|
 |  Reuters -
Nov-06-2009UPDATE 2-Blackstone posts profit; sees more deals ahead(topic overview)
CONTENTS:
SOURCES
FIND OUT MORE ON THIS SUBJECT
The Blackstone Group on Friday reported a $275 million profit for the third quarter, as the giant publicly held private equity firm bounced back from the depths of the financial crisis last year. Blackstone's profit, which is after taxes and excludes costs tied to its 2007 initial public offering, drew largely upon the improving market conditions, which raised the value of the firm's private equity and hedge fund holdings and added to its performance fees. Its real estate portfolio, which includes office properties and Hilton Hotels, also stabilized. [1] PE Beat is live blogging the Blackstone Group's third quarter financial results call for the media, which starts at 9:30 a.m. Blackstone reports its earnings a lot of different ways. Its GAAP loss attributable to Blackstone was $176 million, narrower than a loss of $340 million in the year-ago quarter. Total segment revenue rose to $603.8 million from negative revenue of $229.2 million a year ago, as the value of its portfolio appreciated. In its private equity segment, the fair value of the portfolio appreciated by 5% in the third quarter.[2]
NEW YORK -- Reuters is reporting that private equity firm Blackstone Group, which recently bought Busch Gardens Europe and Water Country USA along with 8 other Busch Entertainment parks, posted a profit for the third quarter, reversing a loss from the previous year.[3] NEW YORK (Reuters) - Private equity firm Blackstone Group LP posted a forecast-beating quarterly profit and said it is gearing up for more deals and IPOs as the lending and equity markets recover.[4]
"We see great opportunities to buy assets from motivated sellers," Blackstone Chief Operating Officer Tony James said on a conference call. He said Blackstone has $27 billion of "dry powder" -- capital available for investment. It is the latest sign of improvement in the private equity industry, which has struggled to keep portfolio companies healthy during the recession and has had limited access to financing for new deals.[5] Blackstone itself struck a deal for Anheuser-Busch InBev's theme parks last month for as much as $2.7 billion. Blackstone and other private equity firms have also begun seeking to sell their portfolio companies to raise cash.[1]
The company, which has immense real estate and private equity assets, has stepped up deal activity in the past few months, including buying Anheuser-Busch InBev's U.S. theme parks for up to $2.7 billion. It is also considering initial public offerings for a number of its companies.[4]
Our alternative asset management businesses include the management of private equity funds, real estate funds, funds of hedge funds, credit-oriented funds, collateralized loan obligation vehicles (CLOs) and closed-end mutual funds.[6]
Net Fee Related Earnings from Operations were $24.0'million for the third quarter of 2009, a decrease from $25.2'million for the second quarter of 2009 and from $42.4'million for the third quarter of 2008. The main driver of the decline from 2008 was a decrease in Base Management Fees, partially attributable to Blackstone's restructuring of its proprietary single manager hedge funds, partially offset by a reduction in Compensation and Benefits and Other Operating Expenses. [6] The table below details Blackstone's Economic Net Income, Net Fee Related Earnings from Operations, Adjusted Cash Flows from Operations and Fee-Earning Assets Under Management as of and for the three and nine months ended September 30, 2009 and 2008. Economic Net Income, Total Segments includes unrealized gains (losses) and the direct compensation impact related to those gains/losses, but excludes IPO and acquisition-related charges.[6] Blackstone's third-quarter earnings before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets -- a measure it calls "economic net income" (ENI) -- were $278.4 million, compared with a loss of $509.3 million a year earlier.[4]
For the three months ended Sept. 30, Blackstone posted what it terms economic net income of $275.3 million, or 25 cents per unit, up substantially from a year-ago equivalent loss of $502.5 million, or 45 cents a share.[7] For Economic Net Income purposes, the weighted-average fully diluted unit count (the "Adjusted Units") for the three and nine month periods ended September 30, 2009 was 1,119.8 million units and 1,125.2'million units, respectively.[6]
