Blackstone Group

Blackstone Group continues to ail in crisis

Jim Kim — Thu, 06 Nov 2008 13:08:58 -0500

Way back when, it seemed that The Blackstone Group got the best of rival Kohlberg Kravis Roberts when it managed to go public first. That was a year and a half ago. KKR of course still hasn't gone public--and they must be feeling a bit lucky. It has hardly been a picnic for Blackstone, who just reported the biggest loss as a public company, a massive $500 million loss. Its stock has fallen 70 percent since the offering, which occurred at the peak of the private equity boom. Of course, the market has been tough on KKR too. A KKR fund trades publicly in Amsterdam and it has been under pressure as well, this month it marked down the value of some big deals, notably TXU.

For more:
- here's a Forbes article

Top deals faring surprising well

Jim Kim — Thu, 30 Oct 2008 12:07:10 -0400

TheDeal.com offers a nice rundown of the top 10 deals of the boom years, concluding that they are holding up well. This is something of a surprise given the pathetic valuations for leveraged loans and senior debt as well as the tough economic climate. But it's not over until someone defaults, and that doesn't seem to be in the offing. The article notes that some deals look like home runs for the sponsors. TPG and Goldman Sachs Capital Partners may rake in a $1.3 billion profit on their $4.53 billion in Alltel when the sale to Verizon closes. Hilton Hotels is also said to be performing well for the Blackstone Group. One exception is Harrah's, which was supposed to be immune to economic slowdown. But tough times have hit, and Apollo has written down the value of its investment by 25 percent.

For more:
- here's the article from TheDeal.com

KKR's timing stokes questions

Jim Kim — Sun, 07 Sep 2008 09:01:10 -0400

The New York Times weighs in with a lengthy piece on Kohlberg's Kravis Roberts decision to go public via a reverse merger with its Dutch financial affiliate. It notes that Henry Kravis has been thinking about how to go public for about five years. It offers an interesting account of how the decisions was made. In the end, it seem like a decision borne of a problem: what to do with KKR Financial, which was really tanking in Amsterdam. That, and the fact that the Blackstone Group had already gone public, and thus acquired a valuable currency to make deals and lure talent. KKR just might want to make some definitive moves to make the firm a more diversified company. We'll see if the timing is right.

For more:
- here's the article

GPs vs. LPs vs. shareholders

Jim Kim — Thu, 04 Sep 2008 13:34:26 -0400

Private equity companies make a strong case for going public. But everyone knows that there's always the possibility of complications. The news that Calstrs will invest much less in funds offered by the Blackstone Group--$250 million vs. the $1.7 billion it invested in the last Blackstone fund--has led to an interesting post at Portfolio. Calstrs Chief Investment Officer Christopher Ailman says this: "Money-management organizations are based around a culture, and being public changes the culture of the organization--the stock price now becomes the focus." And this: "I don't like seeing my GPs on the cover of Vanity Fair or bantered about on CNBC. I liked it when they were private." Wow. These are strong words via the media. The issue for the Blackstone Group is whether any of its other big investors are thinking along the same lines.

For more:
- here's the Portfolio item

Bizarre tale of extortion of Blackstone exec

Jim Kim — Wed, 27 Aug 2008 21:30:27 -0400

Stuart Ross and his good friend Stuart Jackson, both in their 70s, were arrested in a sting operation at the Union League Club in Manhattan. They were accused of trying to extort millions from a Blackstone Group managing director, David Blitzer. The bizarre part is that Ross is Blitzer's father-in-law. Prosecutor say Ross made repeated "threats to ruin Blitzer's life, personally and professionally, unless" he was paid. Ross says the real issue is his request to have visitation rights with his grandchildren. He apparently demanded money to stop his requests. Ross is estranged from Blitzer's wife. Meanwhile, Blitzer has sued Ross for $11 million, charging him with the theft of hundreds of thousands of dollars.

