I talked to investor relations, let me comment on a few things.
1) Dividend will remain at $1.20 through 2009, and their ability to raise it of course is based on earnings - which is not going to happen.
2) Non-cash charges of $700-$800 million will continue quarterly for the next 5 years. What they did is when they went public instead of allowing their partners to vest immediately (giving them the ability to sell their shares and leave) they did a 5 year vesting period. In accordance with GAAP they amortize this over 5 years. Economic Net Income is the true measure of the earnings of their company and excludes this non-cash vesting charge. However read below about ENI.
3) The $500 million buyback is only $200 million. $300 million of the purchase price paid for GSO accounted for the issuance of equity to GSO and the buyback. It's an intercompany transaction - the $200 million buyback hasn't even started and there is no timeline. They know the stock is going to get cheaper so they haven't even started.
4) I asked how bad is the credit market and he said "awful." No rebound yet and the inability of companies to raise credit is making assets cheaper. This forces BX to write down their assets to comparable market pricing so their earnings are going to get hit bad in Q4 in terms of ENI (economic net income). He didn't say that but I read into it that way. He did specifically say "FGIC will be commented on in our conf. call and we are having to take a big write down on that investment." FGIC is their bond insurer and when I pressed him for insight into that I could tell his mood became somber. It's ugly.
5) The company is well capitalized and with their structure investors / funds / countries can't pull out for 5 years. They have capital but their ability to lever up using debt is not there. He just said there is no credit to be found so they are having to utilize other methods (direct contact to investors, countries, other country banks) to raise capital.
6) Are we in a recession? I asked him that and he said he didn't know but he did say BX's market is in a recession - that being the portfolio of business.
7) I asked him where they are looking to buy a refinery and he didn't know. But he said they are partnered up with Petroplus to purchase a refinery asset. The reason they are partnered with Petroplus is because their own inability to raise credit has forced BX to push partnerships and minority interests in deals.
8) My last question was about the presidential election. He said obviously the democratic party has targeted us in the way we're taxed. Their tax structure now has an effective tax rate of 20% based on realization of long term value, but he would expect that to more than double if the democrats change tax policy. His specific comments was "it would be catastrophic to our returns if our tax structure changes since we have modeled our investments based on current tax structures of the past."
BX is about to get very cheap. I told Westin I was pretty disgusted by the performance of such a top tier investment name. He said "look BX is not a 3 month or 1 year investment, you need to look at 5-10 years."
Looks like Westin Tucker who I talked with at BX was pretty honest with me on the phone.
FGIC write down, lower ENI based on write downs, same dividend etc.
If you guys go back just a couple weeks I posted that I loaded up on 2010 Jan calls at a strike price of $10.00 - I thought BX was going to soar like an eagle - right now it looks like dead money for the next 18 months or so. I sold out of the BX options at a loss and shorted this to offset my long position in the stock to hedge my downside. I'm totally netural in this position. Long term - I'm very bullish on BX, short term it's going down in my opinion. I'm neutral in this stock and instead of selling my underlying shares and taking my loss now, I shorted this position. I will wait until year end to evaluate my portfolio before taking losses to offset my capital gains.
I think BX will see a double digit yield before it sees $20 again.
The gist of the original post seems correct - assets values are deteriorating due to the inability to get credit. And, why buy back shares when the stock has no catalyst to move higher.
Whether the original post was the truth or a complete lie, the reality is that BX is going lower before it goes higher. Anyone who thinks the Board of Directors are going to put in place a buyback strategy now, is dreaming the impossible dream.
Just face it - buying BX was a mistake and if you continue to be long, you're going to lose more money.
I'm neither long or short the shares but if take a position, it will definitely be on the short side.
Don't believe this guy. He might have spoken with IR, but his post is commentary. He colored his post with some true information to make the fake stuff sound real. Tony James already said the buy back wouldn't start until earnings are announced in mid-march. He has also repeatedly stated that taxes are probably going up regardless of who is in the White House ("they need money down there") and that BX thinks any tax increase is already discounted in the stock price. He also stated that BX can live with any tax increase that is not directespecifically at them - they just want to be treated like everyone else.
Think for yourself.