SecProbe.io

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May 13, 2005

Mail Stop 0409

Barbara J.S. McKee, Esq.
General Counsel and Secretary
KKR Financial Corp.
Four Embarcadero Center, Suite 250
San Francisco, CA 94111

Re:	KKR Financial Corp.
	Form S-11 filed on April 15, 2005
	File No. 333-124103

	Form S-11 filed on April 18, 2005
	File No.  333-124135

Dear Ms. McKee:

      We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments.  If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary.  Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.

      Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or any other aspect
of
our review.  Feel free to call us at the telephone numbers listed
at
the end of this letter.

Form S-11 filed on April 18, 2005 (Shelf Registration)
1. Please note that we will monitor your Form S-11 shelf
registration, filed on April 18, 2005, for compliance with
comments
on your Form S-11 filed on April 15, 2005.  Also, we may have
additional comments once you have identified your selling
stockholders.

Form S-11 filed on April 15, 2005

General Comments
2. Disclosure at the bottom of page 65 indicates that as of March
31,
2005 you had mortgage loans and securities totaling $3.5 billion
that
you believe meet the intent and definition of qualifying real
estate
assets for purposes of the 55% requirement under Section
3(c)(5)(C)
of the Investment Company Act.  We further note disclosure that
you
require $3.7 billion of such assets in order to meet the test,
$200
million more than you currently have.  Supplementally, please
provide
a detailed analysis of your portfolio and how it meets this test.
3. Supplementally, please provide us with all diagrams, pictures
and
graphic information to be used in the prospectus.  We may have
additional comments.
4. We note that you intend to offer shares overseas.
Supplementally,
please tell us the exemption from U.S. registration upon which you
intend to rely.

Summary, page 1
5. In order to ensure consistency, please conform your business
section and other parts of your prospectus to changes made in
response to the comments on your summary.
6. Where relevant, please discuss the fact (from page 141) that
you
have filed a separate resale registration statement and indicate
the
size of that offering.

7. Please remove cross references from your summary and risk
factors
sections.  Material information should be included.
8. We note your disclosure in italics that the summary highlights
"some" of the information in the "prospectus."  Please revise to
make
it clear that the summary highlights the key aspects of the
offering.
Refer to the instruction to Item 503(a) of Reg. S-K.
9. Please include a separate section describing briefly how you
derive income from the bulk of your investments (i.e., the
interest
rate spread) and the risks posed by a rising rate environment and
continued inflation (i.e., prepayment and default and a decreasing
spread).  Discuss briefly the magnified risks associated with
leverage, the costs associated with and practical limitations on
hedging, and the continuing impact of fixed management fees that
are
not tied to performance. The object of this section should be to
give
investors an idea of the mechanics of your business in light of
the
dominant risks to it.

Our Company, page 1
10. We note that you "believe" that your investment strategy
"allows"
you to generate cash for dividends, provide "competitive total
returns" to your investors, and mitigate risk through
diversification. Please balance this disclosure by making it clear
that:
* your belief applies only to future dividends and capital
appreciation, which are not guaranteed;
* your belief is not based on your operating history or REIT
experience, which is "limited" (in fact, your manager was formed
only
in July 2004); and
* not all of your portfolio risk will or can be mitigated through
asset allocation.  On this note, please provide summary disclosure
here of the characteristics of your portfolio that suggest areas
of
exposure.  For instance, we note that more than 80% of your
investments are residential  in nature.  Moreover, the bulk of
these
investments are in securities, as opposed to actual loans.
Finally,
please consider whether the investments are geographically
concentrated in any way.
On a supplemental basis only, please tell us what your beliefs are
based on, in light of the foregoing.
11. We note the summary discussion of your results for the first
quarter of 2005.  Please omit this in favor of the more detailed
and
balanced disclosure in your MD&A.
12. To complement your asset description:
* please disclose key strategic objectives for various asset
categories (such as your leverage ratio, hedge correlation,
weighted
average rating factor, weighted average FICO score, weighted
average
loan-to-value ratio, target debt rating) and explain how they
diverge
from your current portfolio, if at all;
* please describe, in summary form, the other key aspects of your
portfolio, including weighted average maturities and interest
rates
and prepayment and default rates; and
* please provide summary disclosure of your liabilities and other
obligations, including the types and amounts of financing and
hedging
mechanisms currently in use.

