenses was primarily due to a $1.2 million decrease in DD&A on our oil and natural gas properties in the first nine months of 2016 compared to the same prior year period, slightly offset by a $0.2 million increase in oil and gas production costs, comprised solely of severance and ad valorem taxes.

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 September 30, 2016 compared to the three months ended September 30, 2015

Total other income (loss), comprised solely of net realized and unrealized gain (loss) on investments, favorably changed $58.2 million from other loss of $36.2 million in the third quarter of 2015 to other income of $22.0 million in the third quarter of 2016. The positive change in other income period over period was largely as a result of the less volatile change in commodity prices in 2016 compared to 2015. For example, as of June 30, 2015 and September 30, 2015, the long-term price of WTI crude was approximately $64 per barrel and $53 per barrel, respectively, compared to approximately $54 per barrel and $55 per barrel as of June 30, 2016 and September 30, 2016, respectively. In addition, the long-term price of natural gas was approximately $3.36 per mcf and $2.98 per mcf as of June 30, 2015 and September 30, 2015, respectively, compared to approximately $3.00 per mcf and $2.80 per mcf as of June 30, 2016 and September 30, 2016, respectively.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total other income (loss), comprised solely of net realized and unrealized gain (loss) on investments, favorably changed $53.7 million in the first nine months of 2016 compared to the first nine months of 2015. Net realized and unrealized gains totaled $3.4 million during the first nine months of 2016 compared to net realized and unrealized losses of $50.3 million during the same prior year period. As commodity prices have had less volatility during 2016 compared to 2015, during which we saw significant declines in crude oil and natural gas prices, the values of our natural resources assets have also stabilized in comparison. For example, as of December 31, 2014 and September 30, 2015, the long-term price of WTI crude oil was approximately $67 per barrel and $53 per barrel, respectively, compared to approximately $50 per barrel and $55 per barrel as of December 31, 2015 and September 30, 2016, respectively, and the long-term price of natural gas was approximately $3.77 per mcf and $2.98 per mcf as of December 31, 2014 and September 30, 2015, respectively, compared to approximately $2.90 per mcf and $2.80 per mcf as of December 31, 2015 and September 30, 2016, respectively.

Other Expenses

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

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Total other expenses remained relatively flat for the third quarter of 2016 compared to the third quarter of 2015. 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 based on the investment portfolio balance in each respective segment as of period-end. As of September 30, 2016 and September 30, 2015, the carrying value of our natural resources assets, comprised of oil and gas properties and interests in joint ventures and partnerships, excluding noncontrolling interests, totaled $203.7 million and $217.4 million, respectively.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Total other expenses remained relatively flat in the first nine months of 2016 compared to the first nine months of 2015. As mentioned above, corporate expenses are allocated based on the investment portfolio balance in each respective segment as of period-end. As of September 30, 2016 and September 30, 2015, the carrying value of our natural resources assets, comprised of oil and gas properties and interests in joint ventures and partnerships, excluding noncontrolling interests, totaled $203.7 million and $217.4 million, respectively.

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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 September 30, 2016			For the three months ended September 30, 2015			For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Revenues
Dividend income	$	3,214		$	5,535		$	12,483		$	14,355
Total revenues	3,214			5,535			12,483			14,355
Investment costs and expenses
Interest expense:
Senior notes	304			241			870			712
Junior subordinated notes	146			144			471			422
Total interest expense	450			385			1,341			1,134
Other	—			3			3			13
Total investment costs and expenses	450			388			1,344			1,147
Other income (loss)
Net realized and unrealized gain (loss) on derivatives and foreign exchange:
Foreign exchange(1)	(196		)	(201		)	(334		)	477
Total realized and unrealized gain (loss) on derivatives and foreign exchange	(196		)	(201		)	(334		)	477
Net realized and unrealized gain (loss) on investments	(847		)	940			(11,847		)	20,068
Total other income (loss)	(1,043		)	739			(12,181		)	20,545
Other expenses
Related party management compensation:
Base management fees	85			88			145			260
Total related party management compensation	85			88			145			260
Professional services	42			11			121			73
Other general and administrative	7			—			17			—
Total other expenses	134			99			283			333
Income before income taxes	1,587			5,787			(1,325		)	33,420
Income tax expense (benefit)	214			30			91			1,044
Net income (loss)	$	1,373		$	5,757		$	(1,416	)	$	32,376

(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 September 30, 2016 compared to the three months ended September 30, 2015

Revenues totaled $3.2 million for the third quarter of 2016 compared to $5.5 million for the third quarter of 2015 and represented dividend income from certain of our commercial real estate assets, the majority of which was received from assets acquired during 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

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episodic in their frequency and amount. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 million, respectively.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Revenues totaled $12.5 million for the first nine months of 2016 compared to $14.4 million for the first nine months of 2015 and represented dividend income from certain of our commercial real estate assets, primarily from those acquired during 2012 and 2013. As mentioned above, 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. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 million, respectively.

Investment Costs and Expenses

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Investment costs and expenses remained relatively flat for the third quarter of 2016 compared to the third quarter of 2015 at $0.5 million and $0.4 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 period-end. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 million, respectively.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Investment costs and expenses increased $0.2 million in the first nine months of 2016 compared to the first nine months of 2015 at $1.3 million and $1.1 million, respectively. As mentioned above, 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 period-end. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 million, respectively.

Other Income (Loss)

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Other income (loss) unfavorably changed $1.8 million from other income of $0.7 million in the third quarter of 2015 to other loss of $1.0 million in the third quarter of 2016. Key inputs including the current capitalization rate impact the values of our investments. Additional factors that impact the carrying value of our commercial real estate assets may also include overall market conditions, as well as the pace of development, vacancies and ability to rent, and amount of cash distributions made from the individual investments.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Other income (loss) unfavorably changed $32.7 million from other income of $20.5 million in the first nine months of 2015 to other loss of $12.2 million in the first nine months of 2016, primarily driven by net realized and unrealized loss on investments which unfavorably changed $31.9 million. A majority of the unfavorable change in net realized and unrealized loss on investments was attributable to two factors: (i) the first nine months of 2016 included $8.9 million of unrealized losses related to one investment, which made an $8.1 million cash distribution during the period and (ii) the first nine months of 2015 included a $7.7 million gain from the sale of a property in one of our investments. Factors that impact the carrying value of our commercial real estate assets may include overall market conditions, as well as the pace of development, vacancies and ability to rent, and amount of cash distributions made from the individual investments.

Other Expenses

For the three months ended September 30, 2016 compared to the three months ended September 30, 2015

Other expenses remained relatively flat for the third quarter of 2016 compared to the third quarter of 2015. 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 based on the investment portfolio balance in each respective

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segment as of period-end. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 million, respectively.

For the nine months ended September 30, 2016 compared to the nine months ended September 30, 2015

Other expenses remained relatively flat for the first nine months of 2016 compared to the first nine months of 2015. As mentioned above, corporate expenses are allocated based on the investment portfolio balance in each respective segment as of period-end. As of September 30, 2016 and 2015, our commercial real estate assets had carrying values of $211.7 million and $230.2 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 and nine months ended September 30, 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 and nine months ended September 30, 2016, we recorded total income tax expense of $0.3 million and $0.2 million, respectively. 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

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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 $3.9 billion as of September 30, 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)

	September 30, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Senior secured	$	3,688,372	$	3,671,757	$	3,585,415	$	5,513,949	$	5,401,562	$	4,997,394
Second lien	96,464		95,230		85,679		83,492		81,453		78,267
Subordinated	105,403		105,218		84,689		125,205		136,800		112,949
Total	$	3,890,239	$	3,872,205	$	3,755,783	$	5,722,646	$	5,619,815	$	5,188,610

As of September 30, 2016, $3.8 billion par amount, or 96.6%, of our corporate loan portfolio was floating rate and $130.7 million par amount, or 3.4%, was fixed rate. In addition, as of September 30, 2016, $145.1 million par amount, or 3.7%, of our corporate loan portfolio was denominated in foreign currencies, of which 69.9% 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 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 September 30, 2016, our fixed rate corporate loans, which include PIKs, had a weighted average coupon of 15.3% and a weighted average years to maturity of 3.4 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 4.9% as of September 30, 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 4.0% as of September 30, 2016 and 3.7% as of December 31, 2015. The weighted average years to maturity of our floating rate corporate loans was 4.8 years as of September 30, 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 September 30, 2016, we held a total par value and estimated fair value of non-accrual loans of $104.2 million and $35.5 million, respectively, and $435.2 million and $127.5 million, respectively, as of December 31, 2015. The decline in total non-accrual loans was primarily due to the sale of one asset from a single issuer, which previously comprised the majority of the balance as of December 31, 2015.

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Defaulted Loans

Defaulted loans consist of corporate loans that have defaulted under the contractual terms of their loan agreements. As of September 30, 2016, no corporate loans in our portfolio were in default. 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 September 30, 2016, approximately 21% 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 RedPrairie Corp, iPayment Investors L.P. and SRS Distribution Inc., which combined represented $152.2 million, or approximately 4% 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 $308.5 million and $447.8 million as of September 30, 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 condensed consolidated balance sheets. The following table summarizes our corporate debt securities portfolio stratified by type: 

Corporate Debt Securities

(Amounts in thousands)

	September 30, 2016						December 31, 2015
	Par		Amortized Cost		Estimated Fair Value		Par		Amortized Cost		Estimated Fair Value
Senior secured	$	155,078	$	128,989	$	49,995	$	178,396	$	166,313	$	110,406
Senior unsecured	25,280		28,880		29,079		137,634		137,949		142,990
Subordinated	128,158		109,288		90,803		131,720		122,997		114,502
Total	$	308,516	$	267,157	$	169,877	$	447,750	$	427,259	$	367,898

As of September 30, 2016, $154.2 million par amount, or 54.1%, of our corporate debt securities portfolio was fixed rate and $130.7 million par amount, or 45.9%, was floating rate. In addition, we had $23.6 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 September 30, 2016, $26.5 million par amount, or 8.6%, of our corporate debt securities portfolio, was denominated in foreign currencies, of which 89.3% 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 September 30, 2016, our fixed rate corporate debt securities had a weighted average coupon of 9.9% and a weighted average years to maturity of 3.5 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 14.9% as of September 30, 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 September 30, 2016 and December 31, 2015. The weighted average years to maturity of our floating rate corporate debt securities was 5.0 years and 5.9 years as of September 30, 2016 and December 31, 2015, respectively.

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Defaulted Securities

As of both September 30, 2016 and December 31, 2015, no corporate debt securities in our portfolio were in default.

Concentration Risk

Our corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2016, approximately 98% 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, Mizuho Bank Ltd, and Preferred Proppants LLC, which combined represented $114.4 million, or approximately 67% 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	As of September 30, 2016		As of December 31, 2015
Oil and gas properties, net	$	111,631	$	114,868
Interests in joint ventures and partnerships(1)	120,372		114,136
Total	$	232,003	$	229,004

_____________________

(1) Includes $28.3 million and $32.6 million of noncontrolling interests as of September 30, 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 September 30, 2016 and December 31, 2015, our oil and gas properties, net totaled $111.6 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 1,003 and 902 gross productive wells as of September 30, 2016 and December 31, 2015, respectively, in which we own an overriding royalty interest, and the acreage is still under development.

Commodity prices, specifically natural gas and oil, have varied meaningfully over the course of the years. Following a meaningful fall in commodity prices that started in the second half of 2014, the long-term price of WTI crude and natural gas has had less volatility during 2016 compared to 2015. However, commodity prices remain low compared to recent historical levels, and if commodity prices remain depressed or decline again or if a decline is not offset by other factors, we would expect the value of our natural resources assets to be adversely impacted.

Equity Holdings

As of September 30, 2016 and December 31, 2015, our equity investments carried at estimated fair value totaled $213.1 million and $262.9 million, respectively. The following table summarizes the changes in our equity investments, at estimated fair value (amounts in thousands):

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	For the three months ended September 30, 2016			For the three months ended September 30, 2015			For the nine months ended September 30, 2016			For the nine months ended September 30, 2015
Beginning balance	$	218,306		$	292,330		$	262,946		$	181,378
Additions	—			1,503			10,039			109,578
Dispositions and paydowns	—			(167		)	(38,727		)	(3,342		)
Unrealized gains (losses)	(5,403		)	(14,246		)	(21,852		)	(6,873		)
Other(1)	165			(74		)	662			(1,395		)
Ending balance	$	213,068		$	279,346		$	213,068		$	279,346

_____________________

(1) Includes foreign exchange translation.

Interests in Joint Ventures and Partnerships Holdings

As of September 30, 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 $779.0 million, which included noncontrolling interests of $65.8 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 September 30, 2016 totaled $1.7 billion and included $65.8 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, to achieve a desired allocation of assets among various strategies, and/or to facilitate the management and administration of such assets by us.

On May 25, 2016, our board of directors approved the distribution of certain of our loans, equity investments at estimated fair value and CLO subordinated notes owned by us to our Parent, as the holder of our common shares. The estimated fair value of these distributions totaled approximately $132.0 million and were completed during May 2016. Refer to "Sources of Funds - Cash Flow CLO Transactions" for further details.

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
	June 23, 2016	July 8, 2016	July 15, 2016	$0.460938
	September 22, 2016	October 10, 2016	October 17, 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
	Second Quarter ended June 30, 2016	July 21, 2016	July 22, 2016	$179,230
	Third Quarter ended September 30, 2016	(1)	(1)	(1)
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

___________________

(1) There were no distributions declared or paid for the period.

Distribution amounts and the decision whether or not to declare and pay a regular quarterly distribution to the holders of common shares and Series A LLC Preferred Shares 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. Refer to “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

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preserve our ability to fund our operations and fulfill our commitments, we may evaluate opportunities to issue incremental capital. As of September 30, 2016, we had unrestricted cash and cash equivalents totaling $677.2 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 the secured note holders of the Cash Flow CLOs. As described in further detail below, as of September 30, 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.

Since April 30, 2014, the date we became a subsidiary of KKR & Co., the size of our corporate loan and debt securities portfolio has declined largely due to the calling of our CLOs. As of September 30, 2016, all of our legacy CLOs have been called for redemption. These legacy CLOs, which were issued prior to 2012, were larger in total transaction size relative to those that were issued subsequently. The size of new CLOs and the frequency of CLO issuances will depend on market conditions. CLO issuances typically increase when the spread between the value of CLO assets and liabilities generates an attractive return to subordinated note holders. In the case where demand for loans leads to tighter spreads or if interest rates for the liabilities increase, the return to subordinated note holders would be less attractive, and the issuance of CLOs would be expected to generally decline. Consequently, since April 30, 2014, the amount of corporate loan and security interest income and interest expense on our CLO notes has declined along with the volatility in our interest income and interest expense. While the size of our CLO portfolio may continue to decline in the near term, along with the levels of associated corporate loan and security interest income and interest expense on our CLO notes, as we have called for redemption all notes issued by all six legacy CLOs, we do not expect the rate of decline in the near term to be as significant as in recent quarters. Based on the above factors combined with alternative investment opportunities, we may selectively redeploy capital to other assets outside of CLOs.  

Sources and Uses 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.    

During the three and nine months ended September 30, 2016, we issued $7.0 million par amount of CLO 13 class F notes for proceeds of $5.9 million.    

On September 14, 2016, we closed CLO 15, a $410.8 million secured financing transaction maturing on October 18, 2028. We issued $370.5 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 2.05%. We also issued $12.1 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 15 collateralize the CLO 15 debt, and as a result, those investments are not available to us, our creditors or shareholders.  

On June 7, 2016, we closed CLO 2016-1, a $426.4 million secured financing transaction maturing on June 7, 2018, which was funded during the third quarter of 2016. We issued $330.9 million par amount of senior secured notes to unaffiliated investors at a rate of three-month LIBOR plus 1.70% and $25.7 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 2016-1 collateralize the CLO 2016-1 debt, and as a result, those investments are not available to us, our creditors or shareholders.  

