Publicly listed private equity has had a disastrous week in the US and Europe. Falling share prices, write-downs and even trading suspension have plagued some of the industry’s biggest brand names.
As Wall Street faltered thanks in large part to lacklustre US employment data released Friday, shares in the management companies of The Blackstone Group and Och-Ziff Capital Management hit all-time lows, while Fortress Investment Group’s low for the day was only one cent off its 52-week low.
Blackstone’s low of $14.30 (€9.31) is a nearly 54 percent drop from its June 2007 issue price of $31 per unit; while Och-Ziff’s low of $19.20 is a 40 percent drop from its November 2007 issue price of $32 per unit; and Fortress’ low of $10.54 is a drop of more than 41 percent from its February 2007 issue price of $18.50.
Meanwhile, listed specialty finance funds associated with Kohlberg Kravis Roberts and The Carlyle Group have also had a tumultuous week.
Trading was suspended yesterday of the $21.7 billion, Euronext-listed Carlyle Capital following a wave of margin calls and default notices from lenders. Prior to its suspension, the Wall Street Journal estimated shares in the specialty vehicle, which invests largely in AAA-rated residential mortgage-backed securities, were roughly 74 percent off their 2006 issue price of $14 per share.
“Although the company believed last week that it had sufficient liquidity, it was informed by its lenders this week that additional margin calls and increased collateral requirements would be significant and well in excess of the margin calls it received Wednesday,” Carlyle said in a statement. “The company believes these additional margin calls and increased collateral requirements could quickly deplete its liquidity and impair its capital.”
Carlyle said it is in “continuing discussions with its lenders”.
KKR suffered setbacks with two of its funds, one listed in Europe and one listed in the US.
KKR Private Equity Investors, KKR’s $5 billion Euronext fund that invests in KKR funds and deals, wrote down the value of a number of its its direct and co-investments, described in an earnings report as “changes in the unrealised fair value of investments” from the third to the fourth quarter of 2007.
KKR Financial, a NYSE-listed REIT that trades under the ticker “KFN”, saw its shares fall roughly 13 percent yesterday, following an analyst’s downgrade and a Standard & Poor's ratings cut on its asset-backed commercial paper issuers, KKR Atlantic Funding Trust and KKR Pacific Funding Trust.
KFN chief executive Saturnino Fanlo said during an earnings call yesterday that the mulit-strategy fund had plenty of liquidity, with $1.4 billion in cash available, Reuters reported. But the stock still hit a low of $10.12, the closest it’s gotten to its 52-week low of $9.39 per share, which occurred in August as the firm tried reduce its mortgage market exposure with the sale of $5.1 billion in residential mortgage loans.