Blackstone CEO's high profile concerns rival firms

By Michael Flaherty

NEW YORK (Reuters) - They may not be blaming him for making their lives more difficult -- yet. But rivals at private equity firms sure wish that Stephen Schwarzman, the founder and CEO of buyout firm The Blackstone Group, would get his name off the front pages.

Such were the sentiments of four private equity executives at major buyout firms interviewed by Reuters on Friday, a day after two powerful U.S. senators introduced a bill that would tax publicly traded private equity firms at a much higher rate than they pay now.

That was enough to have some of the biggest private equity firms immediately reconsider plans for public offerings. Apollo Management, Kohlberg Kravis Roberts & Co. and TPG Capital have all pulled back from plans for public offerings because of the tax bill, according to two bankers familiar with their efforts who spoke to Reuters on Friday on the condition they not be named. The firms declined to comment.

The bill comes after heavy media coverage over the last several months detailing Schwarzman's lavish lifestyle and after disclosure on Monday that he will be worth more than $7.7 billion after Blackstone's IPO, expected in the next few weeks.

Buyout executives, who also did not want to be named, said the attention he seized was not good for the industry's image. That regret only deepened with the introduction of what's being dubbed the "Blackstone bill."

"There is not a lot of sympathy for private equity because we are so highly compensated," said one executive of a leveraged buyout firm and hedge fund. "But it really throws fuel on the fire when you rub people's noses in it."

Even more annoying for buyout firms seeking to go public is that while they would be taxed immediately if the bill passes, Blackstone is grandfathered into the bill, meaning the tax hike would not hit them for another five years.

"It won't curtail the pricing of (Blackstone's) offering. If anything, it may cause peers to reconsider," said Richard Peterson, chief market strategist at Thomson Financial.