Blackstone reports loss amid turbulent markets

By Megan Davies

NEW YORK (Reuters) - Private equity company Blackstone Group (BX.N) reported a first-quarter loss on Thursday as turbulent markets cut into the value of its investments.

The loss of $93.6 million, excluding income taxes, noncash charges for vesting equity-based compensation and amortization of intangible assets, compares with a year-earlier profit of $957.8 million.

Blackstone prefers to focus on this measure, which it calls "economic net income," because of the huge payouts associated with its more than $4 billion initial public offering in June 2007.

The economic net loss after taxes was 6 cents a share, compared with a year-earlier profit of 75 cents. Analysts on average were expecting a profit of 11 cents a share, according to Reuters Estimates.

Blackstone shares were down 37 cents, or nearly 2 percent, to $19.13 in morning New York Stock Exchange trade.

Blackstone adjusts the value of its investments every quarter for accounting purposes, known as the "carrying value." This assumes its assets are "all being sold in today's hostile environment, even if we have no intention or obligation of doing so," Chief Operating Officer Tony James said on a conference call.

"We hold our assets for the long term and expect their value will rise as we come out of the cycle," he added. "Generally speaking, our portfolio companies and our real estate assets are performing ahead of our expectations."

Revenue from corporate private equity was negative $116.7 million, which James said was due nearly entirely to a drop in the value of its investment in German telecoms firm Deutsche Telekom AG (DTEGn.DE).

"We are pleased with the performance of Deutsche Telekom at the operating level although obviously we're not happy with the stock price," James said. "But we feel it is still a good investment long term for us."

Leveraged buyouts, the bread and butter of private equity business, have been virtually nonexistent since last summer, when the credit crunch increased the cost of debt and banks were clogged up with a backlog of leveraged buyout loans that they couldn't pass on to investors.

James said, however, that banks were getting more confident.

"We are getting leverage from the banks now and new commitments -- I wouldn't call it aggressive, but they're open for business again," he said.

But he also said now was not a good time to dispose of assets, so Blackstone was holding off selling.

(Reporting by Megan Davies, editing by Lisa Von Ahn and John Wallace)