Exhibit 10.16

THIRD AMENDMENT TO  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

This THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") dated as of
December 14, 2007, to the Second Amended and Restated Credit Agreement dated as of May 4, 2007 (as amended, the "Credit Agreement;"
capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Credit Agreement) is entered into by and among (i) KKR FINANCIAL
HOLDINGS LLC, a Delaware limited liability company ("KKR Financial"), KKR FINANCIAL CORP., a Maryland corporation ("KKR
Financial Corp."), KKR TRS HOLDINGS, INC., a Delaware corporation ("KKR TRS"), KKR TRS HOLDINGS, LTD., a Cayman
Islands company ("KKR TRS LTD"), KKR FINANCIAL HOLDINGS II, LLC, a Delaware limited liability company ("KKR
Holdings II), KKR FINANCIAL HOLDINGS III, LLC, a Delaware limited liability company ("KKR Holdings III"), KKR FINANCIAL
HOLDINGS, INC., a Delaware corporation ("KKR Holdings"), AND KKR FINANCIAL HOLDINGS, LTD., a Cayman Islands company
("KKR Holdings LTD", and collectively with KKR Financial, KKR Financial Corp., KKR TRS, KKR TRS LTD, KKR Holdings II, KKR Holdings III and
KKR Holdings, the "Borrowers" and each, individually, a "Borrower"), (ii) each lender party
hereto (collectively, the "Lenders" and individually, a "Lender") and (iii) BANK OF AMERICA,
N.A., as Administrative Agent ("Administrative Agent") and Swingline Lender.

WHEREAS,
the Borrowers have requested that the Required Lenders agree to amend certain provisions of the Credit Agreement in the manner set forth herein;

WHEREAS,
the Lenders signatory to this Agreement are agreeable to such amendments on the terms and subject to the conditions set forth herein; and

WHEREAS,
pursuant to Section 10.01 of the Credit Agreement, the consent of the Required Lenders is required to effect the amendments set forth herein.

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto agree as follows:

Section 1.Amendments to Credit Agreement.As of the Effective Date (as defined below), on the basis of
the representations and warranties contained in this Agreement, and subject to the terms and conditions of this Agreement (including satisfaction of the conditions set forth in Section 2) the
Required Lenders hereby amend the Credit Agreement as follows:



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1.2Facility Size.The definition of "Aggregate Commitment Amount" set forth in Section 1.01 of the
Credit Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



1.3Applicable Rate.The definition of "Applicable Rate" set forth in Section 1.01 of the Credit
Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



1.4Applicable Sublimit.The definition of "Applicable Sublimit" set forth in Section 1.01 of the Credit
Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



|Eligible Specified Financial Asset                                                                                                                                                  |  | Sublimits                                    
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------
|Rule 144A private placed Debt Securities with registration rights only                                                                                                              |  |                                              
|a.                                                                                                                                                                                  |  | NAIC 1 / AAA thru A-                         
|b.                                                                                                                                                                                  |  | NAIC 2 / BBB+ thru BBB-                      
|c.                                                                                                                                                                                  |  | NAIC 3 / BB+ thru BB and NAIC 4 / BB- thru B-
|Second Lien Bank Loans, Bridge Loans and Mezzanine Loans                                                                                                                            |  | $125 million                                 
|MBS in the Eligible MBS Portfolio (not constituting Mortgage-backed Debt Securities Interest Only Strips) with a weighted average life of less than five years rated A- through BB- |  | $75 million                                  
|CLO Tranches rated BB+/Ba1 or lower (including non-rated) on transactions managed by KKR Financial LLC or an Affiliate thereof                                                      |  | $100 million                                 

