* Blackstone good counterparty for banks under Volcker
* GSO Capital Solutions Fund II to secure up to $3 bln
NEW YORK, Nov 13 A top Blackstone Group LP
executive said on Tuesday that financial reform
regulations forcing Wall Street banks to take less risk are
bringing new credit investment opportunities to the world's
largest alternative asset manager.
Assets under management at Blackstone's credit investment
arm, GSO, have more than doubled to $55 billion in just three
years as the New York-based firm grew its portfolio of leveraged
loans, high yield bonds, distressed debt and other credit assets
just as banks scaled back their proprietary investing.
"We really want to thank Mr. Volcker. That rule is a little
bit like the Employment Act for GSO and what we do. And it kind
of took our competitor prop desk and kind of put them off to the
side, so that helps as well," Bennett Goodman, GSO's co-founder
and a senior managing director at Blackstone told the Bank of
America Merrill Lynch banking and financial services
conference on Tuesday.
Having served as chairman of the Federal Reserve from 1979
to 1987, Volcker, 85, has been involved in drafting new U.S.
financial regulations, due for completion by the end of the
year, including the "Volcker rule," which would ban banks from
taking risky bets for their own gain.
Unlike banks that often rely on their balance sheet for
proprietary trading, Blackstone and other alternative asset
managers have at their disposal long-dated capital they have
raised from pension funds, insurance firms and other
"Our best competitor in many of our strategies used to be
the Goldman Sachs proprietary trading desk. That, too, of
Deutsche Bank, Credit Suisse, Morgan
Stanley and all the others," Bennett said, pointing out
that investment banks have been shutting down those activities.
"The business model being adopted by the banks is they want
to be syndicators of risk. They don't want to extend their
balance sheet to provide capital to a mid-market single-B rated
company, which is usually our target audience. And as a
consequence, we want to own that risk."
As an example, Bennett cited Chesapeake Energy Corp,
which sought $500 million in capital to have a more orderly
asset sale. Chesapeake "rents" Blackstone's money for three
years, allowing the investment firm to achieve 20 percent rates
of return, he said.
Blackstone's rescue lending fund GSO Capital Solutions Fund
II is looking to raise between $4 billion and $5 billion.
Bennett said the fund was expected to have secured between $2.5
billion and $3 billion in investor commitments by sometime next