Economic Net Income was $17.0'million for the third quarter of 2009 compared to $7.5'million for the second quarter of 2009 and $61.1'million for the third quarter of 2008.[6] Net Loss Attributable to The Blackstone Group L.P. was $(176.2)'million, compared to $(164.3) million for the second quarter of 2009 and $(340.3) million for the third quarter of 2008.[6] The Blackstone Group L.P. has declared a quarterly distribution of $0.30 per common unit to record holders of common units at the close of business on November 30, 2009. This distribution will be paid on December'11, 2009. Public common unitholders will continue to receive a priority distribution ahead of Blackstone personnel and others through 2009, but the amount of those distributions in respect of 2009 will be based on the amount of Adjusted Cash Flows from Operations generated in 2009 available for distributions and could fall below $1.20. No distributions will be paid in respect of the third quarter of 2009 to Blackstone personnel and others with respect to their Blackstone Holdings partnership units.[6]
The change from 2008 was primarily due to an increase in compensation related to carried interest allocations. Other Operating Expenses of $21.3'million remained consistent with the second quarter of 2009 and down from $24.0 million for the third quarter of 2008 reflecting Blackstone's ongoing focus on non-compensation expenses.[6] The increase from the third quarter of 2008 was principally driven by carried interest allocations to certain personnel due to positive returns on certain of Blackstone's credit-related funds, partially offset by a decline in personnel compensation. Other Operating Expenses of $18.1'million were down from $26.1'million for the third quarter of 2008 reflecting Blackstone's ongoing focus on non-compensation expenses.[6]
The change from 2008 was due to a decrease in reversals of prior period carried interest allocations to certain personnel in the third quarter of 2009. Other Operating Expenses of $13.4'million remained consistent with the second quarter of 2009 and down from $14.8'million for the third quarter of 2008 reflecting Blackstone's ongoing focus on non-compensation expenses.[6] Limited Partner Capital Deployed totaled $109.1 million for the third quarter of 2009, including new and follow-on investments, a decrease from $338.3 million for the second quarter of 2009 and $1.5'billion deployed for the third quarter of 2008.[6] Subsequent to the end of the third quarter of 2009, over $165'million of the Limited Partner Capital committed has been deployed and over $375'million of Limited Partner Capital was committed to or is under letter of intent by the funds with regard to new transactions.[6] Limited Partner Capital Deployed in certain carry credit-oriented funds totaled $87.3'million for the third quarter of 2009, down from $112.1'million for the second quarter of 2009 and $657.6'million for the third quarter of 2008.[6]
Corporate Private Equity had revenues of $226.9'million for the third quarter of 2009, compared with revenues of $198.6'million for the second quarter of 2009 and $(68.3)'million for the third quarter of 2008.[6] Revenues were $97.3 million for the third quarter of 2009, an increase from $83.5'million for the second quarter of 2009 and a decrease from $160.7'million for the third quarter of 2008.[6] GAAP results for the third quarter of 2009 included Revenues of $597.0'million, up from $406.4 million for the second quarter of 2009 and $(160.3)'million for the third quarter of 2008.[6]
Fees generated by the corporate and mergers and acquisitions advisory services and the restructuring and reorganization advisory services businesses decreased $20.8 million from the third quarter of 2008 due principally to large transactions fees earned in the third quarter of 2008. The fees generated by these businesses increased $7.7'million from the second quarter of 2009 due to continued strong demand for Blackstone's advisory services.[6] Fee-Earning Assets Under Management were relatively unchanged at $25.2'billion compared with the second quarter of 2009 and the third quarter of 2008. Transaction activity has increased recently in terms of both new commitments as well as realizations.[6]
Total Segment Expenses totaled $325.4 million, up from $230.8 million for the second quarter of 2009 and from $280.0 million for the third quarter of 2008.[6] The largest component of segment expenses, Total Segment Compensation and Benefits was $249.9'million for the third quarter of 2009, up from $159.1'million for the second quarter of 2009 and from $197.9'million for the third quarter of 2008.[6]
Excluding the impact of carried interest allocations, Compensation and Benefits was $199.2'million for the third quarter of 2009, down from $226.1'million for the third quarter of 2008.[6]
The change from 2008 was due primarily to improved returns on the segment's fund of hedge funds and credit-oriented funds, resulting in positive performance fees and allocations and investment income for the third quarter of 2009.[6] The fund of hedge funds posted a composite net return of 5.5% for the third quarter of 2009 and 12.9% for the nine months ended September 30, 2009.[6] CAMA had revenues of $419.0'million for the nine months ended September 30, 2009 compared with revenues of $207.3'million for the same period of 2008. The increase was primarily driven by improved returns on Blackstone's investment in its funds of hedge funds and its credit-oriented and proprietary hedge funds during the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008.[6] GAAP results for the nine months ended September 30, 2009 included Revenues of $1.0'billion, compared to $261.9'million for the nine months ended September'30, 2008, and Net Loss Attributable to The Blackstone Group L.P. of $(572.0)'million, compared to $(747.9)'million for the nine months ended September 30, 2008.[6]
