Posted on 11/12/2007 4:50:13 PM PST by bruinbirdman
Private equity giant Blackstone is beginning to see potential in the credit crisis despite believing that sub-prime is a "black hole" which looks "scarier" than some banks first thought.
Blackstone chief operating officer Tony James said the firm was starting to go long on the sub-prime mortgage sector, a sector which has been hammered for the last 12 months.
Mr James, referring to investment banks, said: "The subprime black hole is appearing deeper, darker and scarier than they thought."
But he added that after 18 months of successfully betting against the sector, Blackstone's hedge fund and private equity teams were now looking to find value in the sector.
However in spite of that, Mr James warned that the current deal backlog will take around six months to play out, with banks having worked through what Blackstone estimates is around 40pc of the leveraged loan backlog.
He made the comments as Blackstone reported a loss of $113.2m (£54.8m) in the three months to September, compared to a profit of $372.25m in the third quarter last year, on the back of $802.6m of costs related to the firm's stock market float earlier this year.
Blackstone, best known in the UK for owning Center Parcs and a stake in Formula One among others, saw revenues up in the quarter – to $526.7m from $461.5m – with private equity and advisory both showing strong growth.
Mr James added that the firm is seeing a rise in deal flow and in a reduction in prices as a direct result of the continuing credit crisis, with strong deal flow particularly in Europe.
He also added that Blackstone is not seeing signs of an economic slow down in the 50-plus companies in its private equity portfolio.
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