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|144A Private Placed Debt Securities with registration rights only rated BB+ to B-plusMBS in the Eligible MBS Portfolio (not constituting Mortgage-backed Debt Securities Interest Only Strips) with a
weighted average life of less than five years rated A- to BB-plusCLO Tranches rated BB+ / Ba1 or lower (including non rated) on transactions managed by KKR Financial LLC or an Affiliate
thereof |  | $175 million                                                                                  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------
|Investments Denominated in Foreign Currency (Euros, Pounds, or Yen)                                                                                                                                                                                                                                                                                                                                     |  | $60 million                                                                                   
|CLO Tranches(2)                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                               
|a.                                                                                                                                                                                                                                                                                                                                                                                                      |  | AAA thru AA-                                                                                  
|b.                                                                                                                                                                                                                                                                                                                                                                                                      |  | A+ thru BBB                                                                                   
|c.                                                                                                                                                                                                                                                                                                                                                                                                      |  | BBB-                                                                                          
|Mortgage-backed Debt Securities Interest Only Strips in the Eligible MBS Portfolio                                                                                                                                                                                                                                                                                                                      |  | $30 million                                                                                   
|a.                                                                                                                                                                                                                                                                                                                                                                                                      |  | Federal National Mortgage Association Fannie Mae ("FNMA") Interest Only Strips                
|b.                                                                                                                                                                                                                                                                                                                                                                                                      |  | Non Agency Interest Only Strips                                                               
|CCC+ thru CCC- rated Eligible Specified Financial Assets                                                                                                                                                                                                                                                                                                                                                |  |                                                                                               
|a.                                                                                                                                                                                                                                                                                                                                                                                                      |  | Rule 144A private placed Debt Securities with registration rights only NAIC 5 / CCC+ thru CCC-
|b.                                                                                                                                                                                                                                                                                                                                                                                                      |  | Other Debt Securities, excl. MBS, rated CCC+/Caa1 thru CCC-/Caa3                              

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|c. |  | Senior Unsecured Bank Loans CCC+ thru CCC- |  | $60 million; however when combined with other CCC-rated Eligible Specified Financial Assets not to exceed $100 million in aggregate.
|-- |  | ------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------------

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1.5CLO/CBO/CDO Tranches.The definition of "CLO/CBO/CDO Tranches" set forth in Section 1.01 of the
Credit Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



1.6References to CLO/CBO/CDO Tranches.Each reference in the Credit Agreement to the term "CLO/CBO/CDO
Tranches" shall be deleted and replaced with the term "CLO Tranches."

1.7Concentration Limit.The definition of "Concentration Limit" set forth in Section 1.01 of the Credit
Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



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|Limits on Single Obligor/Single Asset/Unrated Asset Investments
|---------------------------------------------------------------
|
|> $50 but up to $75                                            
|> $25 but up to $50                                            
|< or = $25                                                     

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1.8Participation Interest.The definition of "Participation Interest" set forth in Section 1.01 of the
Credit Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



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1.9Specified Percentage.The definition of "Specified Percentage" set forth in Section 1.01 of the
Credit Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



|TRANCHE A                                                                                                  | 
|---------------------------------------------------------------------------------------------------------- | 
|
|Cash                                                                                                       | 
|Certificates of deposit                                                                                    | 
|Commercial paper (Limited to A1/P1 or higher)                                                              | 
|United States obligations consisting of interest rate strips or zero coupon obligations                    | 
|Other United States obligations maturing in 10 or more and up to 30 years                                  | 
|Other United States obligations maturing in 2 or more but less than 10                                     | 
|Other United States obligations maturing in less than 2 years                                              | 
|MBS in the Eligible MBS Portfolio rated AAA and with a weighted average life of less than five years       | 
|MBS in the Eligible MBS Portfolio rated AA+ to AA and with a weighted average life of less than five years | 
|MBS in the Eligible MBS Portfolio rated AA- to A and with a weighted average life of less than five years  | 

|
|

|TRANCHE B                                                                                             | 
|----------------------------------------------------------------------------------------------------- | 
|
|Publicly traded investment grade Debt Securities                                                      | 
|a.                                                                                                    | 
|b.                                                                                                    | 
|Rule 144A private placed Debt Securities with registration rights only                                | 
|a.                                                                                                    | 
|b.                                                                                                    | 
|c.                                                                                                    | 
|d.                                                                                                    | 
|e.                                                                                                    | 
|Other Debt Securities, excluding MBS in the Eligible MBS Portfolio, rated BB+/Ba1 through BB-/Ba3     | 
|Other Debt Securities, excluding MBS in the Eligible MBS Portfolio, rated B+/B1 through B-/B3         | 
|Other Debt Securities, excluding MBS in the Eligible MBS Portfolio, rated CCC+/Caa1 through CCC-/Caa3 | 
|First Lien Bank Loans                                                                                 | 
|Second Lien Bank Loans                                                                                | 
|Real estate related Mezzanine Obligations                                                             | 
|Mezzanine Obligations (other than real estate related Mezzanine Obligations)                          | 
|Bridge Loans                                                                                          | 

