At this point maybe we should just keep a list of who isn’t buying Lehman Brothers. Earlier this week it was the Koreans and HSBC. Now “sources familiar with the situation” have told Reuters (who broke the story of the Korean Development Bank) that Blackstone and Kohlberg Kravis Roberts are looking to acquire pieces Lehman’s real estate and asset management units.
Blackstone was said by the Financial Times to be out of the running for the asset management unit, so we’re assuming that it’s mainly interested in the real estate group. Has anyone seen Jon Gray, who runs Blackstone’s powerful real estate arm, over at Lehman HQ lately?
Blackstone, KKR eye Lehman assets: sources [Reuters]
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Today In Lehman Brothers: Blackstone & KKR Looking To Buy Assets
By John CarneyIf you were hoping that the slowing economy and credit crunch would stymie private equity firms, you’ll be disappointed to here the news that the latest plan from the buyout kings at Blackstone involves buying debt from private equity deals gone bad. Blackstone is raising $1.5 billion to invest in the debt of troubled distressed companies taken private in leveraged buyouts. So far they have a $100 million commitment from that New Jersey state pension fund, that invested $180 million in Lehman Brothers.
In other news, if Wall Street gets anymore Jerstastic we’re going to start covering London instead.
Blackstone’s GSO, Monarch Start Funds to Buy Distressed Debt [Bloomberg]
Blackstone has replaced its chief financial officer with a top executive poached from Merrill Lynch. Laurence Tosi, who has been at Merrill for nine years and most recently was the chief operating officer of its investment banking division, will replace Michael Puglisi, a 14 year Blackstone vet.
The move by Tosi is being read by the cynical in two ways. First, it may be a sign that internal friction among the top executives at Merrill continues. Following the resignation of Stanley O’Neal, who appointed Tosi to his spot, and the rise of John Thain, there was lots of talk of internal wrangling at the bank. Lately the internal situation has quieted as executives adjusted to new leadership. But a high-level defection is sure to re-ignite whispers of internal dissent.
The second cynical read of the move highlights a structural change on Wall Street. As investment banks and brokerages lower leverage and come under deeper regulatory scrutiny, the relative power and profitability of alternative investment houses like Blackstone is sure to rise. Could Tosi’s move be further evidence of the coming decline of traditional investment banks and the ascendancy of the increasingly hybrid Blackstone, which many describe as a budding investment bank disguised as a buyout shop?
Or, you know, may he just wanted a new job and more money. But, as Nick Walker says in one of our favorite movies, “It would be better if it meant something.”
Blackstone appoints new CFO [Reuters]
Steve Schwarzman, the head of private equity giant Blackstone, has found himself in hot water after he made some remarks at his firm’s boondoggle at Florida’s Boca Raton Resort & Club. In an early morning session, Schwarzman was noodling over Blackstone’s failed attempt to buy the mortgage company PHH, a deal that collapsed when Blackstone discovered no one was willing to lend it money for the acquisition, Peter Lattman explains on DealJournal. To illustrate just how radioactive the mortgage industry has become to financial players, Schwarzman decided to exercise his well known penchant for world history.
“Trying to buy a mortgage bank in the midst of the subprime crisis was the equivalent of being a noodle salesman in Nagasaki when the atomic bomb went off. Not a lot of noodles left, or even a person, and that’s what happened to us on this deal,” Schwarzman said.
Some are now speculating that this remark could have some serious fallout with Blackstone’s business efforts in Japan. If it does mushroom into a major issue, it could cast a cloud over Blackstone’s many important Japanese connections. Apparently, some of those Japanese types don’t find noodle salesmen appropriate material for homey, jokey anecdotes.
Steve Schwarzman’s Take on the Subprime Mess [DealJournal]
Blackstone closed yesterday below $20. Right this second, it’s at $18.45. I bet a lot of you are saying to yourselves, “Yeah, and? No big d.” That’s because you’re one dimensional thinkers. This is a big d, for four* reasons. 1. Blackstone IPO looks more and more like the physical manifestation of the top tick on the private equity bubble. 2. The Chinese, pissed at buying 8.7 percent of this garbage, now have yet another reason for an arms race with the U.S. 3. It means the follow-up to the bukkake party of IPOs was a bust, and all those yelling “Buy shares on my face! Buy shares on my face!” last spring are now suffering from PCD (that’s Post Coital Depression** to those who, I have no idea why, don’t know). 4. CRAB HANDS, THE GRAPHIC.
Blackstone shares drops below $20 [Reuters]
*The first three don’t really count, I just like the build-up.
**NB: That’s a Hahn-ism you’re reading right there.
Not that I sit around cackling at the idea of middle aged billionaires groveling for money, but, true or false: there’s something mildly amusing about the idea of a man who has pinchers where, anatomically speaking, hands should be, down on his crab hands and knees, begging for some clams?
Steve’s Sorry [NYP]
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BLACKSTONE. GLOBAL M&A. TONIGHT. METROPOLITAN CLUB. CRABS. CRABS. CRABS. SO. MANY. CRABS.
