Blackstone posts 1Q loss on weakening markets

Blackstone Group LP, one of the world's largest private equity funds, on Thursday reported its second straight quarterly loss as the leveraged buyout market dried up and its portfolio of companies lost value.

The New York-based firm, which went public about a year ago near what proved to be the peak of the buyout frenzy, says it lost $251 million, or 97 cents per common unit, during the first quarter. Blackstone earned $1.13 billion a year ago.

Deterioration in credit and equities markets caused Blackstone to lose $188.7 million in performance fees and post a $215.6 million loss from fund investment activities.

Shares of Blackstone, still down about 34 percent since its initial public offering, rose $1.04, or 5.3 percent, to $20.54 Thursday.

Stephen Schwarzman, Blackstone's chairman and chief executive, warned during the first quarter that market uncertainty would crimp results. The credit crisis froze banks' ability to loan money for massive private-equity driven buyouts, and deals dropped off significantly.

This time around, Schwarzman said the market environment has been "both good and bad for us."

"On the one hand, it meant lower carrying values of some of our investments in the short term and restricted our disposition activity," he said in a statement. "On the other hand, purchase prices for new deals declined, opening up many interesting investment possibilities."

Blackstone completed only one leveraged buyout during the first quarter with the $1.2 billion acquisition of food distributor Performance Food Group Co. That is a major decline from the $42 billion of deals the private-equity firm put together in the year-ago period.

Schwarzman said the company continues to make strides outside of its core businesses of managing real estate and launching takeovers. He pointed out the recent acquisition of GSO Capital Partners LP, a fund manager focused on leveraged finance, as one example.

The deal, worth about $930 million, expanded Blackstone's business of buying distressed debt and leveraged loans.

Blackstone announced on Tuesday that it launched a new Asia-focused hedge fund, Altius Advisors. The fund will be based in Hong Kong with offices in Tokyo, Mumbai and New York. Last year, Blackstone sold a $3 billion stake to China's sovereign wealth fund.