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|MBS in the Eligible MBS Portfolio (not constituting Mortgage-backed Debt Securities Interest Only Strips) rated A- to BBBand with a weighted average life of less than five years  |  | 50                                                                                                                     | %
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -
|MBS in the Eligible MBS Portfolio (not constituting Mortgage-backed Debt Securities Interest Only Strips) rated BB+ to BB- and with a weighted average life of less than five years |  | 40                                                                                                                     | %
|CLO Tranches rated BB+/Ba1 or lower (including non-rated)                                                                                                                           |  | 35                                                                                                                     | %
|Investments Denominated in Foreign Currency (Euros, Pounds, or Yen)                                                                                                                 |  | Mimic rates on US currency denominated assets if micro hedged for FX risk and, if not, an additional decrease of 5%(1) |  
|CLO Tranches                                                                                                                                                                        |  |                                                                                                                        |  
|a.                                                                                                                                                                                  |  | AAA through AA-                                                                                                        |  
|b.                                                                                                                                                                                  |  | A+ through BBB                                                                                                         |  
|c.                                                                                                                                                                                  |  | BBB-                                                                                                                   |  
|Mortgage-backed Debt Securities Interest Only Strips in the Eligible MBS Portfolio                                                                                                  |  |                                                                                                                        |  
|a.                                                                                                                                                                                  |  | FNMA Interest Only Strips                                                                                              |  
|b.                                                                                                                                                                                  |  | Non-Agency Interest Only Strips                                                                                        |  
|Senior Unsecured Bank Loans                                                                                                                                                         |  |                                                                                                                        |  
|a.                                                                                                                                                                                  |  | BBB- or higher                                                                                                         |  
|b.                                                                                                                                                                                  |  | BB+ thru BB-                                                                                                           |  
|c.                                                                                                                                                                                  |  | B+ thru B-                                                                                                             |  
|d.                                                                                                                                                                                  |  | CCC+ thru CCC-                                                                                                         |  

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1.10Swingline Sublimit.The definition of "Swingline Sublimit" set forth in Section 1.01 of the Credit
Agreement shall be hereby amended by deleting such definition in its entirety and replacing it with the following:



1.11Tranche A Specified Financial Asset.Subsection (b) of the definition of "Tranche A
Specified Financial Asset" set forth in Section 1.01 of the Credit Agreement shall be hereby amended by deleting such subsection in its entirety and replacing it with the following:



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1.12Tranche B Specified Financial Asset.Subsections (c) through (e) of the definition of
"Tranche B Specified Financial Asset" set forth in Section 1.01 of the Credit Agreement shall be hereby amended by deleting such subsections in their entirety and replacing them with the
following:



1.13Increase Effective Date.The definition of "Increase Effective Date" set forth in Section 1.01 of
the Credit Agreement shall be hereby deleted in its entirety.

1.14Increase in Commitments.Section 2.13 of the Credit Agreement shall be hereby amended by deleting
such Section in its entirety and replacing it with the following:



1.15Financial Statements.Section 6.01 of the Credit Agreement shall be hereby amended by
(i) deleting "and" at the end of Subsection (a); (ii) replacing "." with "; and" at the end of Subsection (b) and (iii) adding the following after
Subsection (b):



1.16Consolidated Tangible Net Worth.Section 7.09(a) of the Credit Agreement shall be hereby amended by
deleting such Section in its entirety and replacing it with the following:



1.17Leverage Ratio.Section 7.09(b) of the Credit Agreement shall be hereby amended by deleting such
Section in its entirety and replacing it with the following:



1.18Positive Net Income.Section 7.09(c) of the Credit Agreement shall be hereby amended by deleting
such Section in its entirety and replacing it with the following:



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1.19Valuation Policies.Section 7.14 shall be added to the Credit Agreement and shall state the
following:



1.20KKR Atlantic and KKR Pacific.Section 7.15 shall be added to the Credit Agreement and shall state
the following:



1.21Cross-Default.Section 8.01(e) of the Credit Agreement shall be hereby amended by deleting such
Section in its entirety and replacing it with the following:



1.22Commitments and Applicable Percentages.Schedule 2.01 to the Credit Agreement shall be hereby
amended by deleting such Schedule in its entirety and replacing it with Schedule 2.01 attached hereto.