Competitive Strengths, page 2
13. We note that this section duplicates disclosure in your
business
section, beginning on page 75.  Since your summary should focus on
the key aspects of the offering and not merely repeat general
information that can be found elsewhere in the prospectus, please
omit this section.  Refer to the instruction to Item 503(a) of
Reg.
S-K.  Also, in general, please avoid aggregating the experience of
management.

Our Financing Strategy, page 4
14. Please explain briefly the difference between, and when you
intend to use, term or non-term financing.

Management Agreement, page 5

15. Please explain on page 6 the difference between "cause" and,
from
page 5, "unsatisfactory performance" that is materially
detrimental
to you, which does not, apparently, constitute cause.
16. Please disclose how your management fees compare to the fees
charged by other investment managers in this area.

17. On page 6, please disclose the strike price of the options
issued
to the manager and when they vest.  Also, disclose the
compensation
charge associated with the issuance of restricted stock to the
manager.

Conflicts of Interest, page 7
18. Please revise your discussion to identify your shared officers
and the affiliations between your directors and your manager.  To
the
extent possible, please quantify the interest in you held by each
of
these individuals and the interest held by each of these
individuals
in any entities (such as the manager and KKR) that may benefit
from
their association with you.  In addition, please discuss:
* that your manager and affiliated companies and individuals hold
18.9% of your common stock (see page 5);
* that your management agreement may not be terminated without
payment of a fee (please quantify) even in the event that your
manager charges you unfairly or performs in an "unsatisfactory"
manner that is "materially detrimental" to you (see page 5);
* that the management agreement was negotiated by related parties
and
thus may not reflect the most advantageous terms for your
investors;
* that your manager owes no fiduciary obligations to your
investors,
has sole discretion to allocate investment opportunities (if true)
and that you will indemnify your manager for actions in connection
with the management agreement (see page 95);
* that your manager may work with any KKR portfolio company, even
one
engaged in business in real estate (indicate whether any of KKR`s
companies are currently in such an area and, if so, which ones);
* that your manager will receive a part of the April dividend
(please
quantify) and any future dividends or distributions; and

* the April dividend to shareholders affiliated with your manager.

19. Please include a separate discussion of conflicts of interest
as
a result of your relationship with your underwriters.  In this
regard, we note from page 38 that "certain" of your underwriters
and
their affiliates have provided you with financing and will receive
proceeds from this offering.  In your discussion please describe
these arrangements (including the identity of the underwriters
involved) and quantify proceeds to be received by them.  Also,
please
describe any other relationship with your underwriters which could
undermine their due diligence obligations, including, from page
154,
your ongoing relationship with underwriters` counsel.

20.  Supplementally, please advise us whether the issuers and
underwriters of any of the securities that you will purchase or
have
purchased are affiliated with any of your underwriters.
Risk Factors, page 14

21. Where relevant, and only to the extent material, please
discuss:
* risk related to any reliance on sub-prime lending and junk bonds
(we note from pages 3 and 4 that you may make such investments in
the
future);
* risk related to the shorter-than-usual (60-day) lockup period to
which holders with registration rights shall be subject (see page
9);
* risk related to conflicts with your underwriters and their due
diligence obligations (see page 38);

* risk related to your reliance on non-agency loans or forms of
risk
correlation (such as residential versus commercial loans and any
geographic concentration of your loans);

* risk related to changes in the tax code that may make owning
REIT
shares comparatively less attractive (including relevant sunset
provisions);

* risk related to the fact that you will not have a full time
attention of your CEO, general counsel, or any other employee of
your
manager except for a CFO (see page 96);

* risk related to the fact that your board will have only five
days
to review your manager`s own calculation of its incentive fee (as
opposed to 20 days for the base management fee) (see page 98);

* risk (such as lower dividend payments) related to your ability
to
retain earnings in your TRSs, including the ones formed for your
completed and anticipated CLO transactions (see page 117);

