SEC Form 424B5 filed by KKR Income Opportunities Fund

(To prospectus dated March 25, 2024, as may be supplemented from time to time)

 

 

KKR Income Opportunities Fund (the “Fund” or “we”) is $75,000,000 of our common shares of beneficial interest, par value of $0.001 per share (the “common shares”). Our common shares are listed on the New York Stock Exchange under the symbol “KIO.” On March 31, 2025, the last reported net asset value per share of our common shares was $12.79 and the last reported sales price per share of our common shares on the NYSE was $12.29.

The Fund is a diversified, management investment company. The Fund’s primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation. The Fund seeks to achieve its investment objectives by employing a dynamic strategy of investing in a targeted portfolio of loans and fixed-income instruments of U.S. and issuers and implementing hedging strategies in order to seek to achieve attractive risk-adjusted returns. Under normal market conditions, the Fund invests at least 80% of its Managed Assets (as defined herein) in loans and fixed-income instruments or other instruments, including derivative instruments, with similar economic characteristics (the “80% Policy”). “Managed Assets” means the total assets of the Fund (including any assets attributable to borrowings for investment purposes) minus the sum of the Fund’s accrued liabilities (other than liabilities representing borrowings for investment purposes). The Fund invests primarily in first- and second-lien secured loans, unsecured loans and high-yield corporate debt instruments of varying maturities. The instruments in which the Fund invests may be rated investment grade or below investment grade by a nationally recognized statistical rating organization, or unrated. The Fund’s investments in below investment grade loans, below investment grade fixed-income instruments and debt instruments of financially troubled companies are considered speculative with respect to the issuer’s capacity to pay interest and repay principal. These investments are commonly referred to as “high-yield” or “junk” instruments. The Fund seeks to tactically and dynamically allocate capital across companies’ capital structures where KKR Credit Advisors (US) LLC (the “Adviser”) believes its due diligence process has identified compelling investment opportunities, including where the Adviser has identified issuer distress, event-driven misvaluations of securities or capital market inefficiencies.

Sales of our common shares, if any, under this prospectus supplement and the accompanying prospectus may be made in negotiated transactions or transactions that are deemed to be “at the market” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange.

KKR Capital Markets LLC, a subsidiary of KKR & Co. Inc. (“KCM” or the “Distributor”) will be compensated at a rate of up to 1.00% of the gross proceeds with respect to sales of the common shares actually effected by it under the distribution agreement, dated June 28, 2024 (the “Distribution Agreement”), between the Fund and KCM. Out of this commission rate, the Distributor will compensate UBS Securities LLC (the Agent”) at a rate of 0.80% of the gross proceeds of the sale of common shares sold through the Agent. In connection with the sale of the common shares on behalf of the Fund, the Distributor may be deemed to be an “underwriter” within the meaning of the Securities Act and the compensation of the Distributor may be deemed to be underwriting commissions or discounts.

An investment in the Fund is not appropriate for all investors. We cannot assure you that the Fund’s investment objectives will be achieved. You should read this prospectus supplement and the accompanying prospectus before

deciding whether to invest in our common shares and retain it for future reference. The prospectus supplement and the accompanying prospectus contain important information about us. Material that has been incorporated by reference, including the Statement of Additional Information (the “SAI”), and other information about us can be obtained from us without charge by calling (855) or from the Securities and Exchange Commission’s (“SEC”) website (http://www.sec.gov).

 

 

May 12, 2025

TABLE OF CONTENTS

Prospectus Supplement

 

Prospectus

 

This prospectus supplement, the accompanying prospectus and the SAI contain or incorporate by reference forward-looking statements. These statements describe KKR Income Opportunities Fund’s (the “Fund” or “we”) plans, strategies, and goals and our beliefs and assumptions concerning future economic and other conditions and the outlook for the Fund, based on currently available information. Forward-looking statements can be identified by the words “may,” “will,” “intend,” “expect,” “estimate,” “continue,” “plan,” “anticipate,” and similar terms and the negative of such terms are used in an effort to identify such forward-looking statements, although some forward-looking statements may be expressed differently. By their nature, all forward-looking statements involve risks and uncertainties, and actual results could differ materially from those contemplated by the forward-looking statements. Several factors that could materially affect our actual results are the performance of the portfolio of securities we hold, the price at which our shares will trade in the public markets and other factors discussed in our periodic filings with the Securities and Exchange Commission (the “SEC”).

Although we believe that the expectations expressed in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and are subject to inherent risks and uncertainties, such as those disclosed in the “Risk Factors” section of the accompanying prospectus. All forward-looking statements contained or incorporated by reference in this prospectus supplement or the accompanying prospectus are made as of the date of this prospectus supplement or the accompanying prospectus, as the case may be. Except for our ongoing obligations under the federal securities laws, we do not intend, and we undertake no obligation, to update any forward-looking statement. The forward-looking statements contained in or incorporated by reference into this prospectus supplement, the accompanying prospectus and the SAI are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”).

Currently known risk factors that could cause actual results to differ materially from our expectations include, but are not limited to, the factors described in the “Risk Factors” section of the accompanying prospectus. We urge you to review carefully those sections for a more detailed discussion of the risks of an investment in our common shares.

