(Adds share fall, details about KKR in paragraph 11)
By Megan Davies
NEW YORK, March 2 Private equity firm
Blackstone Group (BX.N) wrote down the value of its Buyout Fund
V by 35 percent for 2008, a source who has seen a letter it
sent to investors said on Monday.
Blackstone reported a fourth-quarter loss of $827.1 million
on Friday and said it wrote down the value of its private
equity portfolio by 20 percent for the quarter.
The company later on Friday sent out a letter to investors
in its funds detailing the performances of the individual
funds, the source, said. The source requested anonymity because
the letter is confidential.
Blackstone declined to comment on the letter.
According to the source, the letter detailed the
write-downs and write-ups on five private equity funds. In
aggregate, the funds were written down 31 percent for the year
and 20 percent for the quarter.
That is less of a fall than the broad market. For the year,
the Dow Jones industrial average .DJI fell 33.8 percent and
the Standard & Poor's 500 Index .SPX dropped 38.5 percent.
The funds are: Blackstone Fund V, a $21.7 billion fund it
finished raising in August 2007; Fund IV, raised in 2002, with
$6.45 billion; Fund III, a $4 billion fund raised in 1997; and
Fund II. It also detailed a communications and media fund.
Blackstone V was written down 35 percent, said the source.
Fund V has investments including Nielsen Co, Michaels Stores,
Biomet, Freescale Semiconductor, Hilton Hotels and Center
Parcs, according to a press release issued by Blackstone at the
time the fund finished raising money.
Blackstone IV was written down 20 percent; Blackstone III
was written down 17 percent, and the oldest of the five funds,
Blackstone II, was written up by 2 percent, the source said.
The communications and media fund was written down 48 percent,
the source said.
Private equity firms are obliged to value their companies
as if they were to sell them today, rather than years in the
future when they may be sold. The accounting rule known as FAS
157 came into effect for financial years beginning after Nov.
Rival KKR Private Equity Investors (KPE) KKR.AS, which
has investments in a number of Kohlberg Kravis Roberts & Co's
[KKR.UL] funds, announced fourth quarter results on Monday
which also showed a sharp fall in the reported value of its
It was unclear the exact methodology Blackstone used for
Blackstone is raising its sixth buyout fund, which it said
on Friday it expects to start investing in late 2009 or early
Blackstone's shares closed 2.1 percent lower at $4.77.
(Reporting by Megan Davies; editing by Richard Chang and Tim