* risk related to the tax treatment of offshore TRSs engaged in
securities transactions, including the qualification of income
generated by these TRSs for purposes of REIT qualification and the
tax treatment of asset transfers to them made by you, as described
on
pages 120 and 122;

* risk related to future classification of your board, as this may
make it more difficult for shareholders to effect changes to your
board (in this regard, we note from page 147 that you appear to be
set to adopt a classified board);

* risk related to your reliance on the due diligence efforts of
parties from whom you  have acquired your investments;

* risk related to limitations on the rating agencies ability to
reliably assess the quality of debt offerings or the possibility
that
ratings may be lowered or withdrawn;

* risk related to the fact that your manager receives a base fee
regardless of whether it achieves capital appreciation or growth
in
income (see page 6); and

* risk related to the increased difficulty of predicting
prepayment
rates in an environment of materially rising (or falling) interest
rates (see page 45).

22. Titles of the following risk factors fail to identify specific
risks.  Please revise accordingly:

* "We are dependent upon our Manager`s personnel..." (page 14);

* "Our financial condition and results of operations..." (page
18);

* "If we engage in securitizations, we may be exposed..." (page
19);
and

* "The amount of our distributions will depend upon..." (page 30).

Risks Related to Our Management and Our Relationship with Our
Manager, page 14

There are potential conflicts of interest..., page 15

23. Please enhance your discussion of conflicts in light of
additional information provided in your summary and be more
specific
as to the identities of people with conflicts and the nature of
those
conflicts.

Termination by us of the management agreement..., page 15

24. Please relocate disclosure on page 16, regarding your
manager`s
ability to work with competitors, to the discussion of conflicts
of
interest and disclose whether any of the portfolio companies in
funds
currently controlled by KKR compete with you.  With regard to the
allocation of overlapping investment opportunities, please
indicate
whether such allocation is at the discretion of your manager and
remove mitigating language.

Certain of our investments may create a conflict..., page 16

25. Please explain the nature of this risk in more detail.

Risks Related to Our Operations and Business Strategy, page 17

We have a limited operating history..., page 17

26. Please break the second paragraph out into a separate risk
factor
and explain in detail the material weaknesses identified by your
accountants.

If we engage in securitizations..., page 19

27. Please discuss risk related to gain-on-sale accounting for
your
securitizations, including the future impairment of portfolio
securities, to the extent you intend to rely on such accounting.

We are highly dependent on information systems..., page 22

28. Please explain these systems in more detail and the nature of
the
risk to them and, therefore, to you.

Risks Related to Our Investments, page 22

A prolonged economic slowdown..., page 27

29. Please explain how falling real estate values could hurt your
investors.

Shares eligible for future sale could depress..., page 29

30. Supplementally, please confirm whether you will include (here
and
on page 148) your vested option grants in these calculations.  It
appears to us that grants to your manager begin vesting in August
2005

Tax Risks, page 33

Your investment has various federal..., page 33

31. Please describe the material risks.

Our ownership of and relationship with..., page 35

32. On page 36, in the first full paragraph, please remove the
mitigating language.

Use of Proceeds, page 38
33. We note from here and page 9 your intended use of proceeds for
debt repayment.  Please provide the disclosure required by
instruction 4 to Item 504 of Reg. S-K.

Institutional Trading of Our Common Stock, page 39

34. Please provide the high and low prices for each quarterly
period
and as of the most recent practicable date, to the extent there
has
been trading since March 31, 2004.

Distribution Policy, page 40
35. Here and on page 11, where you disclose your April dividend,
please make it clear that this dividend does not in any way: (1)
guarantee that you will issue future dividends or, (2) in the
event
that you issue future dividends, provide investors with any kind
of
guidance as to the amount of such dividends.

MD&A, page 44

36. Where relevant, please define:

* the difference between loans and securities;

* the difference between amortized cost and dollar price;

* the significance of WARF and LTV to your business (i.e., how an
investor should view changes in these indicators);

* all of the rates used to describe your investment repricing,
discussed on pages 57-60; and

* "weighted average cost," and the difference between par and
weighted average cost discussed on page 61.

37. Where relevant, please explain the purpose of each of your
TRSs.

Executive Overview, page 44

38. Please update the first paragraph t