Business | Markets
Blackstone COO sees slow market recovery
Blackstone Group chief operating officer Hamilton James said on Tuesday that debt markets had weakened materially in the last month and would be "slower to recover, not faster".
- Reuters
- Published: 00:27 February 27, 2008
Munich: Blackstone Group chief operating officer Hamilton James said on Tuesday that debt markets had weakened materially in the last month and would be "slower to recover, not faster".
Speaking on the sidelines of a private equity conference in Munich, James forecast it would take until next year for banks to get through the backlog of leveraged buyout debt.
Blackstone is managing its business as if there were a US recession, he said, adding that the economy was definitely slowing.
Markets seized up in the summer after the subprime turmoil, bringing to an abrupt halt a buyout boom that broke records for the largest deals ever struck. Financing large leveraged buyouts was off the table, while deals already struck were put on shaky ground.
James said some of the debt backlog would take care of itself if some deals don't go through - "if Clear Channel doesn't happen, for example".
The $20 billion buyout of radio operator Clear Channel Communications by Thomas H Lee and Bain Capital Partners is yet to close. Clear Channel shares have been trading significantly below the $39.20 offer price, indicating investor concern about whether the deal will fall through.
Blackstone itself has a deal on its hands that may not work out - the $6.76 billion buyout of Alliance Data Systems Corp. In January, Blackstone told Alliance Data that a regulator was making demands that were too burdensome. That prompted Alliance Data to sue Blackstone to complete the deal, although it recently dropped the lawsuit and Blackstone then said it remained committed to finding a way to do the deal.
Asked if he was still aiming to get the transaction completed, James said Blackstone was "still working on it".
While the credit crunch called a halt to large leveraged buyouts, James said banks were still making loans for smaller deals. He said Blackstone was finding ways to work around the credit problems.
"What we're doing with a lot of our deals now is that we're bypassing the banks... there's still ultimate demand for this paper out there... if you can go directly to some of the buyers," he said. Those buyers of the debt include mutual funds and hedge funds.
Blackstone's share price has sunk to about half its initial public offering price amid the credit market woes. It went public last June at $31 a share and closed on Monday at $15.95.
"We are a very complicated company," said James. "We are a proxy for credit stress... I don't think the market at this point understands the model or how to value the company."
More from Markets
More from Business
Business Editor's choice
-
Do unemployment figures flatter to deceive?
Jobseekers and recruiters give out mixed signals ranging from optimism to downright despair even as official data show recovery
-
Banks can increase their share
Longer opening hours, more locations outside cities and lower charges can help
-
Geepas idea blossomed in Dubai
The journey led from a small shop in Bahrain to a $1.27b company in the UAE
