(Agencies)
Updated: 2008-03-11 09:11

NEW YORK - Private equity firm Blackstone Group LP said Monday it swung to a loss during the fourth quarter due to a write-down on its investment in bond insurer Financial Guaranty Insurance Co. and deterioration in the credit markets.

Shares in Blackstone, which went public last June, hit an all-time low on the news. The company did little to bolster the market's confidence, warning on a conference call that things may yet get worse.

"I don't think we'd load the boat and get aggressive until we knew things had bottomed out," said Tony James, Blackstone's president and chief operating officer. "And you know, there's no evidence right now that it's bottomed out yet. We don't like to guess, we're not just shooting from the hip here."

Blackstone lost $170 million during the fourth quarter, compared with earnings of $1.18 billion during the final quarter in 2006.

Adjusted net income, which was adjusted for special revenues and expenses tied to the company's public offering, fell to $88 million, or 8 cents per share, from $808.1 million, or 72 cents per share, during the year-ago period.

Analysts polled by Thomson Financial, on average, expected Blackstone to turn a profit of 19 cents per unit for the quarter. Analysts do not always include special charges in their estimates.

Quarterly revenue fell 73 percent to $345 million from $1.28 billion during the final quarter in 2006. Revenue plummeted because Blackstone posted $141.8 million in negative revenue during the fourth quarter from performance allocation fees, compared with revenue of $776.3 million during the year-ago period.

Blackstone reduced the value of its portfolio investment in bond insurer FGIC because of recent weakness in the credit markets and worries about bond insurers' abilities to repay claims.

Blackstone wrote down the value of its investment in FGIC to "a few cents on the dollar," James said. Blackstone invested in FGIC in 2003.

FGIC recently had its financial strength rating cut by both Moody's Investors Service and Standard & Poor's, which could force the company out of business. Ratings agencies have worried in recent months that bond insurers might not have enough spare cash to maintain their top-notch "AAA" financial strength ratings.

The write-down of FGIC's value reduced Blackstone's fourth-quarter revenue by about $120 million, James said on the call, cutting earnings by 9 cents per unit.

Blackstone Chief Executive Stephen Schwarzman said on the call deterioration in the credit and fixed income markets during the second half of 2007 reduced the level of new investments, transaction fees and appreciation on Blackstone's portfolio of investments.

Schwarzman said those problems have continued into 2008 and it is unclear when conditions will improve.

For the full year, Blackstone earned $1.62 billion on total revenue of $3.05 billion. It posted earnings of $2.27 billion on $2.62 billion in revenue in 2006.

Blackstone shares fell 42 cents, or 2.9 percent, to close at $15 Monday. The stock, which debuted last June at $31, touched an all-time low of $13.82 at one point in the session.