By John Carney
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Stephen Schwarzman: “Private Equity Is Misunderstood And So Am I” [whispering] “The Only People Who Truly Get Me Are My Crabs”
By Bess LevinAt a conference hosted by the Confederation of British Industry yesterday, a visibly shaking Stephen Schwarzman said that private equity is “a force for good” whose only goal is to help the children. Then he bemoaned the fact that his industry is seen as a “destructive force with a short-term perspective, levering companies and stripping their assets to enrich a few nasty people (like me), who then don’t even pay taxes on all that they get in such an unsavory manner,” just before yelling “good bye, cruel world” and throwing himself off a second-story balcony. (Schwarzman also offered this rave review of himself, courtesy of his own family, on the way down: “My wife and children were not ashamed to have me sit with them at the Thanksgiving table on Thursday.” You know what? Sold. I don’t even know what he’s selling, but sold.)
Stephen Schwarzman Speaks [DealBook]
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Stephen Schwarzman Does Not Love Son, Daughter-In-Law As Much As He Loves Himself, Crabs
By Bess LevinStephen Schwarzman threw his son Teddy and new daughter Ellen a lavish Jamaican wedding last weekend blah blah blah $20,000 barbecue blah blah blah$8,500 4-hour fireworks display blah blah blah bought up the entire hotel for a $50,000 flat fee blah blah blah $150,000 open bar blah blah blah $1,000 wedding cake blah blah blah that’s a lot of money for flour, eggs and milk blah blah blah. No. This little gathering was a drop in the bucket compared to the $3 million birthday party Stephen threw himself last year. The subtext here is that Schwarzman is a bad father. The excuse that Blackstone just lost $113.2 million holds no water because we hear Schwarzman has plans to put stone crabs on the endangered species list by the end of the year. (Last complaint, because we’re really not trying to be negative about the whole thing, it’s just happening organically but 4 hours of fireworks? Seriously? That’s like half the workday. Wouldn’t your neck start to hurt? Wouldn’t your ears start to ring? What am I missing here? I’m really asking. Educate me.)
Earlier: Crab Hands Jr. Is Off The Market
Like Pa, Like Son [NYP]
Stephen and Ellen Schwarzman’s son, Edward “Teddy” Schwarzman, was married off Saturday evening to Ellen Maria Zajac, daughter of Ellen and John Zajac. (Ellen DeGeneres performed a couple of sets during cocktail hour and just before the cutting of the cake, and Ellen Barkin sat at table 19. Over dinner, someone mentioned something about Teddy finally fulfilling his life-long dream of marrying a woman with the same name as his favorite actress, Grey’s Anatomy star Ellen Pompeo.) So sad and, yet, kind of meh (call us when Daniel Loeb’s unborn son is no longer available, then we’ll be upset. NB: Carney does not share the indifference. When I’m finished with this, I’ll go try and talk him off the ledge). One DealBreaker spy in attendance for the nuptials reports that “there were fireworks after dessert” and talk that Schwarzman junior had been encouraged to “marry for money,” on account of the family business falling on hard times.
Ellen Zajac and Teddy Schwarzman [NYT]
Hey-o, we’re hearing from the Wall Street Journal, Bloomberg, CNN, the New York Times, MarketWatch and Claudia, our Starbucks barista, that Blackstone maybe didn’t have such a good third-quarter? That it maybe recorded a net loss of $113.2 million, or 44 cents per share, compared to a net income of $372.5 million a year earlier? (Voice getting higher pitched) That the loss is being attributed to $802.60 million of non-cash compensation charges and some stuff related to a so-called credit crisis? That Stephen Schwarzman wishes they’d “never gone public”? (Only dogs and people whose ears are trained to register extremely high pitches can hear me at this point) That he can’t even afford imitation crab meat anymore? Yeah? Yeah? (Voice returns to normal) How embarrassing. Doesn’t it suck when you’re a public company and are required by law to disclose your failures for the entire world to see? Merrill Lynch knows what we’re talking about. (A tip for next time: take a cue from Goldman Sachs and just lie.)
Honestly, though, don’t worry about BX and Stephen (and the shareholders who must be thrilled about Blackstone falling 8 percent this morning)—they’re going to be fine. Not just because the exceedingly wealthy always manage to land on their feet, but because they have a plan, and that plan is to do something so crazy and seemingly stupid-sounding that it just might work (or not work, it’s one of these two things). According to president and CEO Hamilton James, Blackstone took a vote between going bowling or believing in subprime, and the latter won. James says that while the “subprime black hole is appearing deeper, darker and scarier than [banks] thought,” the bottom is not far, which is why BX is “starting to go long the subprime market.” Sounds pretty different from what everyone else on the planet is saying/doing, but okay. We have to assume that Schwarzman is doing everything in his power to bring those $4 billion crab claws back into his life, and not just throwing a bunch of bad ideas against the wall and waiting to see what sticks.
Blackstone skids on quarterly loss [CNN Money]
Blackstone posts loss from IPO charges [Reuters]
