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Talk about obfuscation. From KKR Financial Holdings, filed with the SEC late on Tuesday:

On February 15, 2008, KKR Financial Holdings LLC (the “Company”) entered into an Extension Amendment Agreement (the “Amendment Agreement”) with the holders of non-recourse secured liquidity notes (the “SLNs”) issued by two asset-backed secured liquidity note conduit facilities (the “Facilities”) to allow for restructuring discussions. On October 18, 2007, the Company announced that it had consummated a restructuring to extend the Facilities (the “October Restructuring”). Pursuant to the terms of the October Restructuring, the original maturity date of the SLNs was extended so that approximately 50% of the principal balance was due on February 15, 2008 (the “February Maturity Date”) and the remaining principal balance is due on March 13, 2008. Pursuant to the Amendment Agreement, the February Maturity Date has been extended to March 3, 2008 (the “Extension Period”). The holders of a majority of the SLNs have the right to terminate the Extension Period upon one business day prior written notice. Upon the expiration or termination of the Extension Period without further agreement on restructuring, the SLNs will become due and payable. In connection with the October Restructuring, certain holders of the SLNs agreed to receive an in-kind distribution of the mortgage-backed securities serving as collateral for the Facilities in satisfaction of the outstanding principal balance of their SLNs. In connection with the Amendment Agreement, certain holders of SLNs have been given the option during the Extension Period to receive at their election an in-kind distribution of the mortgage-backed securities serving as collateral for the Facilities in satisfaction of the outstanding principal balance of their SLNs. Upon expiration or termination of the Extension Period, the remaining holders of SLNs have the right to receive at their election an in-kind distribution of the mortgage-backed securities serving as collateral for the Facilities in satisfaction of the outstanding principal balance of their SLNs.

What we think it means is: “The bailiffs are coming round - either in two weeks time or maybe tomorrow.”

Will Kohlberg Kravis Roberts, the buyout house that floated this listed structured investment vehicle, now bail KFH out as it did last summer? In August, when the parent group was ready to put up $100m as part of a wider cash raising to ease short-term liquidity problems, such a move was seen as natural - if only to safeguard hard-won reputations. But now it is not so clear.

Back in the summer KFH had more than $5bn of mortgages financed by short term commercial paper. Since then that seems to have mutated into a $7.6bn portfolio of corporate debt. (Yes, after the residential property blow up it moved into leveraged loans.) We can assume that unwinding all that on a fire sale basis will hurt - and yet KFH was busy declaring a dividend (of 50 cents) to shareholders just three weeks ago.

What’s even odder is that KFN made no mention of the fact that its finances were seriously gummed up when releasing year-end figures on January 28.

Clearly, we must be missing something.