Blackstone Brings in Byron Wien, Wants To Sell Debt (BX)

The Blackstone Group L.P. (NYSE: BX) had a fairly busy day.  It seems that reports of the death of private equity may have been exaggerated.  The company had two key announcements today: it brought on renowned economist and strategist Byron Wien and it said it was raising cash via a  debt offering.
Wien is joining Blackstone as Vice Chairman of Blackstone Advisory Services after having served as Chief Investment Strategist for Pequot Capital and had before that spent some 21 years as Chief Investment Strategist for Morgan Stanley. Blackstone said he will act as a senior adviser both to the firm and to its clients in analyzing economic, social and political trends to determine the direction of financial markets and thus helping guide investment and strategic decisions.

While we do not have a figure yet, but Blackstone announced its intention to offer senior notes of Blackstone Holdings Finance Co. L.L.C., its indirect subsidiary. The company said that the notes will be guaranteed by The Blackstone Group L.P. and its indirect subsidiaries and it intends to use the proceeds for general corporate purposes.  These won’t be open to Joe Public as these are under Rule 144A (private placement) and will be sold to qualified institutional buyers in the United States and under Regulation S to investors outside the U.S.  We have heard figures of the size of the offering already, but we’d consider those numbers as nothing more than hearsay until something formal has been seen.

On a separate note, Blackstone is supposed to have yet another private equity fund that has been in the process of being raised and has either closed or is set to close soon.  The talk we have read is that it could be north of $10 billion, although consider that figure as hearsay until formal data is released.  We started noticing back in 2007 how many funds were set to close with a large amount and closed with a smaller amount.  Some did not even close at all at other private equity firms.

As far as the death of  private equity, it is more likely that it has been on hold from the economy and from lending. Another aspect is that there is still the notion that there is a public war on wealth and the display of wealth.  We still think that private equity firms will be using their own clients’ capital rather than getting leveraged capital from the banks as there is billions upon billions coming due in the coming years from the wave of borrowings that took place in recent years.

JON C. OGG
AUGUST 12, 2009