(Reuters) - U.S. stocks slipped on Monday as mounting concerns about the economy overshadowed stronger-than-expected same-store sales from McDonald's Corp
Monday, March 10, 2008
Carlyle Capital Says Lenders May Force Further Sales
(Bloomberg) -- Carlyle Group's mortgage-bond fund said creditors may liquidate as much as $16 billion of securities unless the two sides reach agreement on debt repayments.
The fund has asked lenders to refrain from further sales after they liquidated collateral securing $5 billion of debt, Carlyle Capital Corp. said in a statement today. It is meeting lenders to discuss more than $400 million of margin calls and is ``evaluating all options,'' the Guernsey, Channel Islands-based fund said.
Carlyle Capital used loans to buy about $22 billion of AAA rated mortgage debt issued by Fannie Mae and Freddie Mac, which the firm says have an ``implied guarantee'' from the U.S. government. Even the safest mortgage bonds have slumped following the collapse of the subprime-mortgage market, leading to the failure of hedge funds led by Peloton Partners LLP.
``This particular Carlyle entity wasn't prepared,'' said Philip Keevil, a senior partner in London at Compass Advisers LLP and former head of European mergers at Salomon Smith Barney Inc. ``They hadn't started selling ahead of time and now they're having trouble liquidating their positions.''
Started by David Rubenstein 21 years ago, Carlyle expanded its mortgage investments last year, selling $300 million of shares in Carlyle Capital.
``Due to recent turmoil in the market for mortgage-backed securities, the company's lenders have significantly reduced the amount they are willing to lend against the company's portfolio of U.S. government agency AAA-rated residential mortgage-backed securities,'' Carlyle Capital said today.
Blackstone Profit Falls 89% on Credit Market Meltdown
(Bloomberg) -- Blackstone Group LP, manager of the world's largest buyout fund, said fourth-quarter profit plunged 89 percent after a ``meltdown'' in the credit markets and warned that getting loans for takeovers will be hard in 2008.
Profit excluding costs tied to its June initial public offering declined to $88 million, or 8 cents a share, from $808.1 million, or 72 cents, a year earlier, the New York-based company said today in a statement. Blackstone fell as much as 5.2 percent in New York trading as earnings missed analysts' estimates.
``Credit market problems persist and if anything have gotten worse,'' Blackstone President Tony James said on a conference call with reporters today. ``We're looking to 2009 before we see much of an improvement.''
Blackstone, which has lost 55 percent of its market value since the IPO, hasn't completed a takeover of more than $2 billion in five months as credit costs doubled and the LBO market shut down. It's struggling to close the $6.6 billion buyout of Alliance Data Systems Corp., the Dallas-based credit- card processor, announced in May.
Earnings were hurt by a decline in fees earned by completing acquisitions and a writedown of its investment in New York-based bond insurer Financial Guaranty Insurance Co. Blackstone invested $2.33 billion of capital in the quarter, down 31 percent from a year earlier.
Net Loss
``Among the risks are that LBO financing conditions continue to worsen and erode Blackstone's ability to earn sufficient private-equity returns,'' Bank of America Corp. analyst Michael Hecht wrote in a March 6 report to investors. Hecht, who is based in New York, cut his fourth-quarter estimate to 11 cents from 25 cents. The average estimate of seven analysts surveyed by Bloomberg was 20 cents a share.
Blackstone fell 55 cents, or 3.7 percent, to $14.03 at 10:17 a.m. in New York Stock Exchange composite trading. It earlier fell to $13.82, the lowest since the IPO.
Blackstone reported a fourth-quarter net loss of $170 million because of compensation costs tied to the IPO. Revenue rose 17 percent to $3.05 billion. The firm agreed to buy GSO Capital Partners LP for as much as $930 million in January to expand investments in distressed debt and leveraged loans.
``Despite the meltdown'' in credit markets, the company sees deal opportunities, especially in Asia, Chairman Stephen Schwarzman said in the statement.
Assets under management jumped 47 percent to $102.4 billion, driven by real estate, which doubled to $26.1 billion. Money-management assets rose 65 percent to $44.5 billion. Private-equity assets gained 7 percent to $31.8 billion.
Blackstone as Proxy
LBO financing evaporated last July as banks and investors pulled out of the market amid the fallout from rising subprime- mortgage delinquencies. The value of deals announced in the second half of 2007 plunged two-thirds from the first six months, according to data compiled by Bloomberg.
``We're a proxy for the credit markets,'' Blackstone President Hamilton James said at the Super Returns private equity conference in Munich on Feb 26.
Still, seven of the eight analysts who rate Blackstone recommend clients buy the stock, including Hecht. The other recommendation is a ``hold.''
Other publicly traded companies that make private-equity investments also have suffered. New York-based Fortress Investment Group LLC has fallen 58 percent in the past year, while 3i Group Plc of London has lost 42 percent.
Subscribe to:
Posts (Atom)