 

S-1

KKR Income Opportunities Fund is a diversified, management investment company organized as a statutory trust under the laws of the State of Delaware on March 17, 2011. Throughout this prospectus supplement, we refer to KKR Income Opportunities Fund as the “Fund” or as “we.”

The Fund’s outstanding common shares of beneficial interest, par value of $0.001 per share (the “common shares”), are listed on the New York Stock Exchange (“NYSE”) under the trading or “ticker” symbol “KIO,” and any newly issued common shares issued will trade under the same symbol. As of March 31, 2025, the Fund had outstanding 40,870,580 common shares. The net asset value (“NAV”) of the Fund’s common shares at the close of business on March 31, 2025, was $12.79 per share. On March 31, 2025, the last reported sale price of the Fund’s common shares on the NYSE was $12.29 per share, representing a discount to NAV of 3.91%.

The Fund uses leverage through a credit facility and mandatory redeemable preferred stock (“MRPS”) representing 29.4% of Managed Assets at an annual interest rate expense to the Fund of 4.2%, which is based on the weighted average interest rate currently applicable under the Fund’s existing credit facility as of March 31, 2025, and the dividends payable on the MRPS at an annual dividend rate equal to 3.81%.

The Fund has entered into a distribution agreement, dated June 28, 2024 (the “Distribution Agreement”), with KKR Capital Markets LLC, a subsidiary of KKR & Co. Inc. (“KCM” or the “Distributor”), pursuant to which the Fund may offer and sell its common shares having an aggregate offering price of up to $75,000,000 from time to time through the Distributor, in transactions that are deemed to be “at the market” as defined in Rule 415 under the Securities Act. The minimum price on any day at which common shares of the Fund may be sold will not be less than the then current NAV per common share plus the per common share amount of the commission to be paid to the Distributor (the “Minimum Price”). The Fund and the Distributor will determine whether any sales of common shares will be authorized on a particular day. The Fund and the Distributor, however, will not authorize sales of common shares if the price per common share is less than the Minimum Price. The Fund and the Distributor may elect not to authorize sales of common shares on a particular day even if the price per common share is equal to or greater than the Minimum Price, or may only authorize a fixed number of common shares to be sold on any particular day. The Fund and the Distributor will have full discretion regarding whether sales of common shares will be authorized on a particular day and, if so, in what amounts.

The Distributor may enter into agent agreements with one or more selected dealers. The Distributor has entered into a agent agreement, dated June 28, 2024 (the Agent Agreement”) with UBS Securities LLC (the Agent”) relating to the Common Shares offered by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the Agent Agreement, the Fund may offer and sell its common shares from time to time through the Agent as agent for the offer and sale of its common shares. The Distributor will be compensated at a rate of up to 1.00% of the gross proceeds with respect to sales of the common shares actually effected by it under the Distribution Agreement. Out of this commission, the Distributor will compensate the Agent at a rate of up to 0.80% of the gross sales proceeds of the sale of the common shares sold by the Agent.

 

S-2

KKR Credit Advisors (US) LLC (the “Adviser”) expects that it will initially invest the proceeds of the offer in temporary investments. The Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund’s investment objectives and policies as appropriate investment opportunities are identified, which is expected to substantially be completed within three months; however, changes in market conditions could result in the Fund’s anticipated investment period extending to as long as six months.

 

S-3

The following tables are intended to assist you in understanding the various costs and expenses directly or indirectly associated with investing in our common shares as a percentage of net assets attributable to common shares. Amounts are for the current fiscal year after giving effect to anticipated net proceeds of the offering, assuming that the Fund incurs the estimated offering expenses.

 

 

 

The Fund estimates the total net proceeds of the offering to be up to $74,212,500 after deducting the estimated underwriting commission and estimated offering expenses.

The Adviser expects that it will initially invest the proceeds of the offer in temporary investments. The Adviser anticipates that the investment of the proceeds will be made in accordance with the Fund’s investment objectives and policies as appropriate investment opportunities are identified, which is expected to substantially be completed within three months; however, changes in market conditions could result in the Fund’s anticipated investment period extending to as long as six months.

The following table sets forth the Fund’s capitalization at March 31, 2025:

i. on a historical basis; and

ii. on an as adjusted basis to reflect the assumed sale of up to $75,000,000 of common shares (assumes the Fund sells 6,102,522 common shares at an offering price of $12.29 (the last reported sale price per common share of the Fund on the NYSE as of March 31, 2025)) in the offer under this prospectus supplement and the accompanying prospectus less the Distributor fee of $750,000 and estimated offering expenses of approximately $37,500, and the application of the estimated net proceeds from the offer.

