By Mike Caggeso
Blackstone Group LP (BX) investors can't be happy.
The private equity and real estate company missed analysts' estimates for fourth-quarter earnings, with profit falling 89% to $128.2 million, or 8 cents a share, compared to $894.9 million, or 72 cents, from a year ago.
Blackstone, the manager of the world's largest buyout fund, cited lower takeover fees and a writedown of its holdings in bond insurer Financial Guaranty Insurance Co.
One of those investors is the Chinese government, who invested $3 billion in Blackstone before its hotly anticipated initial public offering raised $4.1 billion in June 2007.
And since then, the company's share price has gone skiing down credit-crunch mountain – where several financials such as Countrywide Financial Corp. (CFC), Citigroup Inc. (C), Merrill Lynch & Co. Inc. (MER) have crashed because of subprime-related losses.
Blackstone shares have fallen more than 57% since the company's IPO.
"Difficult market conditions in the U.S. and Europe continue in 2008 and there is little
visibility on when these conditions might improve," Chairman and Chief Executive Officer said in a statement.
Schwarzman noted that the company is eyeing opportunities in Asia and "will remain disciplined in our approach and will opportunistically purchase well priced assets throughout the globe."
No Room to Move
Before the worldwide depletion of available credit, Blackstone made a bulk of its profits through high-profile leveraged buyouts.
Since Blackstone's $20 billion buyout of Bloomberg reported.last year, the manager of the world's largest buyout fund hasn't announced a takeover exceeding $2 billion,
On top of that, Blackstone is having trouble scraping capital together to complete its $6.6 billion, or $81.75 a share, buyout of Alliance Data Systems (ADS), a deal agreed upon last May.
And as Blackstone balks, Alliance shares have fallen more than 40%. The payment-processing company sued Blackstone in January for dragging its feet in closing the transaction, but later rescinded the lawsuit.
"Among the risks are that LBO financing conditions continue to worsen and erode Blackstone's ability to earn sufficient private-equity returns," Michael Hecht, a Bank of America Corp. (BAC) analyst, wrote to investors last week. Hecht cut his fourth-quarter estimate to 11 cents from 25 cents.
News and Related Story Links:
- Blackstone Group:
The Blackstone Group Reports Full Year and Fourth Quarter 2007 Earnings