Blackstone Profit Falls 89% on Credit Market Meltdown (Update9)

, director of the
world's biggest buyout fund, said fourth-quarter profit plunged
89 percentage after a ''meltdown'' inch the recognition marketplaces and
predicted a deficit of funding for coup d'etats in 2008.

Profit excluding costs tied to its June initial public
offering drop to $88 million, or 8 cents a share, from $808.1
million, or 72 cents, a twelvemonth earlier, when the company announced
its greatest LBO ever, the $39 billion purchase of Equity Office
Properties Trust. While net income missed estimates,
Blackstone rose 2.9 percentage in New House Of York trading on marks it
would sit out the LBO slump with growing in hedgerow finances and
distressed debt investing.

''Credit marketplace jobs prevail and if anything have
gotten worse,'' , president of the New York-based
company, said on a conference phone call with newsmen today after
the consequences were released. ''We're looking to 2009 before we see
much of an improvement.''

Blackstone, which have lost 55 percentage of its marketplace value
since the IPO, hasn't completed a coup d'etat of more than than $2
billion in five calendar months as doubled and the LBO
market close down. President , who have 23
percent of the company, is struggling to fold the $6.6 billion
buyout of Alliance Data Systems Corp., the Dallas-based credit-
card processor, announced in May.

The company was expected to gain 20 cents a share, the
average of seven analysts surveyed by Bloomberg. Seven
of the eight analysts who charge per unit Blackstone still recommend
clients purchase the stock. The other recommendation is a ''hold.''

Blackstone rose 42 cents to $15 at 4 p.m. inch New House Of York Stock
Exchange composite trading. It earlier drop to $13.82, the
.

'Under no pressure'

Schwarzman and Jesse James told investors on a separate
conference phone call that Blackstone will endure the ''severe
financial crisis'' by focusing on hard-pressed investings and
making littler private-equity acquisitions.

''While Blackstone shares have got been caught up in the credit
storm, the concern have not,'' Citigroup Inc. analyst wrote in a short letter to clients following the call. ''The
franchise is under no pressure level to sell assets.''

Bhatia, based in New York, reiterated his recommendation
that clients purchase Blackstone stock.

Earnings were ache by an operating loss of $37.2 million at
Blackstone's corporate buyout unit, mostly on a writedown of its
stake in New York-based chemical bond insurance company Financial Guaranty
Insurance Co., the company said today in a statement. Jesse James told
investors on a conference phone call Blackstone wrote its FGIC
holdings down to ''a few cents on the dollar.''

Hedge finances up

Real estate operating net income driblet 95 percentage to $20.5
million because of a drop in the value of properties. At the
company's money-management unit, which includes hedgerow funds,
operating net income gained 58 percentage to $110.3 million as assets
increased.

All of Blackstone's ain hedgerow finances ended 2007 with gains,
and Schwarzman said Blackstone may seek to purchase debt in companies
whose values are undervalued amid marketplace turmoil, including
loans sold to fund LBOs.

''Leveraged loans is a very interesting country and getting
more interesting,'' Schwarzman said. ''Some of it is trading at
distressed debt degrees and it haps not to be distressed. It's
a hard-pressed market.''

After the stopping point of the quarter, the house agreed to purchase GSO
Capital Partners L-P for as much as $930 million to expand
investments in hard-pressed debt and leveraged loans.

Credit Market Proxy

LBO funding started to evaporated last July as Banks and
investors pulled out of the marketplace amid the radioactive dust from rising
subprime-mortgage delinquencies. The value of trades announced in
the 2nd one-half of 2007 declined by two-third to $204 billion
from the first six months, according to information compiled by
Bloomberg.

Blackstone invested $2.33 billion of working capital in the
quarter, down 31 percentage from a twelvemonth earlier.

''We're a placeholder for the recognition markets,'' James, 57, said
at the Superintendent Returns private equity conference in Muenchen on Feb
26.

Wall Street analysts alkali their estimations on what
Blackstone phone calls ''economic network income,'' which doesn't conform
with generally accepted accounting rules for nett income and
excludes compensation costs related to the vesting time period for
executives' ownership stakes.

Net Loss

Including those expenses, Blackstone had a fourth-quarter
net loss of $170 million, compared with nett income of $1.18
billion a twelvemonth earlier. The company will go on to post net
losses during the adjacent five old age because of the vesting
expenses.

rose 17 percentage to $3.05 billion. A 45 percentage jump
in fees for consultative services and managing hedge-fund, private-
equity and existent estate assets countervail the diminution in performance
fees.

Assets under direction jumped 47 percentage to $102.4
billion, driven by existent estate, which doubled to $26.1 billion. Money-management assets, which the company have been expanding to
offset the private-equity slowdown, rose 65 percentage to $44.5
billion. Private-equity assets gained 7 percentage to $31.8
billion.

China's Investing Waterfall

Co-founder reaped $1.88 billion from the
IPO, while Schwarzman got $684 million and Jesse James received $191
million. Jesse James have 4.9 percentage of the , while Peterson
held on to a 4.2 percentage stake.

Among the biggest outside holders of Blackstone is China
Investment Corp., A state-owned fund. It paid $3 billion for a
9.4 percentage interest in concurrence with the IPO. The shares are
now deserving $1.42 billion.

Other publicly traded companies that do private-equity
investments also have got suffered. New York-based have fallen 58 percentage in the past year,
while of Greater London have lost 42 percent.

Part of the job is that the financials of private-
equity houses are difficult to understand, said , chief
executive military officer of Sageworks Inc., A Raleigh, North Carolina-
based house that usages computing machine programmes to analyse financial
statements.

''They're an mystery from a fiscal analysis
perspective,'' he said.

Blackstone declared a of 30 cents. The company means to pay an yearly dividend of $1.20 a share
this twelvemonth and next.

No Bottom Yet

Blackstone is considering littler minutes because
investment Banks don't desire to fund big trades until they sell
off more than than $200 billion of LBO debt sitting on their books,
James said.

''It's been a reasonably steady diminution in market
conditions,'' Jesse James said. ''We're getting one-off proposals for
smaller deals. There's not much of a robust market.''

Blackstone may also seek little companies it can unify with
, Jesse James said. The house is holding off on
more purchases to spread out Blackstone for the clip being, he said.

The house is raising money for nine new funds, including for
its private-equity and hedge-fund businesses. Blackstone also is
seeking investings in debt securities whose terms have got dropped
amid the recognition slump.

Still, the house is concerned that the worst is yet to come.

''There's no grounds it's bottomed out yet,'' Jesse James said
on the call.

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