Reports indicate Kohlberg Kravis Roberts & Co. wants to pour more money into a group of its European investments, including troubled semiconductor manufacturer NXP B.V., which Philips Electronics spun off in a leveraged buyout in 2006.
KKR, which led the group that acquired 80 percent of NXP from Philips, has already written off a huge chunk of the money it paid to purchase the chip maker, but is reportedly concerned it might have to spend more to protect its interest in the company.
The New York-based private investment company is said to have asked investors in one of its European funds to contribute just under $1 billion, or 730 million euro, "to fund potential debt restructurings and equity injections," according to a Bloomberg News report.
KKR wants investors in its 4.5 billion Euro European Fund II to contribute the additional capital because of problems at the six companies it wants to help recapitalize or reorganize. If unable to pour additional funds into its investments, KKR may be unable to maintain its control over companies like NXP, according to reports.
If NXP requires additional capital injection from its shareholders, KKR and its private equity partners as well as Philips, which still controls 19.9 percent of the company, might have to contribute cash or lose portions of their equity in the semiconductor vendor.
NXP is struggling with declining sales, lower margins and operating losses as demand for its products weakens in line with the worldwide economic downturn. The company also has huge debts and in recent months has taken moderately successful steps to cut down the long-term obligations to reduce annual interest payments.
In the fourth quarter of 2008, NXP announced revenue fell 42 percent, to $979 million from $1.7 billion in the comparable 2007 quarter. Its long-term debt at the end of the December quarter grew to $6.1 billion although a recent bond swap executed by the company shaved down the total amount.
NXP is scheduled to announce March quarter results on Wednesday, April 29.