KKR Income Opportunities Fund Finalizes Acquisition of Insight Select Income Fund Assets
The Board of Trustees of KKR Income Opportunities Fund (NYSE: KIO) has officially announced the successful completion of KIO’s previously disclosed acquisition of the assets of Insight Select Income Fund (INSI). This transaction marks a significant milestone for KIO as it integrates INSI’s assets and welcomes its shareholders into the KIO investment framework. The merger was designed to create a stronger investment vehicle, leveraging the expertise of KKR Credit Advisors (US) LLC and providing shareholders with enhanced opportunities in the credit investment landscape.
Jeremiah Lane, Co-Head of Global Leveraged Credit at KKR, expressed enthusiasm about this transition, stating, “We are thrilled to officially welcome INSI shareholders to KIO. We continue to believe this is a strong environment for credit investing, and we look forward to leveraging the compelling opportunities we see in the market to continue delivering value to our shareholders.” This statement underscores KIO’s commitment to maximizing shareholder value through strategic investment decisions and capitalizing on opportunities within the credit sector.
Impact on INSI Shareholders and Trading Status
Following the completion of this transaction, shares of INSI ceased trading on the New York Stock Exchange (NYSE) as of January 31, 2025. KIO, on the other hand, will continue trading on the NYSE under its existing ticker symbol, “KIO.” This transition ensures continuity for investors while integrating the assets of INSI into KIO’s broader portfolio. The move aligns with KKR’s vision of consolidating and strengthening its investment funds to create a more robust platform for investors seeking exposure to credit markets.
Under the terms of the agreement, INSI shareholders will receive shares of KIO based on the closing net asset values (NAVs) as of February 6, 2025. The NAVs at that time were reported as $17.62 for INSI and $13.08 for KIO. Based on these values, each INSI shareholder will receive 1.34709 shares of KIO for every share of INSI they previously held. This conversion ratio ensures that shareholders are equitably compensated based on the relative values of the two funds at the time of closing.
Handling of Fractional Shares and Cash Consideration
To ensure a smooth transition, only whole shares of KIO will be issued to INSI shareholders. Any fractional shares resulting from the conversion process will be liquidated at prevailing market prices, with the proceeds distributed to shareholders in cash. This approach is standard practice in fund mergers, allowing for a seamless integration while maintaining fairness in share allocation.
Additionally, INSI shareholders were given the option to receive a portion of their consideration in cash, subject to the adjustment and proration procedures outlined in the Agreement and Plan of Reorganization. Notably, 55.6% of INSI shareholders opted to receive cash consideration as part of this transaction. For those who elected to receive cash, approximately 8.8% of the value of their INSI shares will be paid in cash, with the remainder converted into KIO shares. This option provided flexibility to investors who preferred liquidity over a full share conversion.
The distribution process will be executed as follows:
- February 12, 2025 – Cash election proceeds and whole KIO shares will be distributed to former INSI shareholders.
- Early the following week – Cash proceeds from the sale of fractional shares will be disbursed to shareholders who were entitled to them.
This structured distribution ensures an orderly transition for all shareholders involved in the merger.
Financial and Legal Advisors Involved
To facilitate this acquisition, both KKR and Insight engaged experienced financial and legal advisors. UBS Securities LLC served as the financial advisor to Insight North America LLC (“Insight”), providing guidance on the transaction. In terms of legal representation:
- Dechert LLP acted as legal counsel to KIO and KKR Credit Advisors (US) LLC.
- Clifford Chance LLP provided legal counsel to Insight.
- Troutman Pepper Hamilton Sanders LLP represented INSI.
The involvement of these advisory firms highlights the complexity and significance of the transaction, ensuring compliance with regulatory requirements and protecting shareholder interests throughout the process.
About KKR Income Opportunities Fund (KIO)
KKR Income Opportunities Fund is a diversified, closed-end management investment company managed by KKR Credit Advisors (US) LLC, which is an indirect subsidiary of KKR & Co. Inc. The Fund operates with a dual objective:
- Primary Objective: To seek a high level of current income.
- Secondary Objective: To achieve capital appreciation.
To meet these objectives, KIO invests primarily in:
- First- and second-lien secured loans
- Unsecured loans
- High-yield corporate debt instruments
By employing a dynamic investment strategy, KIO aims to construct a targeted portfolio that includes loans and fixed-income instruments issued by both U.S. and non-U.S. entities. Additionally, the Fund utilizes hedging strategies to optimize risk-adjusted returns for its shareholders. This investment approach enables KIO to adapt to changing market conditions and capitalize on opportunities within the credit investment space.
The acquisition of Insight Select Income Fund by KKR Income Opportunities Fund represents a strategic step forward in strengthening KIO’s investment portfolio. By welcoming INSI shareholders into KIO, the Fund expands its asset base and enhances its ability to generate income and capital appreciation. The transaction was executed smoothly, with clear provisions for share conversion, fractional share handling, and cash election options. Looking ahead, KIO remains well-positioned to capitalize on market opportunities, leveraging KKR’s expertise in credit investing to deliver value to its shareholders.
