Blackstone 3Q loss widens due to financial crisis

The buyout shop, which makes its money buying distressed companies and then selling them for a profit, said its quarterly loss widened to $340.3 million from $113.2 million a year earlier.

Results marked the second loss since Blackstone went public in June 2007 during an unprecedented peak for the private-equity industry. Since then, the global credit crisis has knocked down valuations for companies Blackstone controls and also locked up the lending it counts on to fund deals.

Blackstone Chief Executive Tony James said that during third quarter, the firm wrote down the value on one-third of the private companies in its portfolio. Blackstone holds stakes in about 40 companies, including The Weather Channel, Harrah's Entertainment, and Hilton Hotels.

These write-downs caused Blackstone to report negative revenue of $160.3 million, compared with positive revenue of $526.7 million a year earlier. However, James said operations at 68 percent of its businesses are meeting or surpassing projections.

"Despite a pretty awful market environment, we're still in a strong position," he told reporters on a conference call. "We believe our balance sheet can sustain an extremely bad environment."

He said the company's capital and liquidity was in good shape, with $1.13 billion in available cash and an additional $1.29 billion invested in the firm's liquid funds. The average maturity for debt issued on its companies was 2013, giving it some breathing room from the current recession.

Blackstone reported that its "economic net loss," which excludes compensation costs tied to its initial public offering and income taxes, hit $509.3 million during the quarter. The compares with an operating profit of $99.9 million in the second quarter and a profit of $299.2 million during last year's third quarter.

Blackstone fell 96 cents, or 11 percent, to $7.64 in midday trading. Blackstone's stock had fallen 72 percent since the IPO, compared with the 37 percent decline by the Standard & Poor's 500 Index.

The results come after rival Kohlberg Kravis Roberts & Co. said on Monday that its plan to go public won't be completed this year as scheduled. It also reported that the value of its publicly traded fund, KKR Private Equity Investors, dropped 15 percent to $3.86 billion during the quarter because of write-downs on stakes in companies like energy provider TXU Corp.