1.23     The
Credit Agreement shall be hereby amended to add Schedules I and II attached hereto as Schedules I and II, respectively, to the Credit
Agreement.

1.24     Exhibit D
to the Credit Agreement (the form of Borrowing Base Report) shall be hereby amended by deleting such Exhibit in its entirety and
replacing it with Exhibit D attached hereto.

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1.25     Exhibit E
to the Credit Agreement (the form of Compliance Certificate) shall be hereby amended by deleting such Exhibit in its entirety and
replacing it with Exhibit E attached hereto.

Section 2.Conditions Precedent.This Agreement shall become effective on the date (the
"Effective Date") upon which the following conditions have been satisfied in full or waived by the Administrative Agent in writing:

2.1   The
Administrative Agent shall have received counterparts of this Agreement duly executed by each Borrower, the Required Lenders and the Administrative Agent.

2.2   All
representations and warranties contained in this Agreement or otherwise made in writing to the Administrative Agent in connection herewith shall be true and correct.

2.3   Other
than the fees and other amounts due and owing in accordance withSection 4hereof, the Borrowers shall have
paid all outstanding interest and fees due and payable under the Credit Agreement and the other Loan Documents.

2.4   The
Borrowers shall have paid the amendment fee specified in Section 4 hereof, and shall have paid the expenses described in Section 4 hereof to the extent
invoiced or otherwise specified in writing to the Borrowers at or prior to the time of the fee payment referred to above (but with any failure to so invoice or specify in writing not having any effect
on the Borrowers' obligation to pay such expenses under Section 4 or the Credit Agreement, as applicable).

2.5   The
Administrative Agent shall have received from the Borrowers (i) a Borrowing Base Report, substantially in the form attached hereto as Exhibit D, dated
as of the Effective Date and (ii) a Compliance Certificate, substantially in the form attached hereto as Exhibit E, demonstrating compliance, dated as of September 30, 2007.

Section 3.Effect of Amendment.

3.1   Each
Borrower agrees that after giving effect to this Agreement there is no Default nor Event of Default in existence, nor would a Default nor an Event of Default be
caused by this Agreement or the implementation of the matters reflected herein.

3.2   Except
as specifically modified by this Agreement, the terms and provisions of the Credit Agreement are ratified and confirmed by the parties hereto and remain in full
force and effect.

3.3   The
parties hereto acknowledge that for the purposes of the Credit Agreement, this Agreement is a Loan Document and, upon effectiveness of this Agreement, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to the "Credit
Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Agreement.

Section 4.Fees; Expenses.The Borrowers agree to pay to the Administrative Agent for the ratable benefit
of each of the Lenders executing and delivering this Agreement a non-refundable one time amendment fee of 0.235% of the Commitment of each such Lender and such other fees as may be
mutually agreed upon. The Borrowers shall reimburse the Administrative Agent upon demand for all reasonable out-of-pocket costs and expenses incurred by the Administrative
Agent and its Affiliates (including the reasonable fees, charges and disbursements of counsel for the Administrative Agent) in connection with the preparation, negotiation, execution, delivery and
administration of this Agreement and any other agreements and documents executed and delivered in connection herewith.

Section 5.Acknowledgments.



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5.2   Each
Borrower ratifies and confirms the grant of the security interest in and the Lien on the Collateral contained in the Loan Documents to which each is a party which
were executed in connection with the Credit Agreement.

5.3   For
the avoidance of doubt, each party hereto hereby confirms, as of the date hereof, that (i) the $20,000,000 obligation pledged in connection with the IPS
Corporation 11.25% Senior Subordinated Unsecured Notes program qualifies as a Specified Financial Asset that may be treated as a Rule 144A private placed Debt Security (regardless of whether it
has registration rights), and (ii) any obligation within the Eligible MBS Portfolio may constitute a Specified Financial Asset (with the determination of whether it is a Tranche A
Specified Financial Asset or Tranche B Specified Financial Asset to be made in accordance with the definitions of those terms, as amended hereby).

Section 6.Representations of the Borrower.

