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'Sub-prime black hole is getting
scarier'
Nikhil Kumar
London
Independent
Tuesday November 13, 2007
Blackstone's president warned that the sub-prime crisis on Wall
Street was getting "deeper, darker and scarier" yesterday
as the US private equity firm posted a loss for the third quarter,
hit by a fall in real-estate revenues and charges related to its
initial public offering.
Shares in Blackstone fell 8.3 per cent as it revealed a net loss
of $113m (£55m) for the three months to the end of September,
under the impact of $803m of non-cash charges related to its IPO
on the New York Stock Exchange in June. The real-estate division,
where quarterly revenues were down by 44 per cent, came under
pressure from the sub-prime mortgage crisis. In contrast, the
firm reported net income of $372.5 m last year.
Blackstone's group president and chief operating officer, Hamilton
James, told investors that sub-prime woes were getting worse.
"The sub-prime black hole is appearing deeper, darker and
scarier than they [investment banks] thought." While he estimated
that banks were about halfway through offloading the leveraged
debt backlog on their books, he added that only 15 per cent of
bank losses were related to leveraged loans rather than the sub-prime
market.
(Article continues below)
The firm's co-founder, Stephen Schwarzman, echoed Mr James, highlighting
the impact of the credit crunch. "While it will be difficult
to structure very large leveraged transactions in corporate private
equity and real estate until the credit markets improve, the pricing
of assets is more favourable," he said.
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