During May 2016, we distributed an aggregate $96.5 million par amount of CLO 9, CLO 10, CLO 11 and CLO 13 subordinated notes to our Parent. These notes were previously owned by us and eliminated in consolidation. Following the distribution, the subordinated notes were held by an affiliate of KKR and reflected as collateralized loan obligation junior secured notes to affiliates, at estimated fair value, on our condensed consolidated balance sheets.

During April 2016, the remaining $15.1 million of CLO 2007-A subordinated notes owned by third parties were deemed repaid in full, whereby we distributed cash and assets held as collateral in CLO 2007-A to the subordinated note holders.    

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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 the three months ended September 30, 2015, we issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million. During the nine months ended September 30, 2015, we issued $30.0 million par amount of CLO 2005-2 class E notes for proceeds of $30.2 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 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.

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 September 30, 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 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11, CLO 13 and CLO 15 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019, January 2020 and October 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 August 2016, we called CLO 2007-1 and repaid all senior and mezzanine notes totaling $945.6 million par amount. During November 2015, we called CLO 2005-2 and repaid all senior

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and mezzanine notes totaling $140.2 million par amount. In addition, during July 2015, we called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. Furthermore, 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 2007-1 notes and CLO 2006-1 notes, the related interest rate swaps, with contractual notional amounts of $142.3 million and $84.0 million, respectively, were terminated.

During the three and nine months ended September 30, 2016, $947.6 million and $1.5 billion par amount, respectively, of original CLO 2007-1 and CLO 13 secured notes were repaid, which included the repayment in full related to the calling of CLO 2007-1. Comparatively, during the three and nine months ended September 30, 2015, $583.6 million and $1.1 billion par amount, respectively, of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 secured notes were repaid, which included the repayment in full related to the calling of CLO 2005-1. CLO 2011-1 and CLO 2016-1 do not have reinvestment periods and all principal proceeds from holdings in the respective CLOs are used to amortize the transaction. During both the three and nine months ended September 31, 2016, $280.0 par amount of original CLO 2016-1 secured and subordinated notes were repaid. During March 2016, we called CLO 2011-1 and repaid all senior debt totaling $249.3 million par amount. During the three and nine months ended September 30, 2015, $119.3 million and $150.1 million par amount, respectively, of original CLO 2011-1 senior debt was 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.

Senior Notes

On October 25, 2016, we announced our intention to redeem all of our outstanding Notes due 2041 on November 15, 2016 in accordance with the optional redemption provisions provided in the documents governing the Notes due 2041. As of October 25, 2016, there was $258.8 million aggregate principal amount of the Notes due 2041 outstanding. The redemption price will equal 100% of the principal amount of the Notes due 2041 plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the Notes due 2041. We intend to use cash on hand to fund the redemption.

Off-Balance Sheet Arrangements

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 September 30, 2016 and December 31, 2015, we had unfunded financing commitments for corporate loans totaling $4.3 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 September 30, 2016, we estimated these future contributions to total approximately $94.0 million, whereby approximately 72% was related to our credit segment and 28% 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.

We had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.3 billion as of September 30, 2016 and $1.6 billion as of December 31, 2015. Under non-recourse debt, the lender generally does not have recourse against any other assets owned by the borrower or any related parties

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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 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.

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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 third 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 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

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(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 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

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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 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

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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”.

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”).

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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.

IRAN SANCTIONS RELATED DISCLOSURE

Under the Iran Threat Reduction and Syrian Human Rights Act of 2012, which added Section 13(r) of the Exchange Act, we are required to include certain disclosures in our periodic reports if we or any of our “affiliates” knowingly engaged in certain specified activities during the period covered by the report. We are not presently aware that we and our consolidated subsidiaries have knowingly engaged in any transaction or dealing reportable under Section 13(r) of the Exchange Act during the quarter ended September 30, 2016. We note, however, that KKR & Co. L.P., our parent, has informed us that it has included the disclosure reproduced below (relating to a company in which its credit funds and other vehicles own a minority interest) in Exhibit 99.1 to its quarterly report on Form 10-Q as filed with the SEC on November 4, 2016, as required by Section 13(r) of the Exchange Act (the “KKR Disclosure”).

KKR Disclosure:

"The information below was provided by the relevant company in connection with its activities. We have not independently verified this information.

A European company, in which our credit funds and other vehicles own a minority interest, had brokered an insurance policy for NPC International Limited. The European company has informed us that the gross revenue and net profits attributable to this policy was less than £400 per annum from 2013 to 2015, and less than £120 for the period January 1, 2016 through October 31, 2016. We have been advised that the European company expects the policy will be canceled on November 16, 2016."

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risks

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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 September 30, 2016, $146.9 million estimated fair value, or 3.7%, of our corporate debt portfolio was denominated in foreign currencies, of which approximately 77.7% was denominated in Euros. In addition, as of September 30, 2016, $163.9 million estimated fair value, or 17.7%, of our interests in joint ventures and partnerships and equity investments had foreign exposure, including those denominated in foreign currencies, of which approximately 28.5% was denominated in Euros and 24.9% 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 September 30, 2016, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $297.9 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 September 30, 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%	$	7,558
Increase of 3.0%	$	13,357
Increase of 4.0%	$	19,156
Increase of 5.0%	$	24,955

As of September 30, 2016, approximately 91.7% of our floating rate corporate debt portfolio had LIBOR floors with a weighted average floor of 0.97%. Given these LIBOR floors, increases in short-term interest rates of 1% or more 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.

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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 September 30, 2016, we had interest rate swaps with a contractual notional amount of $125.0 million, which 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. The estimated fair value of the interest rate swaps is based on the 30-year swap rate and all changes in value are reflected as net unrealized gains and losses on the condensed consolidated statements of operations. 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 September 30, 2016
	Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	125,000		$	(47,907	)
Foreign exchange forward contracts and options	(297,947		)	24,642
Common stock warrants	—			1,613
Options	—			2,227
Total				$	(19,425	)

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 September 30, 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	$	(641	)	$	—	$	—	$	(47,266	)	$	(47,907	)
Foreign exchange forward contracts and options	9,555			11,167		3,920		—			24,642
Total	$	8,914		$	11,167	$	3,920	$	(47,266	)	$	(23,265	)

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

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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 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 September 30, 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 September 30, 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 September 30, 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 9 “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 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, filed with the SEC on August 10, 2016, both of which are accessible on the SEC’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.

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ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

The Manager receives quarterly incentive compensation from the Company based on its achievement of specified levels of net income pursuant to the Management Agreement. The Manager has agreed to waive incentive fees of $16.1 million for the three months ended September 30, 2016, which were attributable to a non-cash item.

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
10.1	Fee Waiver Letter, dated November 7, 2016, between KKR Financial Advisors LLC and KKR Financial Holdings LLC
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: November 9, 2016

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EX-10.1

Exhibit 10.1

KKR FINANCIAL ADVISORS LLC

555 CALIFORNIA STREET, 50TH FLOOR

SAN FRANCISCO, CA 94104

November 7, 2016

KKR Financial Holdings LLC

555 California Street, 50th Floor
San Francisco, CA 94104
Attention: Chief Executive Officer

Reference is hereby made to the Amended and Restated Management Agreement (as amended through the date hereof, the “Management Agreement”) dated as of May 4, 2007 among KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), KKR Financial Corp., a Maryland corporation, and KKR Financial Advisors LLC, a Delaware limited liability company (the “Manager”). Capitalized terms used herein and not defined herein shall have the meaning set forth in the Management Agreement, as applicable.

By this letter the Manager hereby releases, relinquishes and forever discharges in full the Company from the payment of any Incentive Compensation due to the Manager pursuant to Section 8(d) of the Agreement for the quarterly period ended September 30, 2016. The Manager and Company agree that this letter agreement shall have effect as of September 30, 2016.

[The remainder of this page has intentionally been left blank]

KKR FINANCIAL ADVISORS LLC,

as Manager

By: KKR Credit Advisors (US) LLC, as Sole Member

By: /s/ Jeffrey B. Van Horn
Name: Jeffrey B. Van Horn
Title: Authorized Signatory

Acknowledged,

KKR FINANCIAL HOLDINGS LLC

By: /s/ William J. Janetschek
Name: William J. Janetschek
Title: Chief Executive Officer

051215-0012-13489-Active.20400799.1

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 September 30, 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: November 9, 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 September 30, 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: November 9, 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 September 30, 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.

November 9, 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	9 Months Ended
	Sep. 30, 2016	Nov. 02, 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	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		100

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Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Assets
Cash and cash equivalents	$ 677,184	$ 320,122
Restricted cash and cash equivalents	384,559	487,374
Securities, at estimated fair value	213,191	417,519
Loans, at estimated fair value	3,755,783	5,188,610
Equity investments, at estimated fair value	213,068	262,946
Oil and gas properties, net	111,631	114,868
Interests in joint ventures and partnerships, at estimated fair value	779,027	888,408
Derivative assets	32,899	40,852
Interest and principal receivable	16,672	22,196
Receivable for investments sold	135,346	19,930
Other assets	11,231	25,570
Total assets	6,330,591	7,788,395
Liabilities
Collateralized loan obligation secured notes, at estimated fair value	3,456,988	4,843,746
Collateralized loan obligation junior secured notes to affiliates, at estimated fair value	60,919	0
Senior notes	411,836	413,006
Junior subordinated notes	249,730	248,498
Payable for investments purchased	361,523	220,085
Accounts payable, accrued expenses and other liabilities	33,625	43,667
Accrued interest payable	18,715	20,619
Related party payable	3,528	3,892
Derivative liabilities	52,324	43,892
Total liabilities	4,649,188	5,837,405
Equity
Preferred shares, no par value, 50,000,000 shares authorized and 14,950,000 issued and outstanding as of both September 30, 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 September 30, 2016 and December 31, 2015	0	0
Paid-in-capital	2,764,061	2,764,061
Accumulated deficit	(1,148,413)	(895,950)
Total KKR Financial Holdings LLC and Subsidiaries shareholders’ equity	1,615,648	1,868,111
Noncontrolling interests	65,755	82,879
Total equity	1,681,403	1,950,990
Total liabilities and equity	$ 6,330,591	$ 7,788,395

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Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Preferred shares, no par value (in dollars per share)
Preferred shares, shares authorized (in shares)	50,000,000	50,000,000
Preferred shares, shares issued (in shares)	14,950,000	14,950,000
Preferred shares, shares outstanding (in shares)	14,950,000	14,950,000
Common shares, no par value (in dollars per share)
Common shares, shares authorized (in shares)	500,000,000	500,000,000
Common shares, shares issued (in shares)	100	100
Common shares, shares outstanding (in shares)	100	100

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Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Revenues
Loan interest income	$ 51,000	$ 62,743	$ 175,434	$ 210,203
Securities interest income	3,795	15,297	15,751	47,146
Oil and gas revenue	2,387	3,876	8,285	13,055
Other	13,835	7,193	30,014	22,182
Total revenues	71,017	89,109	229,484	292,586
Investment costs and expenses
Interest expense	119,039	47,422	224,346	161,589
Interest expense to affiliates	5,437	0	6,446	0
Oil and gas production costs	247	248	702	498
Oil and gas depreciation, depletion and amortization	914	1,404	3,238	4,409
Other	4,956	1,278	6,912	3,959
Total investment costs and expenses	130,593	50,352	241,644	170,455
Other income (loss)
Net realized and unrealized gain (loss) on investments	74,436	(232,549)	(33,085)	(219,058)
Net realized and unrealized gain (loss) on derivatives and foreign exchange	(168)	(10,304)	(13,564)	(3,545)
Net realized and unrealized gain (loss) on debt	131,712	54,860	67,737	(33,933)
Net realized and unrealized gain (loss) on debt to affiliates	2,706	0	(278)	0
Other income (loss)	4,680	2,544	7,620	9,958
Total other income (loss)	213,366	(185,449)	28,430	(246,578)
Other expenses
Related party management compensation	8,100	9,449	22,143	29,486
General, administrative and directors' expenses	8,047	1,779	25,238	9,265
Professional services	994	319	3,016	2,233
Total other expenses	17,141	11,547	50,397	40,984
Income (loss) before income taxes	136,649	(158,239)	(34,127)	(165,431)
Income tax expense (benefit)	340	94	213	1,170
Net income (loss)	136,309	(158,333)	(34,340)	(166,601)
Net income (loss) attributable to noncontrolling interests	1,492	(6,676)	(15,324)	(15,452)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	134,817	(151,657)	(19,016)	(151,149)
Preferred share distributions	6,891	6,891	20,673	20,673
Net income (loss) available to common shares	$ 127,926	$ (158,548)	$ (39,689)	$ (171,822)

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Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 136,309	$ (158,333)	$ (34,340)	$ (166,601)
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale	0	0	0	0
Unrealized gains (losses) on cash flow hedges	0	0	0	0
Total other comprehensive income (loss)	0	0	0	0
Comprehensive income (loss)	136,309	(158,333)	(34,340)	(166,601)
Less: Comprehensive income (loss) attributable to noncontrolling interests	0	0	0	0
Comprehensive income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$ 136,309	$ (158,333)	$ (34,340)	$ (166,601)

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Condensed Consolidated Statements of Changes in 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	1,236						1,236
Net income (loss)	(166,601)					(151,149)	(15,452)
Distributions declared on preferred shares	(20,673)					(20,673)
Distributions to Parent	(141,566)					(141,566)
Balance at Sep. 30, 2015	2,158,567		378,983		2,385,078	(691,447)	85,953
Balance (in shares) at Sep. 30, 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	5,049						5,049
Capital distributions	(6,849)						(6,849)
Net income (loss)	(34,340)					(19,016)	(15,324)
Distributions declared on preferred shares	(20,673)					(20,673)
Distributions to Parent	(212,774)					(212,774)
Balance at Sep. 30, 2016	$ 1,681,403		$ 378,983		$ 2,385,078	$ (1,148,413)	$ 65,755
Balance (in shares) at Sep. 30, 2016		14,950,000		100

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net income (loss)	$ (34,340)	$ (166,601)
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	13,564	3,545
Unrealized (depreciation) appreciation on investments allocable to noncontrolling interests	(15,324)	(15,452)
Net realized and unrealized (gain) loss on investments	48,409	234,510
Depreciation and net amortization	40,799	22,915
Net realized and unrealized (gain) loss on debt	(67,737)	33,933
Net realized and unrealized (gain) loss on debt to affiliates	278	0
Changes in assets and liabilities:
Interest receivable	5,554	24,170
Other assets	(11,481)	(32,759)
Related party payable	(364)	(612)
Accounts payable, accrued expenses and other liabilities	(10,048)	28,235
Accrued interest payable	(1,904)	3,034
Net cash provided by (used in) operating activities	(32,594)	134,918
Cash flows from investing activities
Principal payments from corporate loans	1,068,822	1,160,687
Principal payments from securities	31,118	11,841
Proceeds from sales of corporate loans	1,860,854	1,142,796
Proceeds from sales of securities	116,259	152,707
Proceeds from equity and other investments	122,800	48,915
Purchases of corporate loans	(1,418,194)	(1,391,722)
Purchases of securities	(5,068)	(9,387)
Purchases of equity and other investments	(61,852)	(56,171)
Net change in proceeds, purchases and settlements of derivatives	5,562	21,643
Net change in restricted cash and cash equivalents	102,815	99,124
Net cash provided by (used in) investing activities	1,823,116	1,180,433
Cash flows from financing activities
Issuance of collateralized loan obligation secured notes	745,156	595,056
Retirement of collateralized loan obligation secured notes	(2,075,332)	(1,445,941)
Distributions on common shares	(80,811)	(141,566)
Distributions on preferred shares	(20,673)	(20,673)
Capital distributions to noncontrolling interests	(6,849)	(2,728)
Capital contributions from noncontrolling interests	5,049	3,964
Other capitalized costs	0	(3,652)
Net cash provided by (used in) financing activities	(1,433,460)	(989,477)
Net increase (decrease) in cash and cash equivalents	357,062	325,874
Cash and cash equivalents at beginning of period	320,122	163,405
Cash and cash equivalents at end of period	677,184	489,279
Supplemental cash flow information
Cash paid for interest	195,441	123,224
Net cash paid (refunded) for income taxes	56	(1,988)
Non-cash investing and financing activities
Assets distributed to Parent	(131,963)	0
Redemption of CLO 2007-A subordinated notes	(15,587)	0
Preferred share distributions declared, not yet paid	6,891	6,891
CLO Warehouse Facility
Cash flows from financing activities
Proceeds from credit facilities	62,479	216,063
Repayment of collateralized loan obligation warehouse facility	$ (62,479)	$ (190,000)

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ORGANIZATION

9 Months Ended

Sep. 30, 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

9 Months Ended

Sep. 30, 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, 2016 ("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 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"), KKR CLO 13, Ltd ("CLO 13"), KKR CLO 15, Ltd. ("CLO 15") and KKR 2016-1, Ltd. ("CLO 2016-1") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”) and 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 September 30, 2016, the Company’s CLOs held $3.7 billion par amount, or $3.6 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 September 30, 2016 and December 31, 2015, the aggregate par amount of CLO debt to unaffiliated and affiliated parties totaled $3.6 billion and $4.9 billion, respectively.

