Leveraged buyout firm Blackstone reports quarterly loss of $251 million

16 May 2008

It's not only banks that are feeling the heat of the ongoing financial crisis. Blackstone Group LP, one of the world's largest private equity funds, on Thursday reported its second straight quarterly loss as the leveraged buyout market dried up and its portfolio of companies lost value.

It reported a net loss of $251 million, or 97 cents a share for the first quarter. The New York-based company said its economic net income after taxes was a loss of $66.5 million, or 6 cents per share for the three-month period ended 31st March. Contrastingly, the firm had earned $1.13 billion a year ago.

Revenue fell 94 per cent from $1.23 billion to $68.5 million as Blackstone's share of profits from its investment funds turned negative, it said in a statement. The firm, run by chairman and CEO Stephen Schwarzman, announced only one leveraged buyout of food distributor Performance Food Group Co., valued at $1.2 billion, in the period, compared with $42 billion in deals a year earlier.

Deterioration in credit and equities markets caused Blackstone to lose $188.7 million in performance fees and post a $215.6 million loss from fund investment activities. The only bright spot was a $309.4 million contribution from its management and advisory fees business.

The company had gone public only last year in June at the peak of the buyout boom, but has since fallen 34 per cent. The stock's fall is more than three times that of the Bloomberg IPO Index, which tracks offerings during their first year.

Schwarzman warned during the first quarter that market uncertainty would restrict results. The credit crisis froze banks' ability to loan money for massive private-equity driven buyouts, and deals dropped off significantly.