Real Estate had negative nine-month revenues of $(131.3)'million, compared with negative revenues of $(240.2)'million for the nine months ended September 30, 2008.[6]
For the nine months ended September 30, 2009, Total Segment Revenues were $1.1'billion up significantly from $179.3'million for the same period in 2008.[6]
Compensation and Benefits was $478.6'million for the nine months ended September 30, 2009, an increase from $461.1'million for the nine months ended September'30, 2008, reflecting an increase in carried interest accruals, partially offset by a decrease in personnel compensation of $30.9 million from 2008.[6] The total number of units used in calculating cash distributions was 1,091.9'million units for the nine month period ended September 30, 2009 and 1,085.8'million units for the nine month period ended September'30, 2008. On August 13, 2009, Blackstone issued a ten-year debt obligation of $600'million at 6.625% and continues to maintain its $850 million revolving credit-facility, against which it has no outstanding borrowings.[6]
Friday's announcement represents a sharp turnaround from the results Blackstone announced at the same time last year: a $503 million loss. The stock and debt markets have improved dramatically, paving the way for private equity firms to again resume their core business of buying companies.[1] "We see many opportunities to deploy our substantial available capital across each of our asset management businesses with attractive potential risk-return for our fund investors.''' Stock in Blackstone has risen 112 percent this year to $13.87, but remains well below the $31 a unit the firm fetched in its public debut two years ago.[1]
Blackstone said transaction activity is picking up, with $600 million of capital committed to new deals subsequent to the end of the quarter. "It has been just over a year since the onset of the global financial crisis," Blackstone Chairman Stephen Schwarzman said in a statement.[2] "Our pipeline of new deals is growing substantially," James says. After two years of doing no deals here, Blackstone is putting capital to work again in this segment. It has five new investments in the U.S. and Europe, and James says the firm's new real estate debt business is also thriving.[2]
The year-over-year change was driven by net appreciation of the underlying portfolio investments in the Corporate Private Equity and Credit and Marketable Alternatives segments, as well as stabilization in the fair value of the Real Estate segment's underlying portfolio investments. These increases were partially offset by decreased advisory fees earned in the Financial Advisory segment.[6] The change from 2008 was driven by an increase in carried interest related compensation allocations and accruals in the Corporate Private Equity, Credit and Marketable Alternatives and Real Estate segments.[6]
We don't have any material defaults in our most recent private equity fund or real estate fund." The firm believes it will get to the fund size it wants "but I'm not counting those eggs before they hatch."[2]
Rival hedge fund and private equity firm Fortress Investment Group LLC ( FIG.N ) posted a quarterly loss on Friday, and its shares sank 3.5 percent.[8]
The fair value of the Corporate Private Equity portfolio appreciated by 5% in the third quarter of 2009, versus net depreciation of 8% in the third quarter of 2008.[6] In private equity, two-thirds of companies have growing Ebitda. Four companies were sold to strategics in the quarter and another three companies are in IPO proceedings, which should generate $2.8 billion in proceeds. That's a 40% premium over carrying value under FAS 157.[2] The lifeblood of the private equity industry, cheap credit, is again available, as evidenced by recent leveraged buyouts. TPG and the Canada Pension Plan agreed to buy IMS Health for about $4 billion in one of the biggest leveraged buyouts this year.[1]
Corporate Private Equity had nine-month revenues of $493.6'million, compared with negative revenues of $(92.6)'million in the same period of 2008.[6]
Revenue fell to $603.8 million in the latest quarter from $833 million a year earlier, although it did rise on a sequential basis from the second-quarter total of $403.6 million.[7] Revenues in the quarter were $597 million, topping consensus estimates of $451 million.[9]