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.

In October 2016, the FASB issued guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its 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.

Cash Flow Classification

In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact on its financial statements.

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SECURITIES

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Securities, at estimated fair value	$	370,923	$	307,887	$	213,191	$	520,135	$	474,201	$	417,519
Total	$	370,923	$	307,887	$	213,191	$	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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	724		$	(3,227	)	$	4,910		$	(9,127	)
Net (increase) decrease in unrealized losses	(4,176		)	(15,523		)	(39,272		)	(20,598		)
Net realized and unrealized gains (losses)	$	(3,452	)	$	(18,750	)	$	(34,362	)	$	(29,725	)

Defaulted Securities

As of both September 30, 2016 and December 31, 2015, no corporate debt securities in the Company's portfolio was in default.

Concentration Risk

The Company’s corporate debt securities portfolio has certain credit risk concentrated in a limited number of issuers. As of September 30, 2016, approximately 98% 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, Mizuho Bank, Ltd. and Preferred Proppants LLC which combined represented $114.4 million, or approximately 67% 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 assets for borrowings. The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	25,040	$	170,365
Total	$	25,040	$	170,365

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LOANS

9 Months Ended

Sep. 30, 2016

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

LOANS

LOANS

The Company accounts for all of its loans at estimated fair value. The following table summarizes the Company’s loans as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	3,890,239	$	3,872,205	$	3,755,783	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	3,890,239	$	3,872,205	$	3,755,783	$	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 loans (amounts in thousands):

	Three Months Ended September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	(18,720	)	$	(546	)	$	(229,672	)	$	(22,807	)
Net (increase) decrease in unrealized losses	64,646			(147,107		)	300,072			(92,283		)
Net realized and unrealized gains (losses)	$	45,926		$	(147,653	)	$	70,400		$	(115,090	)

For the corporate loans measured at estimated fair value under the fair value option of accounting, $3.4 million and $122.4 million of net losses were attributable to changes in instrument specific credit risk for the three months ended September 30, 2016 and September 30, 2015, respectively. For the nine months ended September 30, 2016 and September 30, 2015, $54.9 million and $136.7 million of net losses were attributable to changes in instrument specific credit risk, 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 September 30, 2016, the Company held a total par value and estimated fair value of $104.2 million and $35.5 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 September 30, 2016 and December 31, 2015, there were no corporate loans past due 90 or more days and still accruing.

Defaulted Loans

As of September 30, 2016, the Company held no corporate loans that were in default. 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 September 30, 2016, approximately 21% 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 RedPrairie Corp, iPayment Investors L.P. and SRS Distribution Inc., which combined represented $152.2 million, or approximately 4% 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., Texas Competitive Electric Holdings Company LLC 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 assets for borrowings. The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	3,573,587	$	4,917,123
Total	$	3,573,587	$	4,917,123

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS

9 Months Ended

Sep. 30, 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 10 to these condensed consolidated financial statements for further discussion. As of September 30, 2016 and December 31, 2015, the Company held $779.0 million and $888.4 million, respectively, of interests in joint ventures and partnerships carried at estimated fair value.

In addition, as of September 30, 2016 and December 31, 2015, the Company held $213.1 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 September 30, 2016						Three months ended September 30, 2015						Nine months ended September 30, 2016						Nine months ended September 30, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	—		$	(4,566	)	$	1,549		$	9,176		$	(3,771	)	$	3,008		$	2,915		$	9,176
Net (increase) decrease in unrealized losses	(5,402		)	41,930			(14,245		)	(62,630		)	(21,851		)	(46,509		)	(6,872		)	(80,103		)
Net realized and unrealized gains (losses)	$	(5,402	)	$	37,364		$	(12,696	)	$	(53,454	)	$	(25,622	)	$	(43,501	)	$	(3,957	)	$	(70,927	)

(1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016, respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 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 condensed consolidated statements of operations.

As of September 30, 2016 and December 31, 2015, the Company had equity method investments, at estimated fair value, totaling $423.3 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 Credit Corporation Ltd., 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.

Summarized Financial Information

The following table shows summarized financial information for the Company’s equity method investment(s), which were reported under the fair value option of accounting and were determined to be significant as defined by accounting guidance, assuming 100% ownership (amounts in thousands):

	Nine months ended September 30, 2016								Nine months ended September 30, 2015
	Credit			Natural Resources			Other		Credit			Natural Resources		Other
Revenues(1)	$	71,714		$	86,942		$	71,808	$	65,250		$	231,248	$	36,099
Expenses(1)	$	46,060		$	126,414		$	23,725	$	40,424		$	237,275	$	39,019
Net income (loss)	$	(6,644	)	$	(52,786	)	$	48,084	$	(25,056	)	$	32,892	$	(2,921	)

(1) Revenues and expenses exclude realized and unrealized gains and losses.

Pledged Assets

Note 6 to these condensed consolidated financial statements describes the Company’s borrowings under which the Company has pledged assets for borrowings. The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	42,210	$	82,430
Total	$	42,210	$	82,430

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BORROWINGS

9 Months Ended

Sep. 30, 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 September 30, 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 subordinated notes(3)(4)	$	134,468	$	21,155	62.74	%	1688	$	75,945
CLO 2012-1 secured notes	367,500		376,667		2.90		2998	380,108
CLO 2012-1 subordinated notes(3)	18,000		10,226		14.71		2998	18,618
CLO 2013-1 secured notes	458,500		470,021		2.40		3210	488,310
CLO 2013-2 secured notes	339,250		343,686		2.72		3402	367,020
CLO 9 secured notes	463,749		470,905		2.69		3667	460,882
CLO 9 subordinated notes(3)	15,000		9,512		15.52		3667	14,907
CLO 9 subordinated notes to affiliates(3)	25,572		16,217		8.09		3667	25,414
CLO 10 secured notes	368,000		378,010		3.07		3363	362,465
CLO 10 subordinated notes to affiliates(3)	29,948		15,472		9.51		3363	29,498
CLO 11 secured notes	507,750		510,576		2.74		3849	504,497
CLO 11 subordinated notes(3)	28,250		21,709		17.74		3849	28,069
CLO 11 subordinated notes to affiliates(3)	19,362		14,879		9.45		3849	19,238
CLO 13 secured notes	375,000		385,329		3.03		4125	375,414
CLO 13 subordinated notes(3)	4,000		2,653		24.01		4125	4,004
CLO 13 subordinated notes to affiliates(3)	21,636		14,351		18.01		4125	21,660
CLO 2016-1 secured notes	66,665		64,808		2.29		615	69,304
CLO 2016-1 subordinated notes(3)	9,971		10,097		—		615	10,366
CLO 15 secured notes	370,500		370,803		3.06		4401	372,942
CLO 15 subordinated notes(3)	12,100		10,831		—		4401	12,180
Total collateralized loan obligation secured debt	3,635,221		3,517,907					3,640,841
8.375% Senior notes(5)	258,750		288,728		8.38		9177	—
7.500% Senior notes	115,043		123,108		7.50		9302	—
Junior subordinated notes	283,517		249,730		4.01		7310	—
Total borrowings	$	4,292,531	$	4,179,473				$	3,640,841

(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 to unaffiliated and affiliated parties 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.

(4) As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full.

(5) On October 25, 2016, the Company announced its intention to redeem all of its outstanding 8.375% Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion.

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 the three and nine months ended September 30, 2016 and 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 2012-1, CLO 2013-1, CLO 2013-2, CLO 9, CLO 10, CLO 11, CLO 13 and CLO 15 will end their reinvestment periods during December 2016, July 2017, January 2018, October 2018, December 2018, April 2019, January 2020 and October 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 August 2016, the Company called CLO 2007-1 and repaid all senior and mezzanine notes totaling $945.6 million par amount. During November 2015, the Company called CLO 2005-2 and repaid all senior and mezzanine notes totaling $140.2 million par amount. In addition, during July 2015, the Company called CLO 2005-1 and repaid all senior and mezzanine notes totaling $142.4 million par amount. Furthermore, 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 pay-fixed, receive-variable interest rate swaps to hedge interest rate risk associated with its CLOs. In connection with the repayment of CLO 2007-1 notes and CLO 2006-1 notes, the related interest rate swaps, with contractual notional amounts of $142.3 million and $84.0 million, respectively, were terminated.

During the three and nine months ended September 30, 2016, $947.6 million and $1.5 billion par amount, respectively, of original CLO 2007-1 and CLO 13 secured notes were repaid, which included the repayment in full related to the calling of CLO 2007-1. Comparatively, during the three and nine months ended September 30, 2015, $583.6 million and $1.1 billion par amount, respectively, of original CLO 2005-1, CLO 2005-2 and CLO 2007-1 secured notes were repaid, which included the repayment in full related to the calling of CLO 2005-1. CLO 2011-1 and CLO 2016-1 do not have reinvestment periods and all principal proceeds from holdings in the respective CLOs are used to amortize the transaction. During both the three and nine months ended September 30, 2016, $280.0 million par amount of original CLO 2016-1 secured and subordinated notes were repaid. During March 2016, the Company called CLO 2011-1 and repaid all senior debt totaling $249.3 million par amount. During the three and nine months ended September 30, 2015, $119.3 million and $150.1 million par amount, respectively, of original CLO 2011-1 senior debt was repaid.

During the three and nine months ended September 30, 2016, the Company issued $7.0 million par amount of CLO 13 class F notes for proceeds of $5.9 million.    

On September 14, 2016, the Company closed CLO 15, a $410.8 million secured financing transaction maturing on October 18, 2028. The Company issued $370.5 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 2.05%. The Company also issued $12.1 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 15 collateralize the CLO 15 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

On June 7, 2016, the Company closed CLO 2016-1, a $426.4 million secured financing transaction maturing on June 7, 2018, which was funded during the third quarter of 2016. The Company issued $330.9 million par amount of senior secured notes to unaffiliated investors at a rate of three-month LIBOR plus 1.70% and $25.7 million par amount of subordinated notes to unaffiliated investors. The investments that are owned by CLO 2016-1 collateralize the CLO 2016-1 debt, and as a result, those investments are not available to the Company, its creditors or shareholders.  

During May 2016, the Company distributed an aggregate $96.5 million par amount of CLO 9, CLO 10, CLO 11 and CLO 13 subordinated notes to its Parent. These notes were previously owned by the Company and eliminated in consolidation. Following the distribution, the subordinated notes were held by an affiliate of KKR and reflected as collateralized loan obligation junior secured notes to affiliates, at estimated fair value, on the Company's condensed consolidated balance sheets.

During April 2016, the remaining $15.1 million par amount of CLO 2007-A subordinated notes owned by third parties were deemed repaid in full, whereby the Company distributed assets held as collateral in CLO 2007-A to the subordinated note holders.

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 par amount 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 the three months ended September 30, 2015, the Company issued $15.0 million par amount of CLO 2005-2 class E notes for proceeds of $15.1 million. During the nine months ended September 30, 2015, the Company issued $30.0 million par amount of CLO 2005-2 class E notes for proceeds of $30.2 million and $35.0 million par amount of CLO 2007-1 class D and E notes for proceeds of $35.1 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 par amount 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

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	As of September 30, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	125,000		$	(47,907	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(297,947		)	24,642			(375,524		)	38,608
Common stock warrants	—			1,613			—			—
Options	—			2,227			—			95
Total				$	(19,425	)				$	(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 certain of its floating rate junior subordinated notes. The Company had also previously used interest rate swaps to hedge a portion of the interest rate risk associated with its CLOs. In conjunction with the calling of CLO 2007-1 in August 2016, the Company terminated the related interest rate swap. As of September 30, 2016 and December 31, 2015, the Company had interest rate swaps with a notional amount of $125.0 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 September 30, 2016 and December 31, 2015, the net contractual notional balance of our foreign exchange options and forward contract liabilities totaled $297.9 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 September 30, 2016									Three Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)		Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	10,340		$	1,024		$	—	$	(8,489	)	$	(8,489	)
Foreign exchange forward contracts and options(1)	(1,523		)	723			(800		)	12,872		(11,848		)	1,024
Common stock warrants	—			(507		)	(507		)	—		(411		)	(411		)
Options	—			115			115			—		(2,428		)	(2,428		)
Net realized and unrealized gains (losses)	$	(10,839	)	$	10,671		$	(168	)	$	12,872	$	(23,176	)	$	(10,304	)

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

	Nine Months Ended September 30, 2016									Nine Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	(7,325	)	$	(16,641	)	$	(5,297	)	$	5,924		$	627
Foreign exchange forward contracts and options(1)	16,089			(14,614		)	1,475			27,107			(24,571		)	2,536
Common stock warrants	142			(672		)	(530		)	—			(2,412		)	(2,412		)
Total rate of return swaps	—			—			—			304			130			434
Options	—			2,132			2,132			—			(4,730		)	(4,730		)
Net realized and unrealized gains (losses)	$	6,915		$	(20,479	)	$	(13,564	)	$	22,114		$	(25,659	)	$	(3,545	)

(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 September 30, 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) $0.1 million net asset, net of $2.6 million collateral posted, (ii) $1.6 million net asset, net of $3.0 million collateral posted and (iii) $8.2 million net asset, including $38.8 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, including $0.1 million collateral held and (iii) $9.1 million net asset, including $23.6 million collateral held.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 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 September 30, 2016 (amounts in thousands): 

	As of September 30, 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	$	1,061,743	$	1,061,743	$	1,061,743	$	—	$	—
Liabilities:
Senior notes	411,836		382,579		382,579		—		—
Junior subordinated notes	249,730		188,933		—		—		188,933

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 September 30, 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 September 30, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	25,040	$	144,837	$	169,877
Residential mortgage-backed securities	—		—		43,314		43,314
Total securities	—		25,040		188,151		213,191
Loans	—		3,562,107		193,676		3,755,783
Equity investments, at estimated fair value	40,455		49,065		123,548		213,068
Interests in joint ventures and partnerships, at estimated fair value	—		—		779,027		779,027
Derivatives:
Foreign exchange forward contracts and options	—		27,552		1,507		29,059
Warrants	—		—		1,613		1,613
Options	—		—		2,227		2,227
Total derivatives	—		27,552		5,347		32,899
Total	$	40,455	$	3,663,764	$	1,289,749	$	4,993,968
Liabilities:
Collateralized loan obligation secured notes	$	—	$	3,456,988	$	—	$	3,456,988
Collateralized loan obligation secured notes to affiliates	—		60,919		—		60,919
Derivatives:
Interest rate swaps	—		47,907		—		47,907
Foreign exchange forward contracts and options	—		3,887		530		4,417
Total derivatives	—		51,794		530		52,324
Total	$	—	$	3,569,701	$	530	$	3,570,231

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
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 September 30, 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			Warrants			Options
Beginning balance as of July 1, 2016	$	149,372		$	45,800		$	200,841		$	123,374	$	758,321		$	1,652		$	2,120		$	2,112
Total gains or losses (for the period):
Included in earnings(1)	(4,505		)	919			1,884			174		36,668			(675		)	(507		)	115
Transfers into Level 3	—			—			—			—		—			—			—			—
Transfers out of Level 3	—			—			—			—		—			—			—			—
Purchases	—			—			3,979			—		1,574			—			—			—
Sales	—			—			(13,264		)	—		—			—			—			—
Settlements	(30		)	(3,405		)	236			—		(17,536		)	—			—			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548	$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(4,505	)	$	919		$	1,883		$	174	$	36,669		$	(675	)	$	(507	)	$	115

(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 nine months ended September 30, 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			Warrants			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)	(50,054		)	1,999			(49,886		)	(25,287		)	(43,080		)	(1,910		)	(672		)	2,132
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—			—
Purchases	—			—			7,282			—			61,397			—			—			—
Sales	—			—			(39,949		)	(5,130		)	—			—			—			—
Settlements	(95		)	(8,306		)	(22,505		)	7,317			(127,698		)	—			2,285			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548		$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(50,054	)	$	1,999		$	(49,886	)	$	(25,287	)	$	(43,080	)	$	(1,910	)	$	(672	)	$	2,132

(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 September 30, 2015 (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			Warrants			Options
Beginning balance as of July 1, 2015	$	225,891		$	52,389		$	341,047		$	166,879		$	739,597		$	411		$	2,910
Total gains or losses (for the period):
Included in earnings(1)	(11,727		)	2,454			(6,882		)	(8,453		)	(63,887		)	(411		)	(2,429		)
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			—			—			3,767			—			—
Sales	(9,086		)	—			—			—			—			—			—
Settlements	3,038			(4,704		)	(2,539		)	451			(23,822		)	—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(11,727	)	$	581		$	(6,882	)	$	(8,453	)	$	(63,887	)	$	(411	)	$	(2,429	)

(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 nine months ended September 30, 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)	(23,486		)	5,469			(64,930		)	(29,567		)	(84,045		)	(2,412		)	(4,731		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			12,307			—			53,133			—			—			—
Sales	(89,665		)	—			(25,511		)	—			—			—			—			—
Settlements	4,233			(10,514		)	62,683			106,725			(32,205		)	2,412			—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(26,145	)	$	758		$	(64,043	)	$	(28,871	)	$	(84,045	)	$	(2,412	)	$	(4,731	)	$	—

(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.

