Times Online – A group of banks that financed the £450 million leveraged buy-out (LBO) of car wash group IMO will take control of the struggling business leaving a rival group of hedge fund investors with nothing.

In a High Court decision that lawyers say will damage hedge funds’ interests in dozens of ailing private equity deals, a judge awarded 100 per cent of IMO’s equity to the banks, led by HBOS.

The hedge funds, which also lent money to back the 2006 buy-out, argued that they were entitled to some equity in the business, which is being restructured after defaulting on its debts in March.

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Tags: banks, car wash, court-decision, debts, dozens, fund investors, hbos, hedge fund, imo, lawyers, lbo, lent, money, rival group

Bloomberg – Blackstone Group LP, the world’s largest private-equity firm, fell to a record low in New York trading this week on concern that a rebound in leveraged buyouts will lag behind any economic recovery.

“Given the economic outlook and pressure on asset values, even on existing investments, it’s going to be a while before they have a chance to come back,” said Robert Lee, an analyst with Keefe, Bruyette & Woods Inc. in New York. “It’s hard for investors to see through that valley.”

After announcing about $169 billion of buyouts in 2006 and 2007, New York-based Blackstone has since completed $9.2 billion of deals. An absence of financing for new acquisitions and an inability to sell current holdings have idled the firm and competitors such as KKR & Co. and Carlyle Group LP. Investors say deal won’t resume until after the economy starts to grow and banks can rebuild capital depleted by losses on mortgage-backed securities and previous LBO loans.

Blackstone, run by Chairman Stephen Schwarzman, probably will report a loss tomorrow of 31 cents a share, its third in the past four quarters, according to the average estimate of seven analysts in a Bloomberg survey. The company had a profit, excluding some costs, of 8 cents a share in the same quarter a year earlier.

Of the nine analysts who rate Blackstone shares, six have ratings equivalent to hold, including Lee. One analyst, Barclays Capital’s Roger Freeman, suggests selling the stock. Two recommend clients buy the shares.

Blackstone dropped below $4 a share for the first time on Feb. 23, closing at $3.89, almost 90 percent less than its $31 initial public offering price in June 2007. The stock declined 17 cents to $4.12 yesterday in New York Stock Exchange composite trading.

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Reuters – Private equity firm Blackstone Group LP’s chief operating officer said on Tuesday that the limit on bank financing for leveraged buyouts was about $5 billion.

But COO Tony James said there were multiple opportunities to invest despite the market turmoil and the limit on financing, adding the company has had a very active 12 months, investing $8.7 billion in 27 deals since the credit meltdown.

"People say you can’t do leveraged buyouts," said James. "That’s not correct. We are getting bank financing for LBOs (leveraged buyouts), but we’re not getting bank financing for deals over about $5 billion in size."

He said the current volatile market conditions were ideal times for Blackstone to invest.

"One could be forgiven for thinking this is a hostile environment for Blackstone," said James, speaking at a Lehman Brothers conference that was webcast. "I don’t agree at all. I think it’s a fantastic environment. Turmoil, discontinuity in the market and scarce capital are absolutely ideal forces for our businesses."

Blackstone has taken part in some of the largest leveraged buyouts ever, such as the $23 billion purchase of Equity Office Properties Trust, but has also done numerous smaller buyouts.

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Tags: arbitrage, asyst-technologies-inc, fellow-shareholders, fund-of-fund, investment-arm, lbo, lehman-brothers-holdings, sec-charges, stephen-schwarzman, steve-moyer, tennenbaum-capital-partners, trizec-properties, volatility, weather-channel