At September 30, 2009, $179.7 million of Limited Partner Capital had been committed to deals by the segment's funds and not yet deployed. [6] Fees earned in the fund placement business decreased $41.7 million the market for new capital raising remained challenged with capital raised at cyclical lows.[6] The change was driven by decreased fees generated by the fund placement business of $84.8'million, partially offset by an increase in fees earned by the restructuring and reorganization advisory services business of $45.0'million and the corporate and mergers and acquisitions advisory services business of $11.2'million.[6] The Blackstone Group also provides various financial advisory services, including mergers and acquisitions advisory, restructuring and reorganization advisory and fund placement services.[6]
The Blackstone Group L.P. (NYSE: BX) today reported its third quarter 2009 results.[6] Blackstone will host a conference call on November 6, 2009 at 11:00 a.m. ET to discuss third quarter 2009 results.[6]
The fair value of the Real Estate portfolio depreciated by 0.4% in the third quarter of 2009, versus 10% in the third quarter of 2008.[6] Commercial real estate trends in the U.S. and Europe continued to worsen in the third quarter of 2009, with lower occupancy and pricing trends.[6]
The segment's funds also closed or announced four realizations in the third quarter of 2009 and subsequently.[6] Most global equity and debt markets continued to move higher in the third quarter of 2009 as investors anticipated a bottoming of the global economy.[6] Commodities prices were relatively flat during the third quarter although materially higher than one year ago.[6]
"We earned performance fees in every segment of our business last quarter." It completed its first ever bond deal during the quarter. [2] Primarily placement fees and, for Corporate Private Equity, broken deal expenses.[6] I actually think more than fine, because private equity are good owners." He thinks PE IPOs will continue to outperform, even though every deal will not succeed. "We always feel like we're getting abused on the IPO process rather than taking advantage of the situation," he adds of the IPO process. He also addresses the perception that PE firms taking something public is a sell signal.[2] We're coming off a cycle where private equity accounted for a big share of MA, so PE deals are going to surface more just routinely, James says. "We think it's terrible, and it hurts us and it hurts the economy.[2] Produced by the editors of Dow Jones LBO Wire and Private Equity Analyst, Private Equity Beat provides an inside view into the latest buyout deals and emerging trends in the world of private equity.[2]
NEW YORK ( TheStreet ) -- The Blackstone Group ( BX Quote ) Friday turned in a third-quarter performance that topped Wall Street expectations by a dime and the preeminent publicly-traded buyout firm hinted that deal flow was primed to pick up.[7]
The decrease was related to a reduction in new investment activity in certain of Blackstone's credit-oriented funds as a result of a reduction in completed leveraged finance transactions.[6] Blackstone undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. This release does not constitute an offer of any Blackstone Fund.[6]
As of September 30, 2009, Blackstone had $486.5'million in cash, $1'billion invested in high grade liquid debt strategies and $492.5'million invested in liquid Blackstone Funds, against $673.4'million in outstanding borrowings.[6]
Net Fee Related Earnings from Operations is a supplemental measure of after tax performance used to highlight earnings from operations excluding the income from and related profit sharing expenses of Blackstone's performance fees and allocations and investment income except for interest income. The reconciliation of Economic Net Income to Net Fee Related Earnings from Operations is presented in Exhibit 4b to this release.[6] The principal driver of the year-over-year change was an increase in performance fees and investment income as a result of net appreciation in the fair value of the portfolio investments, principally publicly-traded portfolio investments and certain portfolio investments in the energy, healthcare and consumer sectors, as well as gains related to foreign currency fluctuations.[6] The change from 2008 was driven principally by an increase in performance fees which was attributable to the net appreciation in the fair value of the segment's underlying portfolio investments, particularly in publicly traded investments and consumer and energy sector investments.[6]
The change from 2008 was due to positive performance fees accrued, driven by the performance of certain debt strategy portfolio investments as well as stabilization in the fair value of the segment's underlying portfolio investments.[6]
The principal drivers of the year-over-year change was a reduction in the reversal of Blackstone's prior period carried interest allocations and an increase in Base Management Fees, a function of an increase in Fee-Earning Assets Under Management. [6] The change from 2008 was primarily driven by a decrease in fees generated by Blackstone's fund placement business.[6] The decrease from 2008 was principally due to redemptions and the liquidation of certain of Blackstone's proprietary single manager hedge funds.[6]
