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Non-Tech : Blackstone Group -- Ignore unavailable to you. Want to Upgrade?

To: mlkr who wrote (27)	2/27/2009 6:02:39 PM
From: Glenn Petersen	1 Recommendation Respond to of 39

Despite Loss, Blackstone Stars on Wall Street February 27, 2009, 4:55 pm Since taking the Blackstone Group public in 2007, Stephen A. Schwarzman has watched with dread as shares of the firm he founded tumbled 90 percent. But on Friday, the leveraged buyout king finally got some relief. Despite reporting a greater-than-expected loss of $827.1 million for the fourth quarter, Blackstone’s shares jumped more than 25 percent. The move is a sign that Mr. Schwarzman’s message — that Blackstone is much different from banks, hedge funds and other financial institutions — may be striking a chord with investors. “We are not like most companies in the financial services industry,” Mr. Schwarzman emphasized on a conference call with analysts. “We are genuine long-term investors and we are patient. It means not being forced to panic and sell into a rapidly deleveraging world.” While the firm can hold its investments until the market turns around, new accounting rules force private equity firms to value their companies every quarter as if they immediately had to sell. Thus, most of the losses Blackstone incurred in the fourth quarter came from $3.9 billion of markdowns on its portfolio, even as 77 percent of the companies the firm owns had flat or higher earnings. “The markdowns are disappointing, but don’t necessarily represent permanent loss of value and it’s important that you understand that,” Mr. Schwarzman said. “Right now, the world says that every private equity company is a troubled company and that’s just complete garbage.” Still, Blackstone’s companies are saddled with debt, and further economic declines could put some in a precarious position. Mr. Schwarzman said that 60 percent of Blackstone’s companies had no debt covenants and that 90 percent had debt that did not come due until 2012. Blackstone emphasized that it has more than $1 billion of cash on hand and no debt, unlike say Citigroup or Bank of America. The firm’s advisory business, which includes a beefed-up restructuring group, saw record revenue last year and its hedge fund unit experienced net inflows of capital. Blackstone also generates about $1 billion in steady and predictable fees every year for managing investors’ money. But over the last year, investors have pushed Blackstone’s stock down 67 percent as private equity deals dried up and the firm was unable to exit any of its investments — cutting into the fees it collects on profitable investments. “It’s a little frustrating being us,” Mr. Schwarzman said on the call. Despite eliminating its payout to investors in the fourth quarter, Blackstone’s chief executive, Tony James, said that adjusted cash flow this year would be “more than sufficient” to support the $1.20 a share payout this year. Mr. Schwarzman however, questioned whether the firm should pay a distribution at all when the stock was at such a “dim-witted price” that it seemed “nobody cares” about the payout. “We would hope that somebody out there appreciates it — it is frustrating,” he said. But he went on to say that the firm ended the year “with substantial dry powder” and believes it is “well poised to make highly attractive investments in the years ahead.” –Zachery Kouwe dealbook.blogs.nytimes.com