Buyout Industry Staggers Under Weight of Debt

[RamboLiberal]

Source: NY Times

With their big paydays and bigger egos, private equity moguls came to symbolize an era of hyper-wealth on Wall Street.

Now their fortunes are plummeting.

Celebrated buyout firms like the Blackstone Group and Kohlberg Kravis Roberts & Company, hailed only a year ago for their deal-making prowess, are seeing their profits collapse as the credit crisis spreads through the financial markets.

Investors fear that some of the companies that these firms bought on credit could, like millions of American homeowners, begin to buckle under their heavy debts now that a recession seems almost certain. The buyout lords themselves suddenly confront gaping multibillion-dollar losses on their investments.

On a day in which the stock market tumbled to its lowest point in two years and rumors flew that a major Wall Street firm might be in trouble, Blackstone said Monday that its profit had plunged.



Read more: http://www.nytimes.com/2008/03/11/business/11equity.html?hp

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I never got past basic college economics yet even I could've predicted this would happen. Just like the internet bubble of the 90's it was all being done on smoke and mirrors.

[trthnd4jstc]

1. I know that there are anti-socialists out there but think about this?

For every business that our Federal Government bails out, let the government run these businesses until they become solvent again, sell them off, and place the profits back into the Treasury!

[comtec]

2. IF The government had that kind of common sense we would not BE in this mess

The FEC ans SEC would be strong, manly entities that STOMP down on regulation breakers, and ENFORCES THE FUCKING LAWS ON CORPORATIONS so that these things would NEVER HAPPEN!

Sadly it's just a wet dream.
too much common sense and not enough profit for teh really fucking greedy and evil at the top.

nice idea though.

[mikeytherat]

3. re: The Internet Bubble

I have been in IT since the mid-80s, and was working a consulting gig in the mid-90s when the Internet really took off. Though I was a fairly savvy investor, the speculative investing and rocketing stock values really seemed out of whack. I remember late '99 when AOL's stock hit about $110.00 per share, and that was when I pulled everything out of Internet stocks and began investing in real estate and foreign currencies. I remember thinking, "There is nothing, NOTHING, which justifies AOL's stock at that price."

mikey_the_rat

[antigop]

4. I'd say,"Boo frikkin' hoo", but we'll prolly end up paying for all of this mess n/t

[Donnachaidh]

5. Isn't the just retiring Chairman of the GAO office going to work for Blackstone?

I'm having a brainfart -- but isn't the GAO head who just stepped down going to work for Blackstone? Wait -- found the link --

http://ap.google.com/article/ALeqM5jbeaTdw_Q7qsD6fkHRLxUo9PT1GAD8UQSES80

GAO Chief to Resign

Feb 15, 2008

WASHINGTON (AP) — David M. Walker, head of the Government Accountability Office since 1998, is resigning to become president of a new $1 billion private research foundation, the GAO said Friday.

Walker, 56, will step down as GAO comptroller general on March 12 to take over as president and chief executive officer of the Peter G. Peterson Foundation.

Peterson, senior chairman of The Blackstone Group and former Commerce Department secretary, has pledged to contribute $1 billion over the next few years to the foundation, which is to focus on such national sustainability issues as entitlement program and health care costs, trade and budget deficits, energy consumption and the education system.

"My new position will provide me with the ability and resources to more aggressively address a range of current and emerging challenges facing our country," said Walker, who was previously a partner with Arthur Andersen LLP and served as Assistant Secretary of Labor for Pension and Welfare Benefit Programs.



Wonder how this news will effect his new job?