 

 

S-5

The Fund has entered into the Distribution Agreement with KCM, pursuant to which the Fund may offer and sell up to $75,000,000 of shares from time to time through the Distributor in transactions that are deemed to be “at the market” as defined in Rule 415 under the Securities Act. The minimum price on any day at which common shares may be sold will not be less than the Minimum Price, which will be equal to the most recent NAV per common share plus the per Common Share amount of the commission to be paid to the Distributor. The Fund and the Distributor will determine whether any sales of common shares will be authorized on a particular day. The Fund and the Distributor, however, will not authorize sales of common shares if the price per common share is less than the Minimum Price. The Fund and the Distributor may elect not to authorize sales of common shares on a particular day even if the price per common share is equal to or greater than the Minimum Price or may only authorize a fixed number of common shares to be sold on any particular day. The Fund and the Distributor will have full discretion regarding whether sales of common shares will be authorized on a particular day and, if so, in what amounts.

The Distributor may enter into agent agreements with one or more selected dealers. The Distributor has entered into the Agent Agreement with UBS Securities LLC relating to the common shares offered by this prospectus supplement and the accompanying prospectus. In accordance with the terms of the Agent Agreement, the Fund may offer and sell its common shares from time to time through the Agent as agent for the offer and sale of its common shares.

The Distributor (or the Agent) will provide written confirmation to the Fund not later than the opening of the trading day on the NYSE following any trading day on which common shares are sold. Each confirmation will include the number of common shares sold on the preceding day, the net proceeds to the Fund and the compensation payable by the Fund to the Distributor in connection with the sales.

The Distributor will be compensated at a rate of up to 1.00% of the gross proceeds with respect to sales of the common shares actually effected by it under the Distribution Agreement. Out of this commission, the Distributor will compensate the Agent at a rate of up to 0.80% of the gross sales proceeds of the sale of the common shares sold by the Agent. There is no guarantee that there will be any sales of common shares under this prospectus supplement and the accompanying prospectus.

 

S-7

Settlement for sales of common shares will occur on the first trading day following the date on which such sales are made in return for payment of the net proceeds to the Fund. There is no arrangement for funds to be deposited in escrow, trust or similar arrangement.

In connection with the sale of common shares on behalf of the Fund, the Distributor may be deemed to be an “underwriter” within the meaning of the Securities Act, and the compensation paid to the Distributor may be deemed to be underwriting commissions or discounts.

The Fund has agreed to indemnify the Distributor against certain civil liabilities. The Distributor has agreed to indemnify the Agent against certain civil liabilities.

The offering of common shares pursuant to the Distribution Agreement will terminate upon the earlier of (1) the sale of all common shares subject to the Distribution Agreement or (2) the termination of the Distribution Agreement. The distribution may be terminated at any time, without the payment of any penalty, by the Fund or by the Distributor, on sixty days’ written notice to the other party.

The common shares may not be sold through the Distributor or the Agent without delivery or deemed delivery of this prospectus supplement and the accompanying prospectus describing the method and terms of the offering of the common shares.

The Agent, its affiliates or their respective employees hold or may hold in the future, directly or indirectly, investment interests in the Fund. The interests held by the Agent, its affiliates or their respective employees are not attributable to, and no investment discretion is held by, the Agent, its affiliates or their respective affiliates.

The principal business address of KCM is 30 Hudson Yards, New York, NY 10001. The principal business address of UBS Securities LLC is 1285 Avenue of the Americas, New York, New York 10019.

Certain legal matters will be passed on by Dechert LLP, counsel to the Fund in connection with the offering of the common shares.

This prospectus supplement, including the accompanying prospectus, is part of a registration statement that the Fund has filed with the Securities and Exchange Commission (the “SEC”). The Fund is permitted to “incorporate by reference” the information that it files with the SEC, which means that the Fund can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus supplement and the accompanying prospectus, and later information that the Fund files with the SEC will automatically update and supersede this information.

The documents listed below, and any reports and other documents subsequently filed with the SEC pursuant to Rule 30(b)(2) under the Investment Company Act of 1940, as amended (the “1940 Act”) and Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the termination of this offering, are incorporated by reference into this prospectus supplement and the accompanying prospectus and deemed to be part of this prospectus supplement and accompanying prospectus from the date of the filing of such reports and documents:

 

 

 

S-8

 

 

To obtain copies of these filings, see “Additional Information” in the accompanying prospectus.

This prospectus supplement, the accompanying prospectus and the documents incorporated herein or therein by reference constitute part of a registration statement filed by the Fund with the SEC under the Securities Act, and the 1940 Act. This prospectus supplement and the accompanying prospectus omit certain of the information contained in the registration statement, and reference is hereby made to the registration statement and related exhibits for further information with respect to the Fund and the common shares offered hereby. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the registration statement or otherwise filed with the SEC. Each such statement is qualified in its entirety by such reference. The complete registration statement is available along with other Fund-related materials on the EDGAR database on the SEC’s website (http://www.sec.gov), and copies of this information may be obtained, after paying a duplicating fee, by electronic request at [email protected].

You may also request a free copy of the prospectus, SAI, annual and semi-annual reports to shareholders, and additional information about the Fund, and may make other shareholder inquiries, by calling (855) by writing to the Fund or visiting the Fund’s website (https://www.kkrfunds.com/kio/). The information contained in, or accessed through, the Fund’s website is not part of this prospectus supplement or the accompanying prospectus.

 

S-9