Blackstone may have to cut range for IPO

By Lilla Zuill and Dan Wilchins

NEW YORK (Reuters) - Blackstone Group LP BG.UL could have to cut the expected price range for its initial public offering in the face of possibly troublesome tax legislation and rising bond yields, some portfolio managers and analysts said on Friday.

Those investors expect this week's events to cut the price guidance anywhere from 2 percent to 6 percent.

The questions come a day after two U.S. senators proposed legislation that could boost the top tax rate for private equity firms that go public by more than 100 percent, to 35 percent from 15 percent.

On top of the tax bill, bond yields have risen dramatically. The 10-year Treasury yield has risen some 0.6 percentage points over the last month, which potentially boosts financing costs and lowers returns from deals.

"In isolation, the potential tax change would be less of a concern, but all together people may step back and re-evaluate at this point," said Francis Gaskins, president of independent research firm IPOdesktop.com.

To be sure, several investors and analysts interviewed expected demand from retail investors for Blackstone's IPO to be strong regardless of the recent flies in the ointment.

But Blackstone acknowledged in an amended prospectus on Friday that the new risk could materially lower the value of its partnership unit, although it kept the proposed pricing range for its shares at $29 to $31.

The proper way to value Blackstone's shares was the subject of some debate even before the legislation was introduced.