'Depression' Pinch Buffets Blackstone [WSJ]
By PETER LATTMAN
Losses deepened at Blackstone Group LP as the Wall Street firm suspended its quarterly dividend and absorbed billions of dollars in write-downs on its private-equity holdings.
Blackstone posted a fourth-quarter loss of $415.2 million and a full-year loss of $1.16 billion. During the fourth quarter it marked down the equity value of its holdings, on average, by 20%, and its real-estate holdings by 30%. That compares with 7% and 10% reductions from the prior quarter, respectively.
Chief Executive Stephen Schwarzman expressed hope that Blackstone's private-equity holdings -- which include hotel giant Hilton Hotels Corp., technology firm Freescale Semiconductor Inc. and cable network Weather Channel -- will recover coming out of a downturn.
But those debt-heavy companies will have to turn their businesses around in a worsening environment, according to Blackstone President Hamilton James.
"I'm not sure what an economist's definition of a depression is, but I think this is a depression," Mr. James said. "I don't think it's as bad as the Great Depression ... but the world's going to get worse before it gets better."
Blackstone stock has declined 88% since its June 2007 initial public offering. In 4 p.m. New York Stock Exchange trading Friday, shares rose $1, or 26%, to $4.87, bouncing off a 52-week low of $3.55 hit earlier in the day, a price that Mr. Schwarzman described as "dim-witted."
To conserve cash, the firm said it wouldn't pay a fourth-quarter distribution of 30 cents per share but said it expected to pay its planned $1.20-per-share distribution this year.
A large question facing Blackstone is its continued ability to raise capital. For instance, the firm has scaled back its fund-raising ambitions for its newest flagship private-equity vehicle. Originally set at $20 billion, Blackstone has reduced its target to $15 billion and has raised less than $10 billion to date.
A bright spot was the firm's investment-banking business. Revenues at the firm's restructuring advisory group, which is advising General Motors and the Ukraine government, were up 80% in 2008 from the prior year. Blackstone also is advising insurer American International Group, driving a 17% revenue gain in its corporate-advisory business.
But those results hardly offset the negative performance in its asset-management units.
Asked to look back on what the firm did in 2008, Mr. James said, "The big mistake I made is that I didn't send everyone on vacation for the entire year." |