(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 September 30, 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 and nine months ended September 30, 2016 and 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 September 30, 2016 (dollar amounts in thousands): 

	Balance as  of September 30, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase  in Input(4)
Assets:
Corporate debt securities	$	144,837	Yield analysis	Yield	13%	5% - 15%	Decrease
				Net leverage	10x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1500	1500bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
Residential mortgage – backed securities	$	43,314	Discounted cash flows	Probability of default	2%	0% - 3%	Decrease
				Loss severity	43%	35% - 50%	Decrease
				Constant prepayment rate	18%	12% - 23%	(5	)
Corporate loans(6)	$	193,676	Yield Analysis	Yield	15%	3% -28%	Decrease
				Net leverage	10x	3x - 36x	Decrease
				EBITDA multiple	9x	7x - 13x	Increase
Equity investments, at estimated fair value(7)	$	123,548	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	27%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	73%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	9x	0x - 15x	Increase
				Forward EBITDA multiple	7x	3x - 13x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	6% - 14%	Decrease
				LTM EBITDA exit multiple	8x	1x - 9x	Increase
Interests in joint ventures and partnerships(11)	$	779,027	Inputs to market comparables, discounted cash flow and yield analysis	Weight ascribed to market comparables	21%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	72%	0% - 100%	(9	)
				Weight ascribed to yield analysis	7%	0% - 100%	(10	)
			Market comparables	LTM EBITDA multiple	5x	1x- 9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
				Capitalization Rate	7%	6% - 12%	Decrease
			Discounted cash flows	Weighted average cost of capital	10%	6% - 24%	Decrease
				Average price per BOE(12)	$20.45	$17.44-$23.46	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	1x	1x	Decrease
				EBITDA multiple	7x	7x	Increase
Foreign exchange options, net	$	977	Option pricing model	Forward and spot rates	11,635	6 - 13,500	(13	)
Options(14)	$	2,227	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease

		Weight ascribed to market comparables	50%	50%	(8	)
		Weight ascribed to discounted cash flows	50%	50%	(9	)
,	Market comparables	LTM EBITDA multiple	8x	8x	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) Inputs exclude a single loan totaling $2.0 million, which had a yield, net leverage and EBITDA multiple of 513%, 35.6x and 11.2x, respectively.

(7) 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, $6.1 million was valued solely using a market comparables technique and $44.2 million was valued solely using a discounted cash flow technique.

(8) 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 or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach.

(9) 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 or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach.

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

(11) Inputs exclude $346.3 million of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships, $165.3 million was valued solely using a discounted cash flow technique, while $7.8 million was valued solely using a market comparables technique and $24.1 million was valued solely using a yield analysis.

(12) Natural resources assets with an estimated fair value of $120.4 million as of September 30, 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 23% liquids and 77% natural gas.

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

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

The table above excludes warrants of $1.6 million, comprised of equity-like securities in a company that were valued using an independent third party valuation firm primarily based on the contractual agreement and public disclosures of the expected sale value.

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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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015, the Company had unfunded financing commitments for corporate loans totaling $4.3 million and $8.6 million, respectively. The Company did not have any significant losses as of September 30, 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 $94.0 million as of September 30, 2016 and $163.0 million as of December 31, 2015.

Guarantees

The Company had investments, held alongside KKR and its affiliates, in real estate entities that were financed with non-recourse debt totaling approximately $1.3 billion as of September 30, 2016 and $1.6 billion as of December 31, 2015. 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

9 Months Ended

Sep. 30, 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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Base management fees, net	$	2,005	$	2,633	$	3,593	$	8,096
CLO management fees	6,095		6,816		18,550		21,390
Incentive fees	—		—		—		—
Total related party management compensation	$	8,100	$	9,449	$	22,143	$	29,486

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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Base management fees, gross	$	5,527		$	7,702		$	16,312		$	24,029
CLO management fees credit(1)	(3,522		)	(5,069		)	(12,719		)	(15,933		)
Total base management fees, net	$	2,005		$	2,633		$	3,593		$	8,096

(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 $0.4 million and $1.5 million for CLO 2005-2 during the three and nine months ended September 30, 2015, respectively. 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 the three and nine months ended September 30, 2016 and 2015. The Manager credited the Company for a portion of the CLO management fees received by an affiliate of the Manager from CLOs including CLO 2007-1, CLO 2012-1, CLO 9, CLO 10, CLO 11 and CLO 13 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 affiliated and unaffiliated 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 CLOs including CLO 2013-1 and CLO 2013-2 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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Charged and retained CLO management fees(1)	$	2,573	$	1,747	$	5,831	$	5,457
CLO management fees credit	3,522		5,069		12,719		15,933
Total CLO management fees	$	6,095	$	6,816	$	18,550	$	21,390

(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 receives quarterly incentive compensation from the Company based on its achievement of specified levels of net income pursuant to the Management Agreement. The Manager waived incentive fees of $16.1 million for the three and nine months ended September 30, 2016, which was attributable to a non-cash item. Comparatively, the Manager earned incentive fees totaling zero for the three and nine months ended September 30, 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 $1.1 million and $3.0 million for the three and nine months ended September 30, 2016, respectively. The Company incurred reimbursable general and administrative expenses to its Manager totaling $0.7 million and $4.2 million for the three and nine months ended September 30, 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 cash distributions to its Parent, as the sole holder of its common shares. The Company distributed $17.9 million and $80.8 million during the three and nine months ended September 30, 2016, respectively. The Company distributed $52.1 million and $141.6 million for the three and nine months ended September 30, 2015, respectively.

During the nine months ended September 30, 2016, certain assets were distributed to the Parent, including CLO subordinated notes, which were previously held by the Company. As the CLO subordinated notes are held by an affiliate of our Parent, refer to Note 6 in these condensed consolidated financial statements for additional details around these notes to affiliates. The table below summarizes the estimated fair value of distributions at the time of transfer (amounts in thousands):

	Nine months ended September 30, 2016
Loans	$	45,225
Equity investments, at estimated fair value	26,098
CLO subordinated notes	60,640
Total distributions to Parent	$	131,963

Affiliated Investments

The Company has invested in corporate loans, debt securities and other investments of entities that are affiliates of KKR. As of September 30, 2016, the aggregate par amount of these affiliated investments totaled $20.4 million, or less than 1% of the total investment portfolio, and consisted of 2 issuers. The total affiliated investments was comprised of $20.1 million of equity investments and $0.3 million of corporate debt securities. 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 September 30, 2016 and December 31, 2015, the estimated fair value of these interests in joint ventures and partnerships totaled $670.9 million and $805.5 million, respectively.

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SEGMENT REPORTING

9 Months Ended

Sep. 30, 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, if any, 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 tables present the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands):

	Three months ended September 30,
	Credit					Natural Resources					Other					Reconciling Items(1)					Total Consolidated
	2016		2015			2016		2015			2016			2015		2016		2015			2016		2015
Total revenues	$	65,416	$	79,698		$	2,387	$	3,876		$	3,214		$	5,535	$	—	$	—		$	71,017	$	89,109
Total investment costs and expenses	128,549		47,948			1,594		2,016			450			388		—		—			130,593		50,352
Total other income (loss)	192,435		(149,952		)	21,974		(36,236		)	(1,043		)	739		—		—			213,366		(185,449		)
Total other expenses	16,815		11,285			192		114			134			99		—		49			17,141		11,547
Income tax expense (benefit)	126		64			—		—			214			30		—		—			340		94
Net income (loss)	$	112,361	$	(129,551	)	$	22,575	$	(34,490	)	$	1,373		$	5,757	$	—	$	(49	)	$	136,309	$	(158,333	)
Net income (loss) attributable to noncontrolling interests	1,492		(2,727		)	—		(3,949		)	—			—		—		—			1,492		(6,676		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	110,869	$	(126,824	)	$	22,575	$	(30,541	)	$	1,373		$	5,757	$	—	$	(49	)	$	134,817	$	(151,657	)

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

	Nine months ended September 30,
	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	2016			2015			2016			2015			2016			2015		2016		2015			2016			2015
Total revenues	$	208,716		$	265,176		$	8,285		$	13,055		$	12,483		$	14,355	$	—	$	—		$	229,484		$	292,586
Total investment costs and expenses	235,198			163,246			5,102			6,062			1,344			1,147		—		—			241,644			170,455
Total other income (loss)	37,245			(216,786		)	3,366			(50,337		)	(12,181		)	20,545		—		—			28,430			(246,578		)
Total other expenses	49,665			39,702			449			800			283			333		—		149			50,397			40,984
Income tax expense (benefit)	122			126			—			—			91			1,044		—		—			213			1,170
Net income (loss)	$	(39,024	)	$	(154,684	)	$	6,100		$	(44,144	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(34,340	)	$	(166,601	)
Net income (loss) attributable to noncontrolling interests	(10,167		)	(8,403		)	(5,157		)	(7,049		)	—			—		—		—			(15,324		)	(15,452		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(28,857	)	$	(146,281	)	$	11,257		$	(37,095	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(19,016	)	$	(151,149	)

(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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
Total assets	$	5,874,168	$	7,303,305	$	233,925	$	230,815	$	222,498	$	254,275	$	—	$	—	$	6,330,591	$	7,788,395

(1) Total consolidated assets as of September 30, 2016 included $65.8 million of noncontrolling interests, of which $37.5 million was related to the Credit segment and $28.3 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

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

On September 22, 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 October 17, 2016 to preferred shareholders of record as of the close of business on October 10, 2016.

On October 25, 2016, the Company announced its intention to redeem all of its outstanding Notes due 2041 on November 15, 2016 in accordance with the optional redemption provisions provided in the documents governing the Notes due 2041. As of October 25, 2016, there was $258.8 million aggregate principal amount of the Notes due 2041 outstanding. The redemption price will equal 100% of the principal amount of the Notes due 2041 plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the Notes due 2041. The Company intends to use cash on hand to fund the redemption.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 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 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"), KKR CLO 13, Ltd ("CLO 13"), KKR CLO 15, Ltd. ("CLO 15") and KKR 2016-1, Ltd. ("CLO 2016-1") (collectively the “Cash Flow CLOs”) are entities established to complete secured financing transactions. During 2016, the Company called KKR Financial CLO 2007‑1, Ltd. (“CLO 2007‑1”) and 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 September 30, 2016, the Company’s CLOs held $3.7 billion par amount, or $3.6 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 September 30, 2016 and December 31, 2015, the aggregate par amount of CLO debt to unaffiliated and affiliated parties totaled $3.6 billion and $4.9 billion, respectively.

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.

In October 2016, the FASB issued guidance that states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirect interests on a proportionate basis. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact on its 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.

Cash Flow Classification

In August 2016, the FASB issued amended guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows and application of the predominance principle. The guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively from the earliest date practicable if retrospective application would be impracticable. The Company is currently evaluating the impact on its financial statements.

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SECURITIES (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Securities, at estimated fair value	$	370,923	$	307,887	$	213,191	$	520,135	$	474,201	$	417,519
Total	$	370,923	$	307,887	$	213,191	$	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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	724		$	(3,227	)	$	4,910		$	(9,127	)
Net (increase) decrease in unrealized losses	(4,176		)	(15,523		)	(39,272		)	(20,598		)
Net realized and unrealized gains (losses)	$	(3,452	)	$	(18,750	)	$	(34,362	)	$	(29,725	)

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 September 30, 2016						Three months ended September 30, 2015						Nine months ended September 30, 2016						Nine months ended September 30, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	—		$	(4,566	)	$	1,549		$	9,176		$	(3,771	)	$	3,008		$	2,915		$	9,176
Net (increase) decrease in unrealized losses	(5,402		)	41,930			(14,245		)	(62,630		)	(21,851		)	(46,509		)	(6,872		)	(80,103		)
Net realized and unrealized gains (losses)	$	(5,402	)	$	37,364		$	(12,696	)	$	(53,454	)	$	(25,622	)	$	(43,501	)	$	(3,957	)	$	(70,927	)

(1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016, respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	25,040	$	170,365
Total	$	25,040	$	170,365

The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	42,210	$	82,430
Total	$	42,210	$	82,430

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LOANS (Tables)

9 Months Ended

Sep. 30, 2016

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

Schedule of corporate loans

The following table summarizes the Company’s loans as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016						December 31, 2015
	Par		Amortized  Cost		Estimated Fair Value		Par		Amortized  Cost		Estimated Fair Value
Corporate loans, at estimated fair value	$	3,890,239	$	3,872,205	$	3,755,783	$	5,722,646	$	5,619,815	$	5,188,610
Total	$	3,890,239	$	3,872,205	$	3,755,783	$	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 loans (amounts in thousands):

	Three Months Ended September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	(18,720	)	$	(546	)	$	(229,672	)	$	(22,807	)
Net (increase) decrease in unrealized losses	64,646			(147,107		)	300,072			(92,283		)
Net realized and unrealized gains (losses)	$	45,926		$	(147,653	)	$	70,400		$	(115,090	)

Schedule of corporate loans pledged as collateral

The following table summarizes the corporate loans, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	3,573,587	$	4,917,123
Total	$	3,573,587	$	4,917,123

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

9 Months Ended

Sep. 30, 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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Net realized gains (losses)	$	724		$	(3,227	)	$	4,910		$	(9,127	)
Net (increase) decrease in unrealized losses	(4,176		)	(15,523		)	(39,272		)	(20,598		)
Net realized and unrealized gains (losses)	$	(3,452	)	$	(18,750	)	$	(34,362	)	$	(29,725	)

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 September 30, 2016						Three months ended September 30, 2015						Nine months ended September 30, 2016						Nine months ended September 30, 2015
	Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships(1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)			Equity Investments			Interests in Joint Ventures and Partnerships (1)
Net realized gains (losses)	$	—		$	(4,566	)	$	1,549		$	9,176		$	(3,771	)	$	3,008		$	2,915		$	9,176
Net (increase) decrease in unrealized losses	(5,402		)	41,930			(14,245		)	(62,630		)	(21,851		)	(46,509		)	(6,872		)	(80,103		)
Net realized and unrealized gains (losses)	$	(5,402	)	$	37,364		$	(12,696	)	$	(53,454	)	$	(25,622	)	$	(43,501	)	$	(3,957	)	$	(70,927	)

(1) Includes net gain attributable to noncontrolling interests of $1.5 million and net loss attributable to noncontrolling interests of $15.3 million for the three and nine months ended September 30, 2016, respectively. Includes net loss attributable to noncontrolling interests of $6.7 million and $15.5 million for the three and nine months ended September 30, 2015, respectively.

