Fortress Scraps Dividend To Save Capital

NEW YORK (Reuters) – Fortress Investment Group LLC (FIG.N: Quote, Profile, Research, Stock Buzz), one of the few publicly traded U.S. alternative asset managers, said on Thursday it will not pay a third-quarter dividend, citing a need to preserve capital.

The New York-based manager of private equity and hedge funds joins other financial companies to reduce or eliminate dividends as strains on global credit markets deepen, reducing potential gains from private equity and hedge fund operations.

Fortress paid a dividend of 22.5 cents per share in the second quarter. Chief Executive Wesley Edens had told investors on Aug 7 that the company might lower the payout.

In a statement on Thursday, Edens said there are “significant dislocations in the world’s financial markets” that could give Fortress a chance to eventually invest in banks, insurance companies and other asset managers.

“Retaining capital inside the firm increases our ability to act on these opportunities and is the right thing for us to do,” he said. “To the extent that these opportunities become less attractive, we will review our dividend policy.”

Fortress said it had about $300 million in cash as of Sept 24, up from $255.2 million as of June 30, while its debt load was unchanged at about $800 million. It also said it is generating “significant” operating income. The company ended June with $35.1 billion of assets under management.

On Aug 7, Fortress said lower incentive fees contributed to a 59 percent decline in second-quarter profit to $58 million, or 13 cents per share. Under generally accepted accounting principles, Fortress said it lost $55.6 million, or 67 cents per share, in the quarter.

Fortress shares rose 50 cents to $13.49 in morning trading on the New York Stock Exchange. They began the year at $15.58.

Founded in 1998, Fortress went public in Feb 2007 at $18.50 per share in the first initial public offering by a U.S. private equity and hedge fund manager. (Reporting by Jonathan Stempel; editing by John Wallace)