For more:
- here's the North Country Gazette article

Handicapping the Neuberger Berman sweepstakes

Jim Kim — Wed, 27 Aug 2008 14:09:38 -0400

Well, it certainly feels like an auction. Lehman Brothers has informed three private equity firms--Hellman & Friedman, Bain Capital and Kohlberg Kravis Roberts--that they are still in the running to buy its asset management operations. The Carlyle Group was knocked out; the Financial Times says its $7 billion bid was too low, though it was friendly to Lehman's demands. The Blackstone Group was also knocked out; it was never that committed to such a deal, given concerns over how fund managers would react. Lehman, however, remains undecided if it really wants to sell the unit. KKR and Hellman & Friedman would seem to have the inside track. KKR wants to be a diversified financial service company. Hellman & Friedman thinks the unit would be a good way to grow its asset management ambitions.

For more:
- here's the FT article

What does KKR see in Neuberger Berman?

Jim Kim — Tue, 26 Aug 2008 14:23:04 -0400

According to CNBC, Kohlberg Kravis Roberts has emerged as the leading candidate to buy Neuberger Berman, the mutual fund company owned by Lehman Brothers. KKR rival the Blackstone Group apparently is apparently not interested at all, while JC Flowers, Apollo Management and the Carlyle Group may fall somewhere in between. Neuberger Berman is seen as a top wealth management company. The details will be key. As reported, Lehman wanted to sell a 70 percent stake with an option to buy back the remainder later. Which doesn't sound like a great deal for any buyer. It's also unclear what such a sale will do to Lehman's earnings picture and how credit rating agencies will view such a sale. The clock is ticking for Lehman. That's for sure. They are not in position to drive a hard bargain.

For more:
- here's the article

Offering watch: Apollo vs. KKR

Jim Kim — Mon, 25 Aug 2008 13:22:26 -0400

Both Kohlberg Kravis Roberts and Apollo Management made headlines when news broke that they were going public after all. They're not abut to stage traditional IPOs. Both will manage to list themselves without selling shares to new investors. Breakingviews notes Apollo is re-listing its private shares, now on GSTrUE, on the NYSE, while KKR will sort of reverse merge with its Amsterdam-listed affiliate and then re-list on the NYSE. Breakingviews gives KKR the nod, noting that affiliate shareholders will get a nice premium for their shares, which may make them more likely to hang onto the stock. But in both cases, eventually the stock will rise and fall with results and expectations. Both could face an embarrassing after-market situation, not unlike the Blackstone Group.

For more:
- here's the article

Related Articles:
KKR to go public after all
Apollo Group to go public

Man Group aims for U.S.

Jim Kim — Wed, 20 Aug 2008 13:48:36 -0400

Man Group has thrived in London, but New York beckons like never before. And the hedge fund giant is determined to finally make inroads in what could be a very lucrative market. Uwe Eberle, CEO of the U.S. arm since December 2007, thinks the firm can compete with the likes of the Blackstone Group and other brand names. And, as Alpha reports, he scoffs at the idea that Man is little more than an efficient gatherer of assets. The firm may need a more appropriate product line-up; its specialty is products that guarantee to preserve capital. And it may need a bigger presence in the consultant universe. Eberle is addressing all of that, but he has a long road to travel at a very tough time. A flight to quality seems to be underway that will make it that much harder for outsiders to break in. Of course, good returns will open doors.

For more:
- here's the Alpha article

Related Article:
Man results hint at future of hedge funds

Lehman Brothers courts private equity to buy unit

Jim Kim — Tue, 19 Aug 2008 08:10:18 -0400

So the rumors turned out to be true. Lehman Brothers is indeed shopping around its asset management unit, which includes Neuberger Berman, acquired five years ago for $2.6 billion, Lehman Brothers Asset Management and a private client brokers group. The New York Times reports Lehman has sent MOUs to a raft of private equity firms, including Kohlberg Kravis & Roberts, J.C. Flowers, the Blackstone Group, Carlyle Group and others. It invited bids on all or part of the unit. This is surely a sign that third quarter earnings may well be negative and that another capital raise will be required. Another step, more dramatic, would be to sell the whole company. The asset management unit provided a measure of diversification. If you sell those, you end up with the old Lehman. This nuclear option is not out of the question.

For more:
- here's the New York Times article