KKR could get its Sun Micro debt investment back

NEW YORK, April 20 Tue Apr 21, 2009 1:54am BST

NEW YORK, April 20 (Reuters) - Kohlberg Kravis Roberts & Co [KKR.UL] could make its money back on a two-year-old investment in the debt of Sun Microsystems Inc JAVA.O, which agreed to be sold to Oracle Corp ORCL.O on Monday.

The private equity firm, whose Amsterdam-listed fund KKR Private Equity Investors KKR.AS (KPE), invested $700 million in Sun in January 2007 for convertible senior notes, had sharply written down the value of its investment.

But under the terms of the investment, a sale or change in control at Sun would require that the notes be paid to Sun "at par", plus accrued interest, a person familiar with the matter said.

KPE received $350 million in financing from a major bank.

One batch of convertible notes worth $350 million, which pays interest semi-annually at 0.625 percent, is due in 2012, while the second batch, which pays 0.75 percent, is due in 2014.

In its year-end results, KPE reported that it wrote down the value of the convertible senior notes in Sun by $167.4 million.

KKR did not return calls and emails seeking comment. Oracle couldn't be reached immediately for comment. Sun declined to comment. (Reporting by Anupreeta Das; editing by Carol Bishopric)