Schedule of summarized financial information

The following table shows summarized financial information for the Company’s equity method investment(s), which were reported under the fair value option of accounting and were determined to be significant as defined by accounting guidance, assuming 100% ownership (amounts in thousands):

	Nine months ended September 30, 2016								Nine months ended September 30, 2015
	Credit			Natural Resources			Other		Credit			Natural Resources		Other
Revenues(1)	$	71,714		$	86,942		$	71,808	$	65,250		$	231,248	$	36,099
Expenses(1)	$	46,060		$	126,414		$	23,725	$	40,424		$	237,275	$	39,019
Net income (loss)	$	(6,644	)	$	(52,786	)	$	48,084	$	(25,056	)	$	32,892	$	(2,921	)

(1) Revenues and expenses exclude realized and unrealized gains and losses.

Schedule of equity investments pledged as collateral

The following table summarizes the estimated fair value of securities pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	25,040	$	170,365
Total	$	25,040	$	170,365

The following table summarizes the equity investments, at estimated fair value, pledged as collateral as of September 30, 2016 and December 31, 2015 (amounts in thousands):

	September 30, 2016		December 31, 2015
Pledged as collateral for collateralized loan obligation secured debt	$	42,210	$	82,430
Total	$	42,210	$	82,430

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BORROWINGS (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Schedule of Company's borrowings

Certain information with respect to the Company’s borrowings as of September 30, 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 subordinated notes(3)(4)	$	134,468	$	21,155	62.74	%	1688	$	75,945
CLO 2012-1 secured notes	367,500		376,667		2.90		2998	380,108
CLO 2012-1 subordinated notes(3)	18,000		10,226		14.71		2998	18,618
CLO 2013-1 secured notes	458,500		470,021		2.40		3210	488,310
CLO 2013-2 secured notes	339,250		343,686		2.72		3402	367,020
CLO 9 secured notes	463,749		470,905		2.69		3667	460,882
CLO 9 subordinated notes(3)	15,000		9,512		15.52		3667	14,907
CLO 9 subordinated notes to affiliates(3)	25,572		16,217		8.09		3667	25,414
CLO 10 secured notes	368,000		378,010		3.07		3363	362,465
CLO 10 subordinated notes to affiliates(3)	29,948		15,472		9.51		3363	29,498
CLO 11 secured notes	507,750		510,576		2.74		3849	504,497
CLO 11 subordinated notes(3)	28,250		21,709		17.74		3849	28,069
CLO 11 subordinated notes to affiliates(3)	19,362		14,879		9.45		3849	19,238
CLO 13 secured notes	375,000		385,329		3.03		4125	375,414
CLO 13 subordinated notes(3)	4,000		2,653		24.01		4125	4,004
CLO 13 subordinated notes to affiliates(3)	21,636		14,351		18.01		4125	21,660
CLO 2016-1 secured notes	66,665		64,808		2.29		615	69,304
CLO 2016-1 subordinated notes(3)	9,971		10,097		—		615	10,366
CLO 15 secured notes	370,500		370,803		3.06		4401	372,942
CLO 15 subordinated notes(3)	12,100		10,831		—		4401	12,180
Total collateralized loan obligation secured debt	3,635,221		3,517,907					3,640,841
8.375% Senior notes(5)	258,750		288,728		8.38		9177	—
7.500% Senior notes	115,043		123,108		7.50		9302	—
Junior subordinated notes	283,517		249,730		4.01		7310	—
Total borrowings	$	4,292,531	$	4,179,473				$	3,640,841

(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 to unaffiliated and affiliated parties 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.

(4) As of the date of this filing, the CLO 2007-1 subordinated notes were repaid in full.

(5) On October 25, 2016, the Company announced its intention to redeem all of its outstanding 8.375% Senior Notes due 2041 (the "Notes due 2041") on November 15, 2016. Refer to Note 12 to these condensed consolidated financial statements for further discussion.

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)

9 Months Ended

Sep. 30, 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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	As of September 30, 2016						As of December 31, 2015
	Notional			Estimated Fair Value			Notional			Estimated Fair Value
Free-Standing Derivatives:
Interest rate swaps	$	125,000		$	(47,907	)	$	297,667		$	(41,743	)
Foreign exchange forward contracts and options	(297,947		)	24,642			(375,524		)	38,608
Common stock warrants	—			1,613			—			—
Options	—			2,227			—			95
Total				$	(19,425	)				$	(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 September 30, 2016									Three Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)		Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	10,340		$	1,024		$	—	$	(8,489	)	$	(8,489	)
Foreign exchange forward contracts and options(1)	(1,523		)	723			(800		)	12,872		(11,848		)	1,024
Common stock warrants	—			(507		)	(507		)	—		(411		)	(411		)
Options	—			115			115			—		(2,428		)	(2,428		)
Net realized and unrealized gains (losses)	$	(10,839	)	$	10,671		$	(168	)	$	12,872	$	(23,176	)	$	(10,304	)

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

	Nine Months Ended September 30, 2016									Nine Months Ended September 30, 2015
	Realized gains (losses)			Unrealized gains (losses)			Total			Realized gains (losses)			Unrealized gains (losses)			Total
Interest rate swaps	$	(9,316	)	$	(7,325	)	$	(16,641	)	$	(5,297	)	$	5,924		$	627
Foreign exchange forward contracts and options(1)	16,089			(14,614		)	1,475			27,107			(24,571		)	2,536
Common stock warrants	142			(672		)	(530		)	—			(2,412		)	(2,412		)
Total rate of return swaps	—			—			—			304			130			434
Options	—			2,132			2,132			—			(4,730		)	(4,730		)
Net realized and unrealized gains (losses)	$	6,915		$	(20,479	)	$	(13,564	)	$	22,114		$	(25,659	)	$	(3,545	)

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

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2016 (amounts in thousands): 

	As of September 30, 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	$	1,061,743	$	1,061,743	$	1,061,743	$	—	$	—
Liabilities:
Senior notes	411,836		382,579		382,579		—		—
Junior subordinated notes	249,730		188,933		—		—		188,933

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 September 30, 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 September 30, 2016
Assets:
Securities:
Corporate debt securities	$	—	$	25,040	$	144,837	$	169,877
Residential mortgage-backed securities	—		—		43,314		43,314
Total securities	—		25,040		188,151		213,191
Loans	—		3,562,107		193,676		3,755,783
Equity investments, at estimated fair value	40,455		49,065		123,548		213,068
Interests in joint ventures and partnerships, at estimated fair value	—		—		779,027		779,027
Derivatives:
Foreign exchange forward contracts and options	—		27,552		1,507		29,059
Warrants	—		—		1,613		1,613
Options	—		—		2,227		2,227
Total derivatives	—		27,552		5,347		32,899
Total	$	40,455	$	3,663,764	$	1,289,749	$	4,993,968
Liabilities:
Collateralized loan obligation secured notes	$	—	$	3,456,988	$	—	$	3,456,988
Collateralized loan obligation secured notes to affiliates	—		60,919		—		60,919
Derivatives:
Interest rate swaps	—		47,907		—		47,907
Foreign exchange forward contracts and options	—		3,887		530		4,417
Total derivatives	—		51,794		530		52,324
Total	$	—	$	3,569,701	$	530	$	3,570,231

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
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 September 30, 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			Warrants			Options
Beginning balance as of July 1, 2016	$	149,372		$	45,800		$	200,841		$	123,374	$	758,321		$	1,652		$	2,120		$	2,112
Total gains or losses (for the period):
Included in earnings(1)	(4,505		)	919			1,884			174		36,668			(675		)	(507		)	115
Transfers into Level 3	—			—			—			—		—			—			—			—
Transfers out of Level 3	—			—			—			—		—			—			—			—
Purchases	—			—			3,979			—		1,574			—			—			—
Sales	—			—			(13,264		)	—		—			—			—			—
Settlements	(30		)	(3,405		)	236			—		(17,536		)	—			—			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548	$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(4,505	)	$	919		$	1,883		$	174	$	36,669		$	(675	)	$	(507	)	$	115

(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 nine months ended September 30, 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			Warrants			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)	(50,054		)	1,999			(49,886		)	(25,287		)	(43,080		)	(1,910		)	(672		)	2,132
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—			—
Purchases	—			—			7,282			—			61,397			—			—			—
Sales	—			—			(39,949		)	(5,130		)	—			—			—			—
Settlements	(95		)	(8,306		)	(22,505		)	7,317			(127,698		)	—			2,285			—
Ending balance as of September 30, 2016	$	144,837		$	43,314		$	193,676		$	123,548		$	779,027		$	977		$	1,613		$	2,227
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(50,054	)	$	1,999		$	(49,886	)	$	(25,287	)	$	(43,080	)	$	(1,910	)	$	(672	)	$	2,132

(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 September 30, 2015 (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			Warrants			Options
Beginning balance as of July 1, 2015	$	225,891		$	52,389		$	341,047		$	166,879		$	739,597		$	411		$	2,910
Total gains or losses (for the period):
Included in earnings(1)	(11,727		)	2,454			(6,882		)	(8,453		)	(63,887		)	(411		)	(2,429		)
Transfers into Level 3	—			—			—			—			—			—			—
Transfers out of Level 3	—			—			—			—			—			—			—
Purchases	—			—			—			—			3,767			—			—
Sales	(9,086		)	—			—			—			—			—			—
Settlements	3,038			(4,704		)	(2,539		)	451			(23,822		)	—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(11,727	)	$	581		$	(6,882	)	$	(8,453	)	$	(63,887	)	$	(411	)	$	(2,429	)

(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 nine months ended September 30, 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)	(23,486		)	5,469			(64,930		)	(29,567		)	(84,045		)	(2,412		)	(4,731		)	—
Transfers into Level 3	—			—			—			—			—			—			—			—
Transfers out of Level 3(2)	—			—			—			—			—			—			—			(5,501,099		)
Purchases	—			—			12,307			—			53,133			—			—			—
Sales	(89,665		)	—			(25,511		)	—			—			—			—			—
Settlements	4,233			(10,514		)	62,683			106,725			(32,205		)	2,412			—			—
Ending balance as of September 30, 2015	$	208,116		$	50,139		$	331,626		$	158,877		$	655,655		$	—		$	481		$	—
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period(1)	$	(26,145	)	$	758		$	(64,043	)	$	(28,871	)	$	(84,045	)	$	(2,412	)	$	(4,731	)	$	—

(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.

(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 September 30, 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 September 30, 2016 (dollar amounts in thousands): 

	Balance as  of September 30, 2016		Valuation Techniques(1)	Unobservable Inputs(2)	Weighted Average(3)	Range	Impact to Valuation from an Increase  in Input(4)
Assets:
Corporate debt securities	$	144,837	Yield analysis	Yield	13%	5% - 15%	Decrease
				Net leverage	10x	9x-10x	Decrease
				EBITDA multiple	8x	7x - 9x	Increase
				Discount margin	1500	1500bps	Decrease
			Market comparables	LTM EBITDA multiple	9x	9x	Increase
Residential mortgage – backed securities	$	43,314	Discounted cash flows	Probability of default	2%	0% - 3%	Decrease
				Loss severity	43%	35% - 50%	Decrease
				Constant prepayment rate	18%	12% - 23%	(5	)
Corporate loans(6)	$	193,676	Yield Analysis	Yield	15%	3% -28%	Decrease
				Net leverage	10x	3x - 36x	Decrease
				EBITDA multiple	9x	7x - 13x	Increase
Equity investments, at estimated fair value(7)	$	123,548	Inputs to both market comparables and discounted cash flow	Illiquidity discount	11%	0% - 15%	Decrease
				Weight ascribed to market comparables	27%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	73%	0% - 100%	(9	)
			Market comparables	LTM EBITDA multiple	9x	0x - 15x	Increase
				Forward EBITDA multiple	7x	3x - 13x	Increase
			Discounted cash flows	Weighted average cost of capital	9%	6% - 14%	Decrease
				LTM EBITDA exit multiple	8x	1x - 9x	Increase
Interests in joint ventures and partnerships(11)	$	779,027	Inputs to market comparables, discounted cash flow and yield analysis	Weight ascribed to market comparables	21%	0% - 100%	(8	)
				Weight ascribed to discounted cash flows	72%	0% - 100%	(9	)
				Weight ascribed to yield analysis	7%	0% - 100%	(10	)
			Market comparables	LTM EBITDA multiple	5x	1x- 9x	Increase
				Forward EBITDA multiple	8x	8x	Increase
				Capitalization Rate	7%	6% - 12%	Decrease
			Discounted cash flows	Weighted average cost of capital	10%	6% - 24%	Decrease
				Average price per BOE(12)	$20.45	$17.44-$23.46	Increase
			Yield analysis	Yield	14%	14%	Decrease
				Net leverage	1x	1x	Decrease
				EBITDA multiple	7x	7x	Increase
Foreign exchange options, net	$	977	Option pricing model	Forward and spot rates	11,635	6 - 13,500	(13	)
Options(14)	$	2,227	Inputs to both market comparables and discounted cash flow	Illiquidity discount	10%	10%	Decrease

		Weight ascribed to market comparables	50%	50%	(8	)
		Weight ascribed to discounted cash flows	50%	50%	(9	)
,	Market comparables	LTM EBITDA multiple	8x	8x	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) Inputs exclude a single loan totaling $2.0 million, which had a yield, net leverage and EBITDA multiple of 513%, 35.6x and 11.2x, respectively.

(7) 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, $6.1 million was valued solely using a market comparables technique and $44.2 million was valued solely using a discounted cash flow technique.

(8) 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 or yield analysis approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow or yield analysis approach.

(9) 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 or yield analysis approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables or yield analysis approach.

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

(11) Inputs exclude $346.3 million of assets, comprised of an investment that was valued using an independent third party valuation firm and interests in an alternative credit fund that holds multiple investments, which are valued using Level 3 value methodologies similar to those shown for the corporate debt portfolio and equity investments. Of the total interest in joint ventures and partnerships, $165.3 million was valued solely using a discounted cash flow technique, while $7.8 million was valued solely using a market comparables technique and $24.1 million was valued solely using a yield analysis.

(12) Natural resources assets with an estimated fair value of $120.4 million as of September 30, 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 23% liquids and 77% natural gas.

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

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

The table above excludes warrants of $1.6 million, comprised of equity-like securities in a company that were valued using an independent third party valuation firm primarily based on the contractual agreement and public disclosures of the expected sale value.

