Blackstone Group, the world’s largest private equity firm, probably won’t direct companies it owns to seek money under U.S. government programs set up to help businesses navigate the coronavirus crisis, according to its president Jonathan Gray.
Gray said Thursday during Blackstone’s earnings call with analysts that the government’s Paycheck Protection Program and Main Street Lending Program — designed to help small and mid-sized companies survive the economic shutdown prompted by the pandemic — aren’t “really a factor” in how the private equity giant thinks about its portfolio.
“At this point, none of the companies that we control have applied for funds under either of these programs,” Gray said during the call. “It’s unlikely that I think we’ll do that.”
Blackstone has massive “firepower” to deploy during the crisis tied to Covid-19, the deadly disease caused by the novel coronavirus, according to Gray. The firm, which invests across private equity, real estate and credit, has $152 billion in dry powder – “more than anyone in the industry,” chief executive officer Steve Schwarzman said during the call.
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“The Covid-19 pandemic has created a truly unprecedented set of challenges to the global economy, markets, and society at large,” Schwarzman said. During the call, he cited the tragic “human cost” of the crisis and people’s discomfort as they “shelter in place” to curb the spread of the disease.
“For the first time in U.S. history, the country has voluntarily shut much of itself down, creating massive unemployment,” he said. “This resulted in some of the largest ever declines across almost all asset classes and drove market volatility to an all-time high.”
As markets were reeling in March, prompting the U.S. Federal Reserve to intervene with a series of emergency measures, Blackstone pressed on with fundraising efforts. The firm raised almost $5 billion for a private equity fund entirely in the last two weeks of March, Gray said on the call.
The firm’s private equity investments have not been immune to the market turmoil. Corporate private equity funds declined 21.6 percent in the first quarter, with energy-related investments in particular dragging down their value, said Michael Chae, Blackstone’s chief financial officer, during the call.
Blackstone’s returns in corporate private equity and credit were “basically in line” with the Standard & Poor’s 500 index and high-yield indices, respectively, according to Schwarzman. The S&P 500 index lost about 20 percent in the first quarter.
Meanwhile, the Fed’s unprecedented efforts amid the crisis have helped to re-open the high-yield debt and leveraged loan markets, according to Gray, who said some companies owned by Blackstone have successfully accessed them. While the leveraged finance market is no longer completely shut down, Gray said borrowing is expensive and remains challenging for riskier borrowers.
