Tony James: $5 Billion Limit on LBO Bank Financing

NEW YORK (Reuters) – The chief operating officer of private equity firm Blackstone Group LP (BX.N: Quote, Profile, Research, Stock Buzz) said on Tuesday that the limit on bank financing for leveraged buyouts was about $5 billion.

COO Tony James said despite the limit, the company has had an active 12 months, investing $8.7 billion in 27 deals since the credit meltdown.

“People say you can do leveraged buyouts,” said James, speaking at a Lehman Brothers conference that was webcast. “That’s not correct. We are getting bank financing for LBOs (leveraged buyouts), but we’re not getting bank financing for deals over about $5 billion in size.”

Blackstone has taken part in some of the largest leveraged buyouts ever, such as the $23 billion purchase of Equity Office Properties Trust, but has also done numerous smaller buyouts.

“The public perception is that Blackstone just does large buyouts, but it’s not true,” said James.

The credit crunch last summer froze the debt markets for large leveraged buyouts, and private equity firms have instead been focusing on smaller deals, minority investments, and investing in debt or looking overseas.

Blackstone has invested heavily in real estate, and James said in that business, it had been selling rather than buying assets, and was cautious about making new investments.

He said Blackstone saw opportunities to invest in distressed real estate, which he said was still in the early part of the cycle. “We think there will be a lot more. This will become a growing part of our activity,” he said.

Blackstone has also been aggressively buying leveraged loans, he said. (Reporting by Megan Davies; editing by Jeffrey Benkoe)