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)

9 Months Ended

Sep. 30, 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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Base management fees, net	$	2,005	$	2,633	$	3,593	$	8,096
CLO management fees	6,095		6,816		18,550		21,390
Incentive fees	—		—		—		—
Total related party management compensation	$	8,100	$	9,449	$	22,143	$	29,486

Schedule of estimate fair value of contributions and distributions

The table below summarizes the estimated fair value of distributions at the time of transfer (amounts in thousands):

	Nine months ended September 30, 2016
Loans	$	45,225
Equity investments, at estimated fair value	26,098
CLO subordinated notes	60,640
Total distributions to Parent	$	131,963

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 September 30, 2016			Three months ended September 30, 2015			Nine months ended September 30, 2016			Nine months ended September 30, 2015
Base management fees, gross	$	5,527		$	7,702		$	16,312		$	24,029
CLO management fees credit(1)	(3,522		)	(5,069		)	(12,719		)	(15,933		)
Total base management fees, net	$	2,005		$	2,633		$	3,593		$	8,096

(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 September 30, 2016		Three months ended September 30, 2015		Nine months ended September 30, 2016		Nine months ended September 30, 2015
Charged and retained CLO management fees(1)	$	2,573	$	1,747	$	5,831	$	5,457
CLO management fees credit	3,522		5,069		12,719		15,933
Total CLO management fees	$	6,095	$	6,816	$	18,550	$	21,390

(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)

9 Months Ended

Sep. 30, 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 tables present the net income (loss) components of our reportable segments reconciled to amounts reflected in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016 and 2015 (amounts in thousands):

	Three months ended September 30,
	Credit					Natural Resources					Other					Reconciling Items(1)					Total Consolidated
	2016		2015			2016		2015			2016			2015		2016		2015			2016		2015
Total revenues	$	65,416	$	79,698		$	2,387	$	3,876		$	3,214		$	5,535	$	—	$	—		$	71,017	$	89,109
Total investment costs and expenses	128,549		47,948			1,594		2,016			450			388		—		—			130,593		50,352
Total other income (loss)	192,435		(149,952		)	21,974		(36,236		)	(1,043		)	739		—		—			213,366		(185,449		)
Total other expenses	16,815		11,285			192		114			134			99		—		49			17,141		11,547
Income tax expense (benefit)	126		64			—		—			214			30		—		—			340		94
Net income (loss)	$	112,361	$	(129,551	)	$	22,575	$	(34,490	)	$	1,373		$	5,757	$	—	$	(49	)	$	136,309	$	(158,333	)
Net income (loss) attributable to noncontrolling interests	1,492		(2,727		)	—		(3,949		)	—			—		—		—			1,492		(6,676		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	110,869	$	(126,824	)	$	22,575	$	(30,541	)	$	1,373		$	5,757	$	—	$	(49	)	$	134,817	$	(151,657	)

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

	Nine months ended September 30,
	Credit						Natural Resources						Other					Reconciling Items(1)					Total Consolidated
	2016			2015			2016			2015			2016			2015		2016		2015			2016			2015
Total revenues	$	208,716		$	265,176		$	8,285		$	13,055		$	12,483		$	14,355	$	—	$	—		$	229,484		$	292,586
Total investment costs and expenses	235,198			163,246			5,102			6,062			1,344			1,147		—		—			241,644			170,455
Total other income (loss)	37,245			(216,786		)	3,366			(50,337		)	(12,181		)	20,545		—		—			28,430			(246,578		)
Total other expenses	49,665			39,702			449			800			283			333		—		149			50,397			40,984
Income tax expense (benefit)	122			126			—			—			91			1,044		—		—			213			1,170
Net income (loss)	$	(39,024	)	$	(154,684	)	$	6,100		$	(44,144	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(34,340	)	$	(166,601	)
Net income (loss) attributable to noncontrolling interests	(10,167		)	(8,403		)	(5,157		)	(7,049		)	—			—		—		—			(15,324		)	(15,452		)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	$	(28,857	)	$	(146,281	)	$	11,257		$	(37,095	)	$	(1,416	)	$	32,376	$	—	$	(149	)	$	(19,016	)	$	(151,149	)

(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 September 30, 2016 and December 31, 2015 (amounts in thousands):

	Credit				Natural Resources				Other				Reconciling Items				Total Consolidated(1)
As of	September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015		September 30, 2016		December 31, 2015
Total assets	$	5,874,168	$	7,303,305	$	233,925	$	230,815	$	222,498	$	254,275	$	—	$	—	$	6,330,591	$	7,788,395

(1) Total consolidated assets as of September 30, 2016 included $65.8 million of noncontrolling interests, of which $37.5 million was related to the Credit segment and $28.3 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)	9 Months Ended
	Sep. 30, 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	Sep. 30, 2016	Dec. 31, 2015
Collateralized Debt Obligation disclosures
Collateralized loan obligation secured notes	$ 4,292,531	$ 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	$ 3,700,000	5,500,000
Estimated fair value of corporate debt investments	3,600,000	5,100,000
Collateralized loan obligation secured notes	$ 3,600,000	$ 4,900,000

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SECURITIES (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Securities Available-for-Sale
Par	$ 370,923		$ 370,923		$ 520,135
Amortized Cost	307,887		307,887		474,201
Estimated Fair Value	213,191		213,191		417,519
Net realized and unrealized gains
Net realized gains (losses)	724	$ (3,227)	4,910	$ (9,127)
Net (increase) decrease in unrealized losses	(4,176)	(15,523)	(39,272)	(20,598)
Net realized and unrealized gains (losses)	(3,452)	$ (18,750)	(34,362)	$ (29,725)
Securities, at estimated fair value
Securities Available-for-Sale
Par	370,923		370,923		520,135
Amortized Cost	307,887		307,887		474,201
Estimated Fair Value	$ 213,191		$ 213,191		$ 417,519

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SECURITIES (Details 2) - security	Sep. 30, 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) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Concentration risk
Securities	$ 213,191	$ 417,519
Estimated fair value of securities pledged as collateral
Pledged as collateral for collateralized loan obligation secured debt	25,040	170,365
Total	$ 25,040	$ 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)	67.00%	52.00%
Securities	$ 114,400	$ 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)	98.00%	89.00%

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LOANS (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Summary of corporate loans
Par	$ 3,890,239	$ 5,722,646
Amortized Cost	3,872,205	5,619,815
Estimated Fair Value	3,755,783	5,188,610
Corporate loans, at estimated fair value
Summary of corporate loans
Par	3,890,239	5,722,646
Amortized Cost	3,872,205	5,619,815
Estimated Fair Value	$ 3,755,783	$ 5,188,610

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LOANS (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Corporate loans
Net realized and unrealized (losses) gains
Credit risk loss	$ 3,400	$ 122,400	$ 54,900	$ 136,700
Corporate loans, at estimated fair value
Net realized and unrealized (losses) gains
Net realized gains (losses)	(18,720)	(546)	(229,672)	(22,807)
Net (increase) decrease in unrealized losses	64,646	(147,107)	300,072	(92,283)
Net realized and unrealized gains (losses)	$ 45,926	$ (147,653)	$ 70,400	$ (115,090)

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LOANS (Details 3) $ in Millions	Sep. 30, 2016 USD ($) loan	Dec. 31, 2015 USD ($) issuer loan
Recorded investment in impaired loans and related allowances for credit losses
Number of loans in default | loan	0	1
Estimated fair value of corporate loans in default		$ 113.6
Number of issuers in default | issuer		1
Corporate loans, at estimated fair value
Recorded investment in impaired loans and related allowances for credit losses
Par amount of non-accrual loans	$ 104.2	$ 435.2
Estimated fair value of non-accrual loans	$ 35.5	$ 127.5

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LOANS (Details 4) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Concentration risk
Loans, at estimated fair value	$ 3,755,783	$ 5,188,610
Corporate Loans | Percent to total investment in corporate loans, debt securities and other investments | Top Twenty Issuers
Concentration risk
Concentration risk (as a percent)	21.00%	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)	4.00%	8.00%
Loans, at estimated fair value	$ 152,200	$ 434,600

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LOANS (Details 5) - Estimated Fair Value - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Pledged assets
Pledged as collateral for collateralized loan obligation secured debt	$ 3,573,587	$ 4,917,123
Total	$ 3,573,587	$ 4,917,123

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Equity Method Investments and Joint Ventures [Abstract]
Interests in joint ventures and partnerships, at estimated fair value	$ 779,027	$ 888,408
Equity investments, at estimated fair value	213,068	262,946
Estimated fair value of equity method investments	$ 423,300	$ 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		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Gain (Loss) on Investments [Line Items]
Net realized and unrealized gains (losses)	$ 74,436	$ (232,549)	$ (33,085)	$ (219,058)
Net income (loss) attributable to noncontrolling interests	1,492	(6,676)	(15,324)	(15,452)
Equity Investments
Gain (Loss) on Investments [Line Items]
Net realized gains (losses)	0	1,549	(3,771)	2,915
Net (increase) decrease in unrealized losses	(5,402)	(14,245)	(21,851)	(6,872)
Net realized and unrealized gains (losses)	(5,402)	(12,696)	(25,622)	(3,957)
Interests in Joint Ventures and Partnerships
Gain (Loss) on Investments [Line Items]
Net realized gains (losses)	(4,566)	9,176	3,008	9,176
Net (increase) decrease in unrealized losses	41,930	(62,630)	(46,509)	(80,103)
Net realized and unrealized gains (losses)	$ 37,364	$ (53,454)	$ (43,501)	$ (70,927)

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 3) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Credit
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]
Revenues	$ 71,714	$ 65,250
Expenses	46,060	40,424
Net income (loss)	(6,644)	(25,056)
Natural Resources
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]
Revenues	86,942	231,248
Expenses	126,414	237,275
Net income (loss)	(52,786)	32,892
Other
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]
Revenues	71,808	36,099
Expenses	23,725	39,019
Net income (loss)	$ 48,084	$ (2,921)

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EQUITY METHOD INVESTMENTS AND INTERESTS IN JOINT VENTURES AND PARTNERSHIPS (Details 4) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Equity Investments
Financial Instruments Owned and Pledged as Collateral [Line Items]
Total	$ 42,210	$ 82,430

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BORROWINGS (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Details of Company's borrowings
Total borrowings	$ 4,292,531	$ 5,540,207
Collateralized loan obligation secured notes to affiliates	3,456,988	4,843,746
Total borrowings, carrying value	4,179,473	5,505,250
Collateral amount	3,640,841	5,169,916
CLO 2007-1 subordinated notes
Details of Company's borrowings
Par	134,468	134,468
Collateralized loan obligation secured notes to affiliates	$ 21,155	$ 74,954
Weighted Average Borrowing Rate	62.74%	11.66%
Weighted Average Remaining Maturity (in days)	1688 days	1962 days
Collateral amount	$ 75,945	$ 150,912
CLO 2007-1 secured notes
Details of Company's borrowings
Par		1,544,032
Collateralized loan obligation secured notes to affiliates		$ 1,630,293
Weighted Average Borrowing Rate		2.10%
Weighted Average Remaining Maturity (in days)		1962 days
Collateral amount		$ 1,732,855
CLO 2007-A subordinated notes
Details of Company's borrowings
Par		15,096
Collateralized loan obligation secured notes to affiliates		$ 17,060
Weighted Average Borrowing Rate		14.49%
Weighted Average Remaining Maturity (in days)		654 days
Collateral amount		$ 48,856
CLO 2011-1 senior debt
Details of Company's borrowings
Par		249,301
Collateralized loan obligation secured notes to affiliates		$ 249,301
Weighted Average Borrowing Rate		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
Collateralized loan obligation secured notes to affiliates	$ 376,667	$ 365,383
Weighted Average Borrowing Rate	2.90%	2.59%
Weighted Average Remaining Maturity (in days)	2998 days	3272 days
Collateral amount	$ 380,108	$ 361,684
CLO 2012-1 subordinated notes
Details of Company's borrowings
Par	18,000	18,000
Collateralized loan obligation secured notes to affiliates	$ 10,226	$ 10,845
Weighted Average Borrowing Rate	14.71%	15.82%
Weighted Average Remaining Maturity (in days)	2998 days	3272 days
Collateral amount	$ 18,618	$ 17,715
CLO 2013-1 secured notes
Details of Company's borrowings
Par	458,500	458,500
Collateralized loan obligation secured notes to affiliates	$ 470,021	$ 450,280
Weighted Average Borrowing Rate	2.40%	2.05%
Weighted Average Remaining Maturity (in days)	3210 days	3484 days
Collateral amount	$ 488,310	$ 479,391
CLO 2013-2 secured notes
Details of Company's borrowings
Par	339,250	339,250
Collateralized loan obligation secured notes to affiliates	$ 343,686	$ 334,187
Weighted Average Borrowing Rate	2.72%	2.52%
Weighted Average Remaining Maturity (in days)	3402 days	3676 days
Collateral amount	$ 367,020	$ 347,989
CLO 9 secured notes
Details of Company's borrowings
Par	463,749	463,750
Collateralized loan obligation secured notes to affiliates	$ 470,905	$ 454,103
Weighted Average Borrowing Rate	2.69%	2.33%
Weighted Average Remaining Maturity (in days)	3667 days	3941 days
Collateral amount	$ 460,882	$ 463,574
CLO 9 subordinated notes
Details of Company's borrowings
Par	15,000	15,000
Collateralized loan obligation secured notes to affiliates	$ 9,512	$ 9,972
Weighted Average Borrowing Rate	15.52%	15.92%
Weighted Average Remaining Maturity (in days)	3667 days	3941 days
Collateral amount	$ 14,907	$ 14,994
CLO 9 subordinated notes to affiliates
Details of Company's borrowings
Par	25,572
Collateralized loan obligation secured notes to affiliates	$ 16,217
Weighted Average Borrowing Rate	8.09%
Weighted Average Remaining Maturity (in days)	3667 days
Collateral amount	$ 25,414
CLO 10 secured notes
Details of Company's borrowings
Par	368,000	368,000
Collateralized loan obligation secured notes to affiliates	$ 378,010	$ 363,977
Weighted Average Borrowing Rate	3.07%	2.75%
Weighted Average Remaining Maturity (in days)	3363 days	3637 days
Collateral amount	$ 362,465	$ 384,991
CLO 10 subordinated notes to affiliates
Details of Company's borrowings
Par	29,948
Collateralized loan obligation secured notes to affiliates	$ 15,472
Weighted Average Borrowing Rate	9.51%
Weighted Average Remaining Maturity (in days)	3363 days
Collateral amount	$ 29,498
CLO 11 secured notes
Details of Company's borrowings
Par	507,750	507,750
Collateralized loan obligation secured notes to affiliates	$ 510,576	$ 491,699
Weighted Average Borrowing Rate	2.74%	2.38%
Weighted Average Remaining Maturity (in days)	3849 days	4123 days
Collateral amount	$ 504,497	$ 501,286
CLO 11 subordinated notes
Details of Company's borrowings
Par	28,250	28,250
Collateralized loan obligation secured notes to affiliates	$ 21,709	$ 23,306
Weighted Average Borrowing Rate	17.74%	5.28%
Weighted Average Remaining Maturity (in days)	3849 days	4123 days
Collateral amount	$ 28,069	$ 27,890
CLO 11 subordinated notes to affiliates
Details of Company's borrowings
Par	19,362
Collateralized loan obligation secured notes to affiliates	$ 14,879
Weighted Average Borrowing Rate	9.45%
Weighted Average Remaining Maturity (in days)	3849 days
Collateral amount	$ 19,238
CLO 13 secured notes
Details of Company's borrowings
Par	375,000	370,000
Collateralized loan obligation secured notes to affiliates	$ 385,329	$ 364,986
Weighted Average Borrowing Rate	3.03%	2.84%
Weighted Average Remaining Maturity (in days)	4125 days	4399 days
Collateral amount	$ 375,414	$ 323,781
CLO 13 subordinated notes
Details of Company's borrowings
Par	4,000	4,000
Collateralized loan obligation secured notes to affiliates	$ 2,653	$ 3,400
Weighted Average Borrowing Rate	24.01%	0.00%
Weighted Average Remaining Maturity (in days)	4125 days	4399 days
Collateral amount	$ 4,004	$ 3,500
CLO 13 subordinated notes to affiliates
Details of Company's borrowings
Par	21,636
Collateralized loan obligation secured notes to affiliates	$ 14,351
Weighted Average Borrowing Rate	18.01%
Weighted Average Remaining Maturity (in days)	4125 days
Collateral amount	$ 21,660
CLO 2016-1 secured notes
Details of Company's borrowings
Par	66,665
Collateralized loan obligation secured notes to affiliates	$ 64,808
Weighted Average Borrowing Rate	2.29%
Weighted Average Remaining Maturity (in days)	615 days
Collateral amount	$ 69,304
CLO 2016-1 subordinated notes
Details of Company's borrowings
Par	9,971
Collateralized loan obligation secured notes to affiliates	$ 10,097
Weighted Average Borrowing Rate	0.00%
Weighted Average Remaining Maturity (in days)	615 days
Collateral amount	$ 10,366
CLO 15 secured notes
Details of Company's borrowings
Par	370,500
Collateralized loan obligation secured notes to affiliates	$ 370,803
Weighted Average Borrowing Rate	3.06%
Weighted Average Remaining Maturity (in days)	4401 days
Collateral amount	$ 372,942
CLO 15 subordinated notes
Details of Company's borrowings
Par	12,100
Collateralized loan obligation secured notes to affiliates	$ 10,831
Weighted Average Borrowing Rate	0.00%
Weighted Average Remaining Maturity (in days)	4401 days
Collateral amount	$ 12,180
Total collateralized loan obligation secured debt
Details of Company's borrowings
Par	3,635,221	4,882,897
Collateralized loan obligation secured notes to affiliates	3,517,907	4,843,746
Collateral amount	3,640,841	5,169,916
8.375% Senior notes(5)
Details of Company's borrowings
Par	258,750	258,750
Collateralized loan obligation secured notes to affiliates	$ 288,728	$ 289,660
Weighted Average Borrowing Rate	8.38%	8.38%
Weighted Average Remaining Maturity (in days)	9177 days	9451 days
Debt instrument, stated interest rate	8.375%	8.375%
7.500% Senior notes
Details of Company's borrowings
Par	$ 115,043	$ 115,043
Collateralized loan obligation secured notes to affiliates	$ 123,108	$ 123,346
Weighted Average Borrowing Rate	7.50%	7.50%
Weighted Average Remaining Maturity (in days)	9302 days	9576 days
Debt instrument, stated interest rate	7.50%	7.50%
Junior subordinated notes
Details of Company's borrowings
Par	$ 283,517	$ 283,517
Collateralized loan obligation secured notes to affiliates	$ 249,730	$ 248,498
Weighted Average Borrowing Rate	4.01%	5.43%
Weighted Average Remaining Maturity (in days)	7310 days	7584 days

