Blackstone Reports, You Decide

The Blackstone Group this morning released its first set of quarterly financials since going public. The short story on the private equity front is that revenue was up and investment was down. The context is that all of the data is from a quarter that ended just prior to the credit crunch — so it’s unclear how meaningful it is to current shareholders or would-be shareholders. 

A conference call is set up for 11am, and I’ll sit in and report back. In the meantime, you can read Blackstone’s press release

Update: Let the live-blogging begin

  • Blackstone will soon raise another private equity fund. Its $21.7 billion fifth fund (just closed) is 70% committed, and will begin raising its next fund once it’s 75% committed.
  • All of Blackstone’s hedge funds are up YTD.
  • Blackstone invested $1.6 billion in private equity in Q2, which was more than it disbursed in Q1.
  • The Hilton Hotels deal remains on track to close in Q4.
  • Blackstone has $3.5 billion in public securities in its portfolio.
  • The restructuring biz had a tough Q2, but has seen a pickup in the past few weeks.
  • Return opps Blackstone sees in PE are better than it’s seen in two years.
  • Blackstone has already closed on $10 billion for its new real estate fund, which is being capped at $10.2 billion. It’s the largest real estate PE fund ever raised, and is 40% committed.
  • Tony James just said something was “ironical.” Ummm… ok.
  • He feels Blackstone’s competitive position in each biz segment “has never been stronger.” But who cares if you’re the best player, when the game is in the midst of a rain delay?
  • Addresses tax issue: “Wouldn’t surprise me… if tax rates in general rose over the next several years… Our goal is to see that private equity is treated consistently and fairly with venture capital, energy and so on…”
  • Thinks future taxes have already been baked into Blackstone’s share price.
  • We’ve moved onto Q&A…
  • Question about if Blackstone would have not done certain deals, had it not gotten covenent-lite terms. James says “couple of deals in there we probably wouldn’t have done, at the prices we did… In general, we were not a very aggressive buyer in the first half of this year… Would not have changed much of what we decided to do.”
  • James declines to comment on the size of Blackstone’s next private equity fund, due to SEC marketing regulations.
  • Return expectations: PE returns have been historically 2.6x historically, with 3.5 yrs holding period. Earlier part of the year, multiples were only close to 2x — but current deals looking at 2.5-3x.
  • No worries about financing for already-agreed deals.
  • Beginning to look at some debt for hung bridges. Debt that’s trading like distressed, but is not distressed.
  • “Don’t see any signs of an economic slowdown.”
  • Already has put some IPO proceeds into PE and real estate deals.
  • Steve Schwarzman is spending the week in China, and Blackstone already has a couple of Chinese investment transactions in the works.
  • “Mega public-to-privates, in this environment, will be tough…”
  • “Banks are still making new loans, but they are being selective about it… and are leaning toward their biggest and best customers. That helps us compared to other buyout firms.”
  • Every question so far has been from analysts, and we’re nearing the one hour mark. Wonder if any journalists (like me, for example) will get a shot…
  • “Final question is from Wachovia…” Well, there’s my answer. Too bad. I wanted to know if Blackstone plans to fund any hung debt package buys out of its equity fund…
  • You go Wachovia guy! He asked if the current environment will lead to lower alternative asset allocations. James, of course, replied that the current envionment is a better environment for alternatives.
  • Well, that’s all folks. Over 500 people on the call. Blackstone stock is up nearly 7% as of noon today, to $26.98 per share.