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UPDATE 2-Fortress Investment scraps dividend to save capital
(Adds analyst comment, byline, updates stock price)
By Jonathan Stempel
NEW YORK, Sept 25 (Reuters) - Fortress Investment Group LLC (FIG.N), one of the few publicly traded managers of private equity and hedge funds, said on Thursday it will not pay a third-quarter dividend, citing a need to preserve capital.
New York-based Fortress joined other financial companies in reducing or eliminating dividends as strains on global credit markets deepened, reducing potential gains from private equity and hedge fund operations.
Fortress paid a dividend of 22.5 cents per share in the second quarter. Chief Executive Wesley Edens told investors on Aug. 7 the company might lower the payout.
In a statement Thursday, Edens said there are "significant dislocations in the world's financial markets" that could give Fortress a chance to eventually invest in banks, insurance companies and other asset managers.
"Retaining capital inside the firm increases our ability to act on these opportunities and is the right thing for us to do," he said. "To the extent that these opportunities become less attractive, we will review our dividend policy."
Standard & Poor's equity analyst Matthew Albrecht estimated the move should save $25 million of capital. Nevertheless, he downgraded Fortress shares to "sell" from "hold," and cut his full-year earnings estimate, citing lower optimism about flows to funds and performance fee income in the second half of 2008.
Fortress said it had about $300 million in cash as of Sept. 24, up from $255.2 million at June 30, while its debt load was unchanged at about $800 million. It also said it is generating "significant" operating income. The company ended June with $35.1 billion in assets under management.
On Aug. 7, Fortress said second-quarter profit declined 59 percent to $58 million, or 13 cents per share, due in part to lower incentive fees. Under generally accepted accounting principles, it lost $55.6 million, or 67 cents per share, in the quarter.
Fortress shares rose 51 cents to $13.50 on the New York Stock Exchange. They began the year at $15.58.
Founded in 1998, Fortress went public in February 2007 at $18.50 per share in the first initial public offering by a U.S. private equity and hedge fund manager. (Editing by John Wallace/Jeffrey Benkoe)