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BORROWINGS (Details 2) - USD ($)					1 Months Ended						3 Months Ended		9 Months Ended
	Sep. 14, 2016	Jun. 07, 2016	Dec. 16, 2015	May 07, 2015	Aug. 31, 2016	Apr. 30, 2016	Mar. 31, 2016	Nov. 30, 2015	Jul. 31, 2015	Feb. 28, 2015	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	May 31, 2016	Dec. 31, 2015
Details of Company's borrowings
Collateralized loan obligation secured debt repaid													$ 2,075,332,000	$ 1,445,941,000
Collateralized Loan Obligation Secured Notes
Details of Company's borrowings
Fair value, option, credit risk, gains (losses) on liabilities											$ 0	$ 0	0	0
CLO 2007-1 secured notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid					$ 945,600,000						947,600,000		1,500,000,000
Contractual notional amount terminated					$ 142,300,000
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 13 secured notes
Details of Company's borrowings
Par amount of notes issued											375,000,000		375,000,000			$ 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%
Senior Notes Legacy CLO
Details of Company's borrowings
Collateralized loan obligation secured debt repaid												583,600,000		1,100,000,000
2016-1 Notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid											280,000,000		280,000,000
Par amount of notes issued		$ 426,400,000.0
CLO 2011-1 senior debt
Details of Company's borrowings
Collateralized loan obligation secured debt repaid							$ 249,300,000					119,300,000		150,100,000
Par amount of notes issued																249,301,000
CLO 2013 Class F notes
Details of Company's borrowings
Proceeds from senior notes											5,900,000		5,900,000
Par amount of notes issued											7,000,000.0		7,000,000.0
Subordinated Notes to Affiliate
Details of Company's borrowings
Par amount of notes issued															$ 96,500,000.0
CLO 2007-A subordinated notes
Details of Company's borrowings
Collateralized loan obligation secured debt repaid						$ 15,100,000
Par amount of notes issued																15,096,000
Notes CLO 15
Details of Company's borrowings
Par amount of notes issued	$ 410,800,000.0
CLO 15 secured notes
Details of Company's borrowings
Par amount of notes issued											370,500,000		370,500,000
CLO 15 secured notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued	$ 370,500,000.0
CLO 15 secured notes | Nonaffiliates | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)	2.05%
CLO 15 subordinated notes
Details of Company's borrowings
Par amount of notes issued											12,100,000		12,100,000
CLO 15 subordinated notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued	$ 12,100,000.0
CLO 2016-1 secured notes
Details of Company's borrowings
Par amount of notes issued											66,665,000		66,665,000
CLO 2016-1 secured notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued		$ 330,900,000.0
CLO 2016-1 secured notes | Nonaffiliates | LIBOR
Details of Company's borrowings
Percentage of margin added to reference rate to determine interest rate on debt (in percentage)		1.70%
CLO 2016-1 subordinated notes
Details of Company's borrowings
Par amount of notes issued											9,971,000		9,971,000
CLO 2016-1 subordinated notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued		$ 25,700,000.0
Notes C L O13
Details of Company's borrowings
Par amount of notes issued			$ 412,000,000
CLO 13 subordinated notes
Details of Company's borrowings
Par amount of notes issued											4,000,000		4,000,000			4,000,000
CLO 13 subordinated notes | Nonaffiliates
Details of Company's borrowings
Par amount of notes issued			$ 4,000,000
CLO 2005-2 Class E Secured Notes - 1
Details of Company's borrowings
Proceeds from senior notes												15,100,000
Par amount of notes issued												15,000,000.0		15,000,000.0
CLO 2005-2 Class E Secured Notes - 2
Details of Company's borrowings
Proceeds from senior notes														30,200,000
Par amount of notes issued												30,000,000		30,000,000
CLO 2007-1 Class D and E secured notes
Details of Company's borrowings
Proceeds from senior notes														35,100,000
Par amount of notes issued												$ 35,000,000		$ 35,000,000
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

XML

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 13 Warehouse Facility
Details of Company's borrowings
Maximum borrowing capacity	$ 350,000,000
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%

XML

DERIVATIVE INSTRUMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Estimated Fair Value	$ (19,425)	$ (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	125,000	297,667
Estimated Fair Value	(47,907)	(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	(297,947)	(375,524)
Estimated Fair Value	24,642	38,608
Free-Standing Derivatives: | Common stock warrants
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Estimated Fair Value	1,613	0
Free-Standing Derivatives: | Options
Summary of aggregate notional amount and estimated net fair value of the derivative instruments
Estimated Fair Value	$ 2,227	$ 95

XML

DERIVATIVE INSTRUMENTS (Details 2) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Counterparty One
Notional amount
Net asset	$ 100	$ 2,400
Collateral posted	2,600	20,700
Counterparty Two
Notional amount
Net asset	1,600	1,600
Collateral posted	3,000
Collateral held		100
Counterparty Three
Notional amount
Net asset	8,200	9,100
Collateral held	38,800	23,600
Free-Standing Derivatives: | Interest rate swaps
Notional amount
Notional	125,000	297,700
Free-Standing Derivatives: | Foreign exchange forward contracts and options
Notional amount
Notional amount of liability	$ 297,947	$ 375,524

XML

DERIVATIVE INSTRUMENTS (Details 3) - Free-Standing Derivatives: - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Effect on income from free-standing derivatives
Realized gains (losses)	$ (10,839)	$ 12,872	$ 6,915	$ 22,114
Unrealized gains (losses)	10,671	(23,176)	(20,479)	(25,659)
Total	(168)	(10,304)	(13,564)	(3,545)
Interest rate swaps
Effect on income from free-standing derivatives
Realized gains (losses)	(9,316)	0	(9,316)	(5,297)
Unrealized gains (losses)	10,340	(8,489)	(7,325)	5,924
Total	1,024	(8,489)	(16,641)	627
Foreign exchange forward contracts and options
Effect on income from free-standing derivatives
Realized gains (losses)	(1,523)	12,872	16,089	27,107
Unrealized gains (losses)	723	(11,848)	(14,614)	(24,571)
Total	(800)	1,024	1,475	2,536
Common stock warrants
Effect on income from free-standing derivatives
Realized gains (losses)	0	0	142	0
Unrealized gains (losses)	(507)	(411)	(672)	(2,412)
Total	(507)	(411)	(530)	(2,412)
Total rate of return swaps
Effect on income from free-standing derivatives
Realized gains (losses)			0	304
Unrealized gains (losses)			0	130
Total			0	434
Options
Effect on income from free-standing derivatives
Realized gains (losses)	0	0	0	0
Unrealized gains (losses)	115	(2,428)	2,132	(4,730)
Total	$ 115	$ (2,428)	$ 2,132	$ (4,730)

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Liabilities:
Senior notes	$ 411,836	$ 413,006
Junior subordinated notes	249,730	248,498
Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Cash, restricted cash, and cash equivalents	1,061,743	807,496
Liabilities:
Senior notes	382,579	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	188,933	216,757
Carrying Amount
Assets:
Cash, restricted cash, and cash equivalents	1,061,743	807,496
Liabilities:
Senior notes	411,836	413,006
Junior subordinated notes	249,730	248,498
Estimated Fair Value
Assets:
Cash, restricted cash, and cash equivalents	1,061,743	807,496
Liabilities:
Senior notes	382,579	394,390
Junior subordinated notes	$ 188,933	$ 216,757

XML

FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Assets:
Corporate debt securities	$ 213,191	$ 417,519
Total securities	213,191	417,519
Loans	3,755,783	5,188,610
Equity investments, at estimated fair value	213,068	262,946
Interests in joint ventures and partnerships, at estimated fair value	779,027	888,408
Derivatives:
Total derivative assets	32,899	40,852
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	3,456,988	4,843,746
Derivatives:
Total derivative liabilities	52,324	43,892
Recurring basis | Estimated Fair Value
Assets:
Total securities	213,191	417,519
Loans	3,755,783	5,188,610
Equity investments, at estimated fair value	213,068	262,946
Interests in joint ventures and partnerships, at estimated fair value	779,027	888,408
Derivatives:
Total derivative assets	32,899	40,852
Total	4,993,968	6,798,335
Derivatives:
Total derivative liabilities	52,324	43,892
Total	3,570,231	4,887,638
Recurring basis | Estimated Fair Value | Unaffiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	3,456,988	4,843,746
Recurring basis | Estimated Fair Value | Affiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	60,919
Recurring basis | Estimated Fair Value | Corporate Debt Securities
Assets:
Corporate debt securities	169,877	367,898
Recurring basis | Estimated Fair Value | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	43,314	49,621
Recurring basis | Estimated Fair Value | Foreign exchange forward contracts and options
Derivatives:
Derivative assets	29,059	40,757
Derivatives:
Derivative liabilities	4,417	2,149
Recurring basis | Estimated Fair Value | Warrants
Derivatives:
Derivative assets	1,613
Recurring basis | Estimated Fair Value | Options
Derivatives:
Derivative assets	2,227	95
Recurring basis | Estimated Fair Value | Interest rate swaps
Derivatives:
Derivative liabilities	47,907	41,743
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1)
Assets:
Total securities	0	0
Loans	0	0
Equity investments, at estimated fair value	40,455	40,765
Interests in joint ventures and partnerships, at estimated fair value	0	0
Derivatives:
Total derivative assets	0	0
Total	40,455	40,765
Derivatives:
Total derivative liabilities	0	0
Total	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Unaffiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Affiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	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) | Foreign exchange forward contracts and options
Derivatives:
Derivative assets	0	0
Derivatives:
Derivative liabilities	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Warrants
Derivatives:
Derivative assets	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Options
Derivatives:
Derivative assets	0	0
Recurring basis | Quoted Prices in Active Markets for Identical Assets (Level 1) | Interest rate swaps
Derivatives:
Derivative liabilities	0	0
Recurring basis | Significant Other Observable Inputs (Level 2)
Assets:
Total securities	25,040	172,912
Loans	3,562,107	4,889,876
Equity investments, at estimated fair value	49,065	75,533
Interests in joint ventures and partnerships, at estimated fair value	0	0
Derivatives:
Total derivative assets	27,552	37,120
Total	3,663,764	5,175,441
Derivatives:
Total derivative liabilities	51,794	43,142
Total	3,569,701	4,886,888
Recurring basis | Significant Other Observable Inputs (Level 2) | Unaffiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	3,456,988	4,843,746
Recurring basis | Significant Other Observable Inputs (Level 2) | Affiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	60,919
Recurring basis | Significant Other Observable Inputs (Level 2) | Corporate Debt Securities
Assets:
Corporate debt securities	25,040	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) | Foreign exchange forward contracts and options
Derivatives:
Derivative assets	27,552	37,120
Derivatives:
Derivative liabilities	3,887	1,399
Recurring basis | Significant Other Observable Inputs (Level 2) | Warrants
Derivatives:
Derivative assets	0
Recurring basis | Significant Other Observable Inputs (Level 2) | Options
Derivatives:
Derivative assets	0	0
Recurring basis | Significant Other Observable Inputs (Level 2) | Interest rate swaps
Derivatives:
Derivative liabilities	47,907	41,743
Recurring basis | Significant Unobservable Inputs (Level 3)
Assets:
Total securities	188,151	244,607
Loans	193,676	298,734
Equity investments, at estimated fair value	123,548	146,648
Interests in joint ventures and partnerships, at estimated fair value	779,027	888,408
Derivatives:
Total derivative assets	5,347	3,732
Total	1,289,749	1,582,129
Derivatives:
Total derivative liabilities	530	750
Total	530	750
Recurring basis | Significant Unobservable Inputs (Level 3) | Unaffiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	0	0
Recurring basis | Significant Unobservable Inputs (Level 3) | Affiliated Entity
Liabilities:
Collateralized loan obligation secured notes, at estimated fair value	0
Recurring basis | Significant Unobservable Inputs (Level 3) | Corporate Debt Securities
Assets:
Corporate debt securities	144,837	194,986
Recurring basis | Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities
Assets:
Residential mortgage-backed securities	43,314	49,621
Recurring basis | Significant Unobservable Inputs (Level 3) | Foreign exchange forward contracts and options
Derivatives:
Derivative assets	1,507	3,637
Derivatives:
Derivative liabilities	530	750
Recurring basis | Significant Unobservable Inputs (Level 3) | Warrants
Derivatives:
Derivative assets	1,613
Recurring basis | Significant Unobservable Inputs (Level 3) | Options
Derivatives:
Derivative assets	2,227	95
Recurring basis | Significant Unobservable Inputs (Level 3) | Interest rate swaps
Derivatives:
Derivative liabilities	$ 0	$ 0

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Collateralized Loan Obligation Secured Notes
Reconciliation of liabilities measured on Level 3 basis
Balance at the beginning of the period				$ 5,501,099
Included in earnings				0
Transfers into Level 3				0
Transfers out of level 3				(5,501,099)
Purchases				0
Sales				0
Settlements				0
Balance at the end of the period		$ 0		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	$ 149,372	225,891	$ 194,986	317,034
Included in earnings	(4,505)	(11,727)	(50,054)	(23,486)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	0	0	0	0
Sales	0	(9,086)	0	(89,665)
Settlements	(30)	3,038	(95)	4,233
Balance at the end of the period	144,837	208,116	144,837	208,116
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(4,505)	(11,727)	(50,054)	(26,145)
Residential Mortgage- Backed Securities
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	45,800	52,389	49,621	55,184
Included in earnings	919	2,454	1,999	5,469
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Settlements	(3,405)	(4,704)	(8,306)	(10,514)
Balance at the end of the period	43,314	50,139	43,314	50,139
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	919	581	1,999	758
Corporate Loans
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	200,841	341,047	298,734	347,077
Included in earnings	1,884	(6,882)	(49,886)	(64,930)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	3,979	0	7,282	12,307
Sales	(13,264)	0	(39,949)	(25,511)
Settlements	236	(2,539)	(22,505)	62,683
Balance at the end of the period	193,676	331,626	193,676	331,626
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	1,883	(6,882)	(49,886)	(64,043)
Equity Investments, at Estimated Fair Value
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	123,374	166,879	146,648	81,719
Included in earnings	174	(8,453)	(25,287)	(29,567)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	(5,130)	0
Settlements	0	451	7,317	106,725
Balance at the end of the period	123,548	158,877	123,548	158,877
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	174	(8,453)	(25,287)	(28,871)
Interests in Joint Ventures and Partnerships
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	758,321	739,597	888,408	718,772
Included in earnings	36,668	(63,887)	(43,080)	(84,045)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	1,574	3,767	61,397	53,133
Sales	0	0	0	0
Settlements	(17,536)	(23,822)	(127,698)	(32,205)
Balance at the end of the period	779,027	655,655	779,027	655,655
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	36,669	(63,887)	(43,080)	(84,045)
Foreign Exchange Options, Net
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	1,652		2,887
Included in earnings	(675)		(1,910)
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	977		977
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(675)		(1,910)
Warrants
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	2,120	411	0	0
Included in earnings	(507)	(411)	(672)	(2,412)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Settlements	0	0	2,285	2,412
Balance at the end of the period	1,613	0	1,613	0
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	(507)	(411)	(672)	(2,412)
Options
Reconciliation of assets measured on Level 3 basis
Balance at the beginning of the period	2,112	2,910	95	5,212
Included in earnings	115	(2,429)	2,132	(4,731)
Transfers into Level 3	0	0	0	0
Transfers out of Level 3	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Settlements	0	0	0	0
Balance at the end of the period	2,227	481	2,227	481
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$ 115	$ (2,429)	$ 2,132	$ (4,731)

