Giants Blackstone, KKR Post Positive Year-End Performance

Buyout giant The Blackstone Group envisions as many as a dozen portfolio company realizations this year as the market improves for deals, and the firm may close three new investment funds by midyear, executives said on Feb. 25.

The day before, rival Kohlberg Kravis Roberts & Co.—in effect making its first financial report as a public company—said it plans to transfer its Euronext Amsterdam stock registration to the New York Stock Exchange, but noted it has no plans for fundraising.

Executives of the two New York firms offered these outlooks during their respective earnings calls that showed their funds regaining strength after two years of financial struggle.

Blackstone said its economic net income of $329 million in the fourth quarter reversed a $764 million loss in the same period a year earlier. Its fee-earning assets under management came were valued at $96.1 billion at year-end 2009, up from $91 billion at the close of 2008.

Meanwhile, KKR & Co. (Guernsey) LP, KKR’s listed unit in Amsterdam, reported economic net income of $515.3 million in the fourth quarter, although the company, in restating its results after its Oct. 1 restructuring, did not provide comparisons to the year-ago period. The firm said it had $52.2 billion in assets under management as of Dec. 31.

Stephen A. Schwarzman, Blackstone’s chief executive, said his firm will be active in the markets this year.

“We’ll have more realizations in 2010 than we did last year,” Schwarzman said.

But that does not necessarily mean initial public offerings, said Hamilton E. “Tony” James, Blackstone’s president and chief operating officer, noting that sales of portfolio companies to strategic buyers and dividend recapitalizations also represent ways for the company to monetize its investments.

“We could easily see 10 to 12 monetizations this year,” James said.

Laurence Tosi, Blackstone’s chief financial officer, said the buyout shop plans to close its Blackstone Capital Partners VI LP fund, along with a China-focused fund and the firm’s initial clean tech-focused vehicle, by July. Fund VI, which would be the firm’s newest flagship fund, is targeting $15 billion, according to Buyouts.

Schwarzman said Blackstone also is stepping up investments in areas other than buyouts. The firm, for example, has committed $650 million to new opportunistic real estate investments since the beginning of the fourth quarter, after being essentially out of that market for the past two years.

KKR, by contrast, has no plans to raise a new buyout fund because since it already has $14.5 billion in “dry powder” in its existing investment funds, according to Scott Nuttall, a member of the firm, on a conference call.

“The environment has improved substantially over last year,” Nutall said. “Liquidity returning to the market resulted in an upswing in valuations” during the second half of 2009.

In announcing its restated numbers, KKR said it was going to seek a listing on the New York stock exchange and delist from the Euronext exchange in Amsterdam.

“We’re going to be concentrating the liquidity on one exchange,” said Jon Levin, KKR’s treasurer and head of investor relations. The process is expected to take several months, but executives would not discuss details of the plan.

KKR Financial Holdings LLC, the arm of the firm that is now listed on the NYSE, expects to hold its own earnings announcement on March 1.