Blackstone sees chances in PIPEs, rescues--BofA

By Michael Flaherty

NEW YORK, Sept 12 (Reuters) - Blackstone Group LP's (BX.N: Quote, Profile, Research, Stock Buzz) management sees investment opportunities in PIPEs and minority stake rescue financing, Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) said in a note on Wednesday, adding it expected Blackstone's to raise around $15 billion for its next buyout fund.

BofA analyst Michael Hecht said he recently met with Blackstone President and COO Hamilton James and Joan Solotar, head of public markets. Solotar left her job as BofA's director of equity research in June to join Blackstone.

PIPEs -- private investments in public equity -- are privately negotiated securities that provide companies with quick capital, often in exchange for a discount on their stock price.

That Blackstone is focusing on smaller acquisitions in PIPEs and minority stakes shows how deep the credit squeeze is impacting large private equity buyers, which for that last year pursued takeovers of companies worth tens of billions of dollars.

Blackstone can still get financing for deals of up to $1 billion, Hecht said in the note, while the appetite for deals above $10 billion is "gone."

The current environment is "likely to be a little slower in terms of pace of investment spending and realization over the course of '07, and could be until early '08 before things get better," Hecht said in the note.

Blackstone's management told Hecht the M&A climate will be slow in the United States and strong in Europe and Asia.

Blackstone's $21.7 billion private equity fund is 70 percent invested, Hecht said, adding the next fund is likely to be around $15 billion -- although Blackstone believes it could be as big as its predecessor.