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 4) $ / shares in Units, $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2016 USD ($) $ / barrel	Dec. 31, 2015 USD ($) $ / shares $ / barrel
Crude Oil
Valuation techniques used for assets, measured at fair value
Percentage of share in total revenue	23.00%	25.00%
Natural Gas
Valuation techniques used for assets, measured at fair value
Percentage of share in total revenue	77.00%	75.00%
Natural Resources
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 120,400	$ 114,100
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) | Option pricing model | Weighted Average | Foreign Exchange Options, Net
Valuation techniques used for assets, measured at fair value
Forward and spot rates		11,500
Significant Unobservable Inputs (Level 3) | Option pricing model | Minimum | Foreign Exchange Options, Net
Valuation techniques used for assets, measured at fair value
Forward and spot rates		6
Significant Unobservable Inputs (Level 3) | Option pricing model | Maximum | Foreign Exchange Options, Net
Valuation techniques used for assets, measured at fair value
Forward and spot rates		14,000
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 144,837	$ 194,986
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	13.00%	23.00%
Net leverage	10	10
EBITDA multiple	8	7
Discount margin	15.00%	7.50%
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Minimum
Valuation techniques used for assets, measured at fair value
Yield	5.00%	6.00%
Net leverage	9	10
EBITDA multiple	7	7
Discount margin	15.00%	7.50%
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Yield analysis | Maximum
Valuation techniques used for assets, measured at fair value
Yield	15.00%	31.00%
Net leverage	10	12
EBITDA multiple	9	10
Discount margin	15.00%	7.50%
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities | Market comparables | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 43,314	$ 49,621
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | Discounted cash flows | Weighted Average
Valuation techniques used for assets, measured at fair value
Probability of default	2.00%	1.00%
Loss severity	43.00%	40.00%
Constant prepayment rate	18.00%	15.00%
Significant Unobservable Inputs (Level 3) | Residential Mortgage- Backed Securities | Discounted cash flows | 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) | Residential Mortgage- Backed Securities | Discounted cash flows | Maximum
Valuation techniques used for assets, measured at fair value
Probability of default	3.00%	3.00%
Loss severity	50.00%	45.00%
Constant prepayment rate	23.00%	18.00%
Significant Unobservable Inputs (Level 3) | Corporate Loans
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 193,676	$ 298,734
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	15.00%	11.00%
Net leverage	10	7
EBITDA multiple	9	9
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Minimum
Valuation techniques used for assets, measured at fair value
Yield	3.00%	3.00%
Net leverage	3	1
EBITDA multiple	7	6
Significant Unobservable Inputs (Level 3) | Corporate Loans | Yield analysis | Maximum
Valuation techniques used for assets, measured at fair value
Yield	28.00%	18.00%
Net leverage	36	19
EBITDA multiple	13	15
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 2,000
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability | Yield analysis
Valuation techniques used for assets, measured at fair value
Yield	513.00%
EBITDA multiple	11.2
Significant Unobservable Inputs (Level 3) | Corporate Loan Lacking Comparability | Yield analysis | Weighted Average
Valuation techniques used for assets, measured at fair value
Net leverage	35.6
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 123,548	$ 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) | Equity Investments, at Estimated Fair Value | Discounted cash flows
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 44,200
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Weighted Average
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	9.00%	9.00%
LTM EBITDA exit multiple	8	8
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Minimum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	6.00%	7.00%
LTM EBITDA exit multiple	1	0
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Discounted cash flows | Maximum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	14.00%	14.00%
LTM EBITDA exit multiple	9	9
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes
Valuation techniques used for assets, measured at fair value
Assets, fair value		$ 6,400
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Weighted Average
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares		$ 4
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Minimum
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares		0
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Broker quotes | Maximum
Valuation techniques used for assets, measured at fair value
Offered quotes (in dollars per share) | $ / shares		$ 5
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 6,100	$ 11,300
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9	8
Forward EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	0	4
Forward EBITDA multiple	3	3
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Market comparables | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	15	13
Forward EBITDA multiple	13	11
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | Weighted Average
Valuation techniques used for assets, measured at fair value
Illiquidity discount	11.00%
Weight ascribed to market comparables	27.00%
Weight ascribed to discounted cash flows	73.00%
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | 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) | Equity Investments, at Estimated Fair Value | Inputs to both market comparables and discounted cash flow | 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%
Significant Unobservable Inputs (Level 3) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | 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) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | 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) | Equity Investments, at Estimated Fair Value | Inputs to market comparables, discounted cash flow and broker quotes | 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%
Significant Unobservable Inputs (Level 3) | Corporate Debt Securities and Equity Investments
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 346,300
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships
Valuation techniques used for assets, measured at fair value
Assets, fair value	779,027	$ 888,408
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 24,100	$ 17,500
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Weighted Average
Valuation techniques used for assets, measured at fair value
Yield	14.00%	16.00%
Net leverage	1	2
EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Minimum
Valuation techniques used for assets, measured at fair value
Yield	14.00%	16.00%
Net leverage	1	2
EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Yield analysis | Maximum
Valuation techniques used for assets, measured at fair value
Yield	14.00%	16.00%
Net leverage	1	2
EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 165,300	$ 164,400
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Weighted Average
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	10.00%	8.00%
Average price per BOE (in dollars per barrel) | $ / barrel	20.45	20.61
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Minimum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	6.00%	6.00%
Average price per BOE (in dollars per barrel) | $ / barrel	17.44	14.33
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Discounted cash flows | Maximum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	24.00%	20.00%
Average price per BOE (in dollars per barrel) | $ / barrel	23.46	23.22
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 7,800	$ 98,900
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	5	5
Forward EBITDA multiple	8
Capitalization Rate	7.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	1	1
Forward EBITDA multiple	8
Capitalization Rate	6.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Market comparables | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	9	9
Forward EBITDA multiple	8
Capitalization Rate	12.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | Weighted Average
Valuation techniques used for assets, measured at fair value
Weight ascribed to market comparables	21.00%	43.00%
Weight ascribed to discounted cash flows	72.00%	57.00%
Weight ascribed to yield analysis	7.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | 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%
Weight ascribed to yield analysis	0.00%
Significant Unobservable Inputs (Level 3) | Interests in Joint Ventures and Partnerships | Inputs to both market comparables and discounted cash flow | 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%
Weight ascribed to yield analysis	100.00%
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 977	$ 2,887
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Weighted Average
Valuation techniques used for assets, measured at fair value
Forward and spot rates	11,635
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Minimum
Valuation techniques used for assets, measured at fair value
Forward and spot rates	6
Significant Unobservable Inputs (Level 3) | Foreign Exchange Options, Net | Option pricing model | Maximum
Valuation techniques used for assets, measured at fair value
Forward and spot rates	13,500
Significant Unobservable Inputs (Level 3) | Options
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 2,227	$ 95
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Weighted Average
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	15.00%	14.00%
LTM EBITDA exit multiple	6	8
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Minimum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	15.00%	14.00%
LTM EBITDA exit multiple	6	8
Significant Unobservable Inputs (Level 3) | Options | Discounted cash flows | Maximum
Valuation techniques used for assets, measured at fair value
Weighted average cost of capital	15.00%	14.00%
LTM EBITDA exit multiple	6	8
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Weighted Average
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	8	9
Forward EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Minimum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	8	9
Forward EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Options | Market comparables | Maximum
Valuation techniques used for assets, measured at fair value
LTM EBITDA multiple	8	9
Forward EBITDA multiple	7	8
Significant Unobservable Inputs (Level 3) | Options | Inputs to both market comparables and discounted cash flow
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) | Options | Inputs to both market comparables and discounted cash flow | 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) | Options | Inputs to both market comparables and discounted cash flow | 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) | Options | Inputs to both market comparables and discounted cash flow | 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) | Warrants
Valuation techniques used for assets, measured at fair value
Assets, fair value	$ 1,600

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COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Debt Instrument
Estimated future contributions for interests in joint ventures and partnerships	$ 94.0	$ 163.0
Guarantees
Non-recourse debt	1,300.0	1,600.0
Corporate loans, at estimated fair value
Debt Instrument
Unfunded financing commitments for corporate loans	$ 4.3	$ 8.6

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016 USD ($) issuer	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) issuer period	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) issuer
Management Agreement and Related Party Transactions
Related party transaction expense	$ 8,100,000	$ 9,449,000	$ 22,143,000	$ 29,486,000
Distribution to parent			$ 80,811,000	141,566,000
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
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%		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 | Incentive Fees
Management Agreement and Related Party Transactions
Fees, waived	$ 16,100,000		$ 16,100,000
Related party transaction expense	0	0	0	0
Manager | Reimbursable General And Administrative Expenses
Management Agreement and Related Party Transactions
Related party transaction expense	1,100,000	700,000	3,000,000	4,200,000
Majority Shareholder
Management Agreement and Related Party Transactions
Distribution to parent	17,900,000	52,100,000	80,800,000	141,600,000
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Fees, waived		400,000		1,500,000
Related party transaction expense	6,095,000	$ 6,816,000	18,550,000	$ 21,390,000
Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	$ 20,400,000		$ 20,400,000		$ 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)			1.00%		11.00%
Investment in affiliates, number of issuers | issuer	2		2		8
Equity Investments, at Estimated Fair Value | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	$ 20,100,000		$ 20,100,000		$ 11,000,000
Securities, at estimated fair value | Affiliated Entity
Management Agreement and Related Party Transactions
Estimated fair value	300,000		300,000
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	$ 670,900,000		$ 670,900,000		$ 805,500,000

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 2) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 8,100,000	$ 9,449,000	$ 22,143,000	$ 29,486,000
Manager | Base Management Fees
Management Agreement and Related Party Transactions
Total CLO management fees	2,005,000	2,633,000	3,593,000	8,096,000
Manager | Incentive Fees
Management Agreement and Related Party Transactions
Total CLO management fees	0	0	0	0
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Total CLO management fees	$ 6,095,000	$ 6,816,000	$ 18,550,000	$ 21,390,000

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 8,100	$ 9,449	$ 22,143	$ 29,486
Manager | Base Management Fees
Management Agreement and Related Party Transactions
Base management fees, gross	5,527	7,702	16,312	24,029
CLO management fees credit	(3,522)	(5,069)	(12,719)	(15,933)
Total CLO management fees	$ 2,005	$ 2,633	$ 3,593	$ 8,096

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 4) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Management Agreement and Related Party Transactions
Total CLO management fees	$ 8,100	$ 9,449	$ 22,143	$ 29,486
Collateral manager | CLO Management Fees
Management Agreement and Related Party Transactions
Charged and retained CLO management fees	2,573	1,747	5,831	5,457
CLO management fees credit	3,522	5,069	12,719	15,933
Total CLO management fees	$ 6,095	$ 6,816	$ 18,550	$ 21,390

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MANAGEMENT AGREEMENT AND RELATED PARTY TRANSACTIONS (Details 5) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Management Agreement and Related Party Transactions
Asset distributions	$ 131,963	$ 0
Majority Shareholder
Management Agreement and Related Party Transactions
Asset distributions	131,963
Majority Shareholder | Loans
Management Agreement and Related Party Transactions
Asset distributions	45,225
Majority Shareholder | Equity investments, at estimated fair value
Management Agreement and Related Party Transactions
Asset distributions	26,098
Majority Shareholder | CLO subordinated notes
Management Agreement and Related Party Transactions
Asset distributions	$ 60,640

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SEGMENT REPORTING (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Segment Reporting Information
Total revenues	$ 71,017	$ 89,109	$ 229,484	$ 292,586
Total investment costs and expenses	130,593	50,352	241,644	170,455
Total other income (loss)	213,366	(185,449)	28,430	(246,578)
Total other expenses	17,141	11,547	50,397	40,984
Income tax expense (benefit)	340	94	213	1,170
Net income (loss)	136,309	(158,333)	(34,340)	(166,601)
Net income (loss) attributable to noncontrolling interests	1,492	(6,676)	(15,324)	(15,452)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	134,817	(151,657)	(19,016)	(151,149)
Total assets	6,330,591		6,330,591		$ 7,788,395
Noncontrolling interests
Segment Reporting Information
Net income (loss)			(15,324)	(15,452)
Total assets	65,800		65,800		82,900
Reportable Segments | Credit
Segment Reporting Information
Total revenues	65,416	79,698	208,716	265,176
Total investment costs and expenses	128,549	47,948	235,198	163,246
Total other income (loss)	192,435	(149,952)	37,245	(216,786)
Total other expenses	16,815	11,285	49,665	39,702
Income tax expense (benefit)	126	64	122	126
Net income (loss)	112,361	(129,551)	(39,024)	(154,684)
Net income (loss) attributable to noncontrolling interests	1,492	(2,727)	(10,167)	(8,403)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	110,869	(126,824)	(28,857)	(146,281)
Total assets	5,874,168		5,874,168		7,303,305
Reportable Segments | Credit | Noncontrolling interests
Segment Reporting Information
Total assets	37,500		37,500		50,300
Reportable Segments | Natural Resources
Segment Reporting Information
Total revenues	2,387	3,876	8,285	13,055
Total investment costs and expenses	1,594	2,016	5,102	6,062
Total other income (loss)	21,974	(36,236)	3,366	(50,337)
Total other expenses	192	114	449	800
Income tax expense (benefit)	0	0	0	0
Net income (loss)	22,575	(34,490)	6,100	(44,144)
Net income (loss) attributable to noncontrolling interests	0	(3,949)	(5,157)	(7,049)
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	22,575	(30,541)	11,257	(37,095)
Total assets	233,925		233,925		230,815
Reportable Segments | Natural Resources | Noncontrolling interests
Segment Reporting Information
Total assets	28,300		28,300		32,600
Reportable Segments | Other
Segment Reporting Information
Total revenues	3,214	5,535	12,483	14,355
Total investment costs and expenses	450	388	1,344	1,147
Total other income (loss)	(1,043)	739	(12,181)	20,545
Total other expenses	134	99	283	333
Income tax expense (benefit)	214	30	91	1,044
Net income (loss)	1,373	5,757	(1,416)	32,376
Net income (loss) attributable to noncontrolling interests	0	0	0	0
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	1,373	5,757	(1,416)	32,376
Total assets	222,498		222,498		254,275
Reconciling Items
Segment Reporting Information
Total revenues	0	0	0	0
Total investment costs and expenses	0	0	0	0
Total other income (loss)	0	0	0	0
Total other expenses	0	49	0	149
Income tax expense (benefit)	0	0	0	0
Net income (loss)	0	(49)	0	(149)
Net income (loss) attributable to noncontrolling interests	0	0	0	0
Net income (loss) attributable to KKR Financial Holdings LLC and Subsidiaries	0	$ (49)	0	$ (149)
Total assets	$ 0		$ 0		$ 0

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SUBSEQUENT EVENTS (Details) - USD ($)			9 Months Ended
	Oct. 25, 2016	Sep. 22, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Subsequent events
Dividends, preferred stock			$ 20,673,000	$ 20,673,000
8.375% Senior notes(5)
Subsequent events
Par			$ 258,750,000		$ 258,750,000
Subsequent Event | 8.375% Senior notes(5)
Subsequent events
Par	$ 258,800,000.0
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed	100.00%
Series A LLC Preferred Shares
Subsequent events
Dividends, preferred stock		$ 6,900,000
Cash distribution declared (in dollars per share)		$ 0.460938