After
giving effect to this Agreement, each Borrower reaffirms and restates the representations and warranties set forth in Article V of the Credit Agreement (except to the extent
such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date)
and all such representations and warranties shall be true and correct on the date hereof with the same force and effect as if made on
such date. Each Borrower represents and warrants (which representations and warranties shall survive the execution and delivery hereof) to the Administrative Agent that:

6.1   It
has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Agreement and the transactions contemplated hereby and has
taken or caused to be taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the transactions contemplated hereby;

6.2   No
consent of any Person (including, without limitation, shareholders or creditors of the Borrowers), and no action of, or filing with any governmental or public body or
authority is required to authorize, or is otherwise required in connection with the execution, delivery and performance of this Agreement;

6.3   This
Agreement has been duly executed and delivered on behalf of each Borrower by a duly authorized officer, and constitutes a legal, valid and binding obligation of the
Borrowers enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally and
the exercise of judicial discretion in accordance with general principles of equity; and

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6.4   The
execution, delivery and performance of this Agreement will not violate any law, statute or regulation, or any order or decree of any court or governmental
instrumentality, or conflict with, or result in the breach of, or constitute a default under any contractual obligation of the Borrowers.

6.5   Since
September 30, 2007, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a
Material Adverse Effect.

Section 7.Successors and Assigns.The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.

Section 8.Governing Law.THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW PROVISIONS THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

Section 9.Effect.Except as expressly stated herein, the terms and conditions of the Credit Agreement
and the other Loan Documents remain in full force and effect. The amendments contained herein shall be deemed to have prospective application only, unless otherwise specifically stated herein.

Section 10.Counterparts; Integration.This Agreement may be executed in counterparts (and by different
parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a
signature page by telecopier shall be effective as delivery of a manually executed counterpart.

[The
remainder of this page left blank intentionally]

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Second Amended and Restated Credit Agreement to be duly executed as of the date first above written.

| |  | KKR FINANCIAL HOLDINGS LLC     
| |  | -------------------------------
| |  | By:                            
| |  | KKR FINANCIAL HOLDINGS II, LLC 
| |  | By:                            
| |  | KKR FINANCIAL HOLDINGS III, LLC
| |  | By:                            
| |  | KKR FINANCIAL HOLDINGS, INC.   
| |  | By:                            

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| |  | KKR FINANCIAL HOLDINGS, LTD.
| |  | ----------------------------
| |  | By:                         
| |  | KKR FINANCIAL CORP.         
| |  | By:                         
| |  | KKR TRS HOLDINGS, INC.      
| |  | By:                         
| |  | KKR TRS HOLDINGS, LTD.      
| |  | By:                         

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| |  | BANK OF AMERICA, N.A., as
Administrative Agent
| |  | ----------------------------------------------
| |  | By:                                           

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| |  | BANK OF AMERICA, N.A., as a Lender,
and Swingline Lender
| |  | --------------------------------------------------------
| |  | By:                                                     

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| |  | CITICORP NORTH AMERICA, INC., as
a Lender         
| |  | --------------------------------------------------
| |  | By:                                               
| |  | CITICORP NORTH AMERICA, INC., as
Syndication Agent
| |  | By:                                               

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| |  | JPMORGAN CHASE BANK, N.A., as a
Syndication Agent and a Lender
| |  | --------------------------------------------------------------
| |  | By:                                                           

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| |  | THE BANK OF NOVA SCOTIA, as a
Lender
| |  | ------------------------------------
| |  | By:                                 

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| |  | CREDIT SUISSE, CAYMAN ISLANDS
BRANCH, as a Lender
| |  | -------------------------------------------------
| |  | By:                                              
| |  | By:                                              

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| |  | GOLDMAN SACHS & CO., INC., as a
Lender
| |  | --------------------------------------
| |  | By:                                   

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| |  | ROYAL BANK OF CANADA, as a
Lender
| |  | ---------------------------------
| |  | By:                              

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| |  | FORTIS CAPITAL CORP., as a Lender
| |  | ---------------------------------
| |  | By:                              
| |  | By:                              

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| |  | MIZUHO CORPORATE BANK, LTD.,
as a Lender
| |  | ----------------------------------------
| |  | By:                                     

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| |  | MORGAN STANLEY BANK, as a Lender
| |  | --------------------------------
| |  | By:                             

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| |  | SUMITOMO MITSUI BANKING, as a
Lender
| |  | ------------------------------------
| |  | By:                                 

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| |  | CHANG HWA COMMERCIAL
BANK LTD., as a Lender
| |  | -------------------------------------------
| |  | By:                                        

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