Blackstone Profit Plummets Amid Credit Woes

Mar 11 2008 | 10:42am ET

The credit crisis has left a parched lending market in its wake. That, in turn, has left private equity giant The Blackstone Group feeling parched.

Blackstone said its fourth-quarter profits evaporated, plummeting from $808.1 million a year ago to just $88 million, an 89% drop. The firm’s performance fell far short of analysts’ already-dismal estimates, with a profit of $0.08 per share, compared to an expected $0.20. It also posted a net loss of $170 million due to initial public offering-related vesting expenses.

Unable to find financing as banks and other lenders have grown skittish in the wake of the subprime mortgage market collapse and credit crisis, Blackstone hasn’t closed a deal of more than $2 billion in five months. The firm invested just $2.33 billion last quarter, a 31% decline from the fourth quarter of 2006.

“Credit market problems persist and if anything have gotten worse,” Tony James, president of the firm, said on a conference call. Chairman Stephen Schwartzman added, “We are in the midst of a severe financial crisis.”

The firm is looking into doing some smaller transactions to fill the gap, James said, warning that “There’s no evidence [the credit market has] bottomed out yet.”

But the news wasn’t all gloomy for Blackstone: Its assets under management soared 47% to $102.4 billion and it also posted a 17% jump in revenue to $3.05 billion, in spite of a decline in fees earned by completing acquisitions.

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