Private equity giant Kohlberg Kravis Roberts’ publicly-traded KKR Financial Holdings is heading to market after being battered by the downturn in asset-backed securities.

KKR Financial is set to sell $500 million in stock as it seeks to rid itself of its remaining residential mortgage-backed securities portfolio. The firm sold some $5.1 billion in such loans last week, taking a $40 million hit on the deal.

“We are shoring up the company for tougher times,” KKR Financial CEO Saturnino Fanlo said on a conference call. “The cost of obtaining protection is well-purchased insurance for these challenging times.”

San Francisco hedge fund Farallon Capital Management is to buy 16 million shares at $14.40 each—KFN shares were trading at a 52-week-low of $9.39 just last week, but were going for $15.60 in midday trading on Monday. Morgan Stanley is making a similar commitment. Between them, Farallon and Morgan Stanley will pay some $230 million for their shares. Also getting in on the action are Fir Tree Partners, JGE Capital Management, Marsico Capital Management, Oakhill Advisors and Sageview Capital, according to KKR Financial.

Other shareholders also have an opportunity to get in on the deal; their rights to buy new shares expire on Sept. 19. In addition, KKR has made a backstop commitment to buy as much as $100 million in KKR Financial shares if necessary.