Blackstone hits $5bn cap on rescue lending fund

The firm, which reported strong earnings in the second quarter, has also raised $3bn for its separately managed accounts business called Tactical Opportunities.

The Blackstone Group’s credit-focused affiliate GSO Capital has reached its $5 billion cap on its second rescue lending fund and will close fundraising this month, Tony James, Blackstone’s president, announced on the firm’s second quarter earnings call Thursday. 

The firm has been raising its Capital Solutions Fund II since at least last year. The capital solutions group focuses on companies in need of liquidity or restructurings due to potential breaches of debt covenants, impending loan maturations, cyclical downturns or other funding needs. The group is led by Blackstone senior managing directors David Posnick, Jason New and Dwight Scott. 

The news came during Blackstone’s second quarter earnings call, during which the firm described a strong overall quarter. In private equity, overall carrying value of portfolio assets rose by 5.4 percent in Q2, and 13.3 percent over the year to date. The firm had $1.6 billion of realisation activity in the quarter and $3.6 billion to date, according to the earnings statement. 

Prices are pretty high right now. Our job is not to try and push a lot of money out in that environment.

Tony James

Second quarter realisation activity included secondary sales in ratings firm Nielsen, petroleum refinery company PBF Energy and highway rest stop business Travelport at an average 2.6x multiple, the firm said. Blackstone also completed the initial public offering of SeaWorld, which resulted in a quarter-end valuation of 3x multiple of investment. 

The firm also invested $1.6 billion during the quarter and $1.9 billion year to date, according to the earnings statement. However, the environment has been more attractive for selling than buying, James said. “In general, hot credit markets with abundant low-cost debt pushes up prices that leveraged buyers are willing to pay,” he said. “Prices are pretty high right now. Our job is not to try and push a lot of money out in that environment.”

While fundraising activity was subdued over the quarter, Blackstone did raise $324 million for its customised

Tony James

accounts business known as Tactical Opportunities, bringing total capital commitments to $3 billion. 

Tactical Opportunities, which includes a fund where smaller limited partners can make commitments and a pool of separately managed accounts for larger investors, remains one of the firm’s most interesting businesses, James said during the earnings call. 

Blackstone has a cap on cumulative commitments to the Tactical Opportunities business of about $5 billion, James said. “This is a small team in a new business with a lot of deal flow. We need to get our people focused on investing. So we’re not going to keep fundraising too much longer,” he said. 

Tactical Opportunities has completed 11 deals so far, he said.

The firm’s overall earnings were strong. Economic net income, a measure that includes both realised and unrealised investments, more than tripled to $703 million for the quarter, Blackstone said.