Blackstone fees increase as income slumps in 1Q

The asset manager and private equity investor is likely to struggle in finding a near-term solution to problems plaguing its primary business model

Greggory Warren, CFA 7 May, 2009 | 1:11PM

We're maintaining our fair value estimate for The Blackstone Group following the release of first-quarter earnings by the firm. The company continues to struggle with the disruption in the credit and equity markets as well as the dramatic slowdown in major economies around the globe.

With lenders continuing to severely restrict access to debt, it has been near impossible for Blackstone to initiate any kind of leveraged buyouts in either its corporate private-equity or real estate segments. It has also been more difficult (and more expensive) to roll over debt that had been used to complete past deals, given that credit standards and costs are significantly higher.

With the equity markets continuing to be less than receptive to new offerings (especially those that Blackstone would like to eventually take public), and the credit markets still far too expensive for debt-driven deals, we don't envision Blackstone finding a near-term solution to the problems plaguing its primary business model.

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About Author

Greggory Warren, CFA  Greggory Warren, CFA, is a senior stock analyst with Morningstar.

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