Blackstone cuts dividend, shares surge
Fri Feb 27, 2009 1:39pm EST
By Megan Davies
NEW YORK (Reuters) – Private equity company Blackstone Group LP (BX.N) reported a deep quarterly loss on Friday after writing down the value of its portfolio, and eliminated its fourth-quarter payout.
But the company’s stock surged 20 percent to $4.67 after Blackstone’s chief operating officer Tony James said on a conference call that the 2009 dividend looked “pretty well assured.”
Blackstone has been hammered by the financial crisis and shutdown of the credit markets. A revival in leverage is vital for the New York-based firm to be able to do deals of any significant scale and sell off current investments.
James said the firm wrote down the value of its private equity portfolio by 20 percent for the quarter, and its real estate portfolio by 30 percent.
But he pointed to $25 billion of “dry powder,” or capital the firm has to invest, and said that credit opportunities were attractive.
The firm is also talking to the U.S. Treasury and Federal Reserve about ways to revive the system.
Treasury Secretary Timothy Geithner is aiming to unfreeze credit markets by way of a new program that would combine public and private capital to buy troubled assets.
Blackstone shares have fallen to a fraction of their June 2007 initial public offering price of $31 as the financial crisis hit and access to leverage shrank.
CEO Stephen Schwarzman said on a call to analysts that it was frustrating having the stock at a “dim-witted level.”
James said that if the share price gets “too ridiculous” the firm would think about “buying in shares,” but he said that didn’t mean Blackstone would go private.
“We’ve made a commitment to the public market,” he said.
Schwarzman and co-founder Peter Peterson did not receive bonuses in 2008, Blackstone said.
The company reported a fourth-quarter loss of $827.1 million before income taxes, noncash charges for vesting equity-based compensation, and amortization of intangible assets — a measure it calls “economic net income.”
On an after-tax basis, the loss was 68 cents a share, compared with a profit of 8 cents a year earlier. Analysts polled by Reuters had expected a loss of 40 cents a share.
Blackstone prefers to focus on economic net income because of the huge payouts associated with its more than $4 billion initial public offering in June 2007.
The company eliminated its fourth-quarter payout and said its full-year payout to shareholders was 90 cents a share, below its $1.20 target.
It said in the press release that distributions for 2009 could also fall below $1.20. On the conference call, however, James said he expects the adjusted cashflow this year would be “more than sufficient” to pay the full distribution of $1.20.
Daniel Fannon, analyst at Jefferies, said the stock turned around on Blackstone’s assurance that it would likely make the dividend payment in 2009.
“Management reiterated its confidence in the payout for the distribution for 2009 which was certainly in question,” he said.
(Reporting by Megan Davies; Editing by Lisa Von Ahn, John Wallace, Richard Chang)