Monday, 10 March 2008

"Difficult market conditions in the US and Europe continue in 2008 and there is little visibility on when these conditions might improve," said Stephen Schwarzman, Blackstone's chief executive.
The Blackstone Stone Group LP, a large private equity firm which launched one of the biggest share offerings on the US market last year, announced a 170 million dollar quarterly loss Monday.
Blackstone's management cited "the meltdown in the credit markets" affecting the private equity industry in explaining the three-month loss after the firm had reaped a net profit of 1.18 billion dollars in the fourth quarter of 2006.
The private equity firm's shares slumped to all-time lows in the wake of its latest financial report.Its shares were down 3.7 percent from Friday at 14.04 dollars in early afternoon trading, but have tumbled heavily since closing at 35.06 dollars on June 22 last year when the company launched an initial public offering (IPO) which netted 4.13 billion dollars.Private equity firms like Blackstone typically borrow money from banks and investors to takeover public companies which they then take private, overhaul and seek to re-float for a handsome profit.The industry has seen its finances plagued since last August, however, as a widespread credit crunch has ravaged Wall Street making banks more reluctant to lend money and more aggressive about grabbing back collateral."As a consequence of reduced borrowing ability, the volume of new private equity acquisitions has materially declined," Blackstone said.
The private equity group's quarterly revenues fell a hefty 73 percent to 345 million dollars compared with 1.28 billion dollars during the fourth quarter a year earlier.
The company, which has 102 billion dollars of assets under management, said its earnings were also dented by its investments in the Financial Guaranty Insurance Company (FGIC), a major US bond insurer which has seen its finances stressed by the upheavals buffeting the money markets.
Blackstone said FGIC had been "adversely affected" by the financial market turmoil.
Executives said a sharp moderation in property-related revenues had also dragged down Blackstone's earnings.
On an adjusted basis, taking into account some of Blackstone's IPO-related expenses and other accounting measures, the private equity firm reported a net profit of 88 million dollars or eight cents per share, compared with 808.1 million and 72 cents a share a year earlier.



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