Fitch Ratings has assigned the following ratings to two classes of senior unsecured notes issued by Blackstone Holdings Finance Co. LLC:
--$400 million of 4.75% senior unsecured notes due February 2023, 'A+';
--$250
million of 6.25% senior unsecured notes due August 2042, 'A+'.
The notes are guaranteed by The Blackstone Group L.P. (Blackstone) and Blackstone Holdings I, II, III and IV L.P., all of which have long-term Issuer Default Ratings of 'A+' with a Stable Outlook. The notes can be called, at any time at the issuer's option, subject to a make whole provision plus accrued and unpaid interest. Blackstone will also be obligated to repurchase the notes in the event of a change of control (defined as a sale or change in beneficial ownership of Blackstone Holdings Finance Co. LLC and its guarantors) and a downgrade of the notes below investment grade within 60 days of the change of control.
Fitch believes the debt issuance will serve to replenish cash balances used in the acquisition of Harbourmaster Capital Limited and the remaining 15% stake in GSO Capital Partners, L.P. Both acquisitions are expected to add incremental fee-related earnings-EBITDA (FEBITDA) in the second half of 2012 (2H'12) and in subsequent years.
Blackstone's leverage, as measured by corporate debt divided by FEBITDA, was 1.43 times (x) at June 30, 2012 on a trailing 12 month (TTM) basis. Pro forma for the debt issuance, leverage is expected to increase to approximately 2.3x on a TTM basis, which is viewed as at the higher end of the range for the current rating. Fitch expects leverage to come down over time as FEBITDA increases, although leverage levels, and thus ratings, are sensitive to flattening or declining FEBITDA.
The ratings of Blackstone reflect its competitive position as a global alternative asset manager experienced management team, strong corporate culture, solid investment track record, large institutional investor base, significant fee-earning assets under management (FAUM), incentive income-generating capability, ample liquidity, appropriate leverage levels, and subordination of general partner interests to outstanding indebtedness.
RATING DRIVERS AND SENSITIVITIES
The Stable Outlook reflects Fitch's expectations that management will continue to generate stable management and advisory fees, grow/retain FAUM through the raising of new and expansion of existing funds, albeit at a more moderate pace, operate with appropriate leverage levels, and retain a solid liquidity profile in order to meet co-investment commitments to funds.
Declines in investment performance, a key man event, and/or legislative risk which negatively impact the company's ability to raise FAUM and generate fees, meaningful increases in leverage, and/or impairment of the liquidity profile could result in negative rating action. Positive rating momentum is considered relatively limited, given the nature of the business and the company's existing risk profile.
Blackstone, a Delaware incorporated limited partnership, is a leading global alternative investment manager specializing in private equity, real estate, credit funds, fund of hedge funds, corporate advisory and restructuring, and fund placement services. As of June 30, 2012, FAUM amounted to $157.6 billion and total assets under management (AUM) were $190.3 billion. The company's stock is listed on the NYSE under the ticker 'BX'.
Fitch currently rates Blackstone as follows:
The Blackstone Group L.P.
--Long-term Issuer Default Rating (IDR)
'A+;
--Short-term IDR 'F1'.
Blackstone Holdings Finance Co. L.L.C.
--Long-term IDR 'A+;
--Senior
unsecured debt 'A+'; and
--Short-term IDR 'F1'.
Blackstone Holdings I, II, III, and IV L.P.
--Long-term IDR 'A+;
--Short-term
IDR 'F1'.
The Outlook is Stable.
Additional information is available at www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial
Institutions Rating Criteria' (Aug. 15. 2012);
--'Investment
Manager and Alternative Funds Criteria' (Dec. 23, 2011).
Applicable Criteria and Related Research:
Investment Manager and
Alternative Funds Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=661367
Global
Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
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Contacts:
Fitch Ratings
Primary Analyst:
Meghan Neenan, CFA,
+1-212-908-9121
Senior Director
Fitch, Inc.
One State
Street Plaza
New York, NY 10004
or
Secondary Analyst:
Nathan
Flanders, +1-212-908-0827
Managing Director
or
Committee
Chairperson:
Joo-Yung Lee
Managing Director
or
Media
Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
