Kohlberg Kravis Roberts & Co. released the preliminary prospectus for its initial public offering yesterday stating that the company would seek to raise $1.25 billion and use the proceeds to expand its business, make additional capital commitments to its funds and for general corporate purposes. Interestingly, none of KKR's owners appear to be liquidating their stake, in stark contrast to Blackstone's use of its IPO proceeds.

The most interesting part of the filing, however, was a new strategy KKR hinted towards that would end its dependence on third party capital from investment banks like Goldman Sachs and Morgan Stanley. The firm has shelled out billions of dollars to these banks in fees over the years in exchange for help placing more than $350 billion in debt used to finance its leveraged buyouts.

KKR is seeking to avoid these fees by constructing its own in-house syndication desk - similar to the ones that brokerages and banks maintain. The firm also plans to deploy an in-house proprietary trading team that would enable it to deploy capital behind the firm's insights into companies and markets that would have gone unutilized in the past.

The move will not only allow KKR to hand debt placements on its own (a great boost to its LBO division) but will also lead to more syndication fees and trading profits. The new strategy will also enable the firm to pursue opportunities in any credit market while their $5 billion publicly trading equity fund gives the firm an unlimited source of equity funding.

Unlike Blackstone, KKR's IPO is not simply a liquidation for the company's owners. Rather, KKR appears to be using the money to setup a new division that will be able to save it billions of dollars in fees while allowing it to tap into other potential revenue generating activities. The firm plans to IPO in the fourth quarter of 2007 under the ticker "KKR" - it's definitely one to watch!