GSO Founder Discusses Conflict Potential Under B’Stone

GSO Capital Partners Founder Bennett Goodman pulled back the curtain on what life has been like for the lender since being a part of The Blackstone Group, saying that the potential for conflict looms but that the firm has put certain measures in place to prevent them.

“Now that we’re part of Blackstone, there is the potential for conflict,” Goodman said in keynote interview at the Partner Connect conference.

To curb conflict potential, the firm has put certain measures in place. For example, if GSO Capital is financing a mezzanine investment in a Blackstone-sponsored deal, GSO Capital can only be a minority investor, he said. And no one from Blackstone’s private equity group can sit on GSO Capital’s investment board.

“Once we commit to TPG, we’re committed, we’re exclusive,” Goodman said, discussing a hypothetical “awkward position” in which GSO Capital could finance a TPG Capital bid on a company that Blackstone is also bidding on with financing from Goldman Sachs. “David Bonderman doesn’t want Steve Schwarzman reading his” investment documents, he quipped.

Despite the potential for conflict, Goodman said it hasn’t happened all that much. Of the dozens of private equity deals GSO Capital has backed since being under Blackstone, a potential conflict has only surfaced three times, he said.

Blackstone bought GSO Capital back in 2008 in a deal valued at around $945 million.

Goodman also cited two advantages of being under Blackstone: deal opportunities and data. Blackstone’s private equity often refers to GSO Capital opportunities in which companies want to partner with Blackstone but don’t want to give up control, Goodman said. And the company’s global presence gives it deeper insight into industries, regulatory matters and other issues.

“That’s about as good as it gets in terms of synergies,” he said.