There has been some improvement in lending markets, with lower borrowing rates and an improved willingness on the part of banks to increase lending. Access to equity capital markets has improved and volumes of both IPOs and secondary equity markets have increased considerably throughout 2009. If these favorable trends are sustained, Blackstone's funds could participate in an increased number of acquisitions and dispositions.[6] "We see many opportunities to deploy our substantial available capital across each of our asset management businesses with attractive potential risk-return for our fund investors."[7]
There are a lot of CLO managers out there that don't have the ability to grow and have shrinking revenue. They're stuck in a losing business and Blackstone could roll the assets - but not the people or overhead - into its platform. There are examples like that in various of its credit businesses. "It needs to be something that we're very very comfortable with and that connects well to the firm."[2] The change from 2008 primarily reflected an increase in fee related revenues.[6]
The firm isn't collecting management fees on the new fund yet. One is consolidations. It's one of the biggest CLO managers in the world, so it covers all the loans in all the segments.[2] "We have $27 billion of dry powder today which puts us in extraordinary position to capitalize." He believes it has some interesting consolidation opportunities as some of its competitors are weak. It bought back debt when it was cheap, and now that credit markets have recovered, it's refinancing existing debt securities or bank debt by pushing out maturities. "We've played that both ways," James says. The firm has a couple of companies, like Hilton, that it's still working on, and it is optimistic that it can put its companies on an attractive footing.[2] Blackstone shares rose 6 percent to $14.74 in morning trading. The shares have doubled in price this year, and the company is currently valued at about $15.6 billion. It went public in June 2007 at $31 a share.[4] Further information is available at www.blackstone.com. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. Blackstone believes these factors include but are not limited to those described under the section entitled "Risk Factors" in its Annual Report on Form 10-K for the fiscal year ended December'31, 2008, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the prospectus.[6] The negative amounts for the three and nine months ended September 30, 2009 are the result of timing differences between the tax payment due date on certain taxable Performance Fees and Allocations and the cash receipt date of such Performance Fees and Allocations.[6]
The Real Estate funds have seen an increase in potential investment opportunities in recent months. [6] Warner Music has returned 28% as of today's recent price of $6.69. Write to Chip Brian at cbrian@tradethetrend.com SmarTrend analyzes over 5,000 securities simultaneously throughout the trading day and provides its subscribers with trend change alerts in real time.[10]
Economic net income, as defined by the company, can exclude income taxes and transaction-related items, including charges related to equity-based compensation, the amortization of intangibles and corporate actions including acquisitions, according to a filing with the Securities and Exchange Commission.[7]
The Virginia Gazette - News - Blackstone posts profit for 3rd quarter Williamsburg, Virginia -. [3] Blackstone itself has one or two deals that look like that, but so far all the sponsors are seeing eye to eye there. As far as the IPO window, "We believe it will be open at least through the early part of next year" because it's fairly optimistic about the near-term economy.[2]
SOURCES
1. Blackstone Reports $275 Million 3rd-Quarter Profit - DealBook Blog - NYTimes.com
2. Live Blog: Blackstone Group 3Q Earnings Call - Private Equity Beat - WSJ
3. The Virginia Gazette - News - Blackstone posts profit for 3rd quarter
4. Blackstone Posts Profit; Sees More Deals Ahead - ABC News
5. UPDATE 3-Blackstone posts profit; sees more deals ahead | Reuters
6. dBusinessNews :: Daily Business News Delivered to Your Desktop
7. Blackstone Bullish on Deal Flow | Financial Services | Financial Articles & Investing News | TheStreet.com
8. UPDATE 3-Blackstone posts profit; sees more deals ahead | Reuters
9. Blackstone Posts $275 Million Profit on LBO Action says "Worst is Behind us" (BX) - Comtex SmarTrend Alert
10. Warner Music Up 28% Since SmarTrend's Buy Recommendation
GENERATE A MULTI-SOURCE SUMMARY ON ANY SUBJECT
Enter your search query below. WAIT 10-20 sec for the new window to open.
Get more info on UPDATE 2-Blackstone posts profit; sees more deals ahead by using the iResearch Reporter tool from Power Text Solutions.
 |
|  |
|
