NEW YORK (Reuters) - Giant private equity firm Blackstone Group LP (BX.N) posted better-than-expected earnings on Thursday and said that lending for deals has returned, although exiting investments by IPO has been bumpy.
Private equity firms suffered in 2008-9 from sliding stock markets, which reduced the values of their investments, while a limited availability of credit shrank deal volume. That has improved, with valuations higher and increased debt financing available.
Both Blackstone and rival Rival Kohlberg Kravis Roberts Co (KKR.AS), which reported earnings on Wednesday afternoon, noted rising values of their portfolios.
Still, recent volatility in stock markets has meant exiting investments has been hard and Blackstone has postponed the planned IPO of some of its portfolio companies.
"Selling into a toppling market frankly made little sense," said Blackstone"s Chief Executive Officer Stephen Schwarzman. "We expect that several of our more mature companies ... will re-enter the market when they stabilize."
Blackstone could "easily see something like 10-12 monetizations this year", Chief Operating Officer Tony James said, should the markets and economy be healthy. That number would include sales and recapitalizations, as well as IPOs.
Blackstone"s earnings were driven by increased performance fees and improved valuations of its portfolios.
Fourth-quarter economic net income was $329 million, compared with a loss of $764 million a year earlier. ENI per share was 29 cents. Analysts had expected, on average, 20 cents a share, according to Thomson Reuters I/B/E/S/.
ENI strips out items such as noncash charges for vesting equity-based compensation, and the amortization of intangible assets. It is the measure which private equity firms prefer to report and which analysts follow.
Blackstone"s shares, which sold for $31 at its 2007 IPO, fell 8 cents to $13.92, which one analyst said was due to the overall market fall rather than the earnings.
"Generally, the (earnings) were pretty positive, with performance fees and transaction fees coming in better than expected," said Daniel Fannon, analyst at Jefferies.
It marked up its private equity portfolio 7 percent for the quarter and 12 percent for the year. Despite a 31 percent drop in 2008, the portfolio is marked at 1.3 times cost.
Blackstone marked its real estate portfolio down 35 percent for the year, but it was about flat for the quarter, and is valued at around 0.9 times its cost.
"It is the first time we"ve seen stabilization in real estate values for a couple of years," said James.
KKR, which announced long-awaited plans on Wednesday to follow Blackstone in listing on the New York Stock Exchange, said on Thursday it marked its private equity portfolio up 7.5 percent for the quarter. Another rival, Fortress Investment Group LLC (FIG.N), reported a smaller quarterly net loss on Thursday. [nN25146500]
Lending for leveraged buyouts is now available at 5-5.5 times a company"s earnings, up from the 2.5-3 times seen last year, Blackstone said.
"The availability of debt for ... new transactions is back to normal, perhaps even above normal in terms of leverage levels," said James, stressing that is for mid-size deals.
The company has $28 billion of "dry powder," or available cash, to invest.
Blackstone has also been reducing or extending debt at its portfolio companies. Since the beginning of last year, Blackstone has bought back, amended or extended about $23 billion of debt in its private equity portfolios.
James said he was confident the restructuring of Hilton"s debt will come to a successful conclusion.
Blackstone has had a difficult time exiting investments by taking them public during the recent market volatility -- its airline ticketing company Travelport LLC called off its London listing.
Another problem exit for Blackstone is its Kosmos investment, where Ghana has threatened to block a planned $4 billion oilfield stake sale to Exxon Mobil Corp (XOM.N). Kosmos is backed by Blackstone and Warburg Pincus LLC WP.UL.
"I think one way or another we"ll work something out," said James. "But it"s not without doubt; there is certainly plenty of back and forth to come on that one."
Fund-raising remains tough, although Blackstone is close to calling time on a number of its funds in the market.
It has so far raised about $9 billion for BCP VI, its sixth global buyout fund, which has been in the market for two years. James was optimistic Blackstone would pick up some more money for the fund as it nears the finish line, but would not be drawn on an expected final number.
In China, where Blackstone is raising a yuan-denominated fund, three commitments have been received.
Blackstone said it would pay an unchanged quarterly distribution of 30 cents per unit.
(Reporting by Megan Davies, editing by Gerald E. McCormick, Maureen Bavdek, Dave Zimmerman)Deals Asian Markets