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[The_Game]

Thanks. Looks like JP MOrgan is getting scared of my potential Blackstone!


JPMorgan's Black Doubts Blackstone's Financing Plan (Update1)

By Christine Harper and Elizabeth Hester

Feb. 27 (Bloomberg) -- JPMorgan Chase & Co. investment banking co-head Steve Black said he was skeptical that leveraged buyout firm Blackstone Group LP will succeed with a plan to obtain financing for deals without help from Wall Street.

``If they think they can do that themselves without the banks then God bless them,'' Black, 55, said today at an investor conference hosted by JPMorgan in New York. ``I don't think that will work very well, but let them try.''

Black, whose firm ranked as the top arranger of loans for U.S. buyouts last year, was responding to comments made yesterday by Blackstone President Hamilton ``Tony'' James at a private- equity conference in Munich. Blackstone, which manages the world's biggest buyout fund, is contacting hedge funds and mutual funds directly for financing instead of hiring banks, James said.

``We're bypassing the banks,'' James, 57, said. ``There's still ultimately demand for this paper out there if you can go directly to the buyers.''

Blackstone's plan would cut fees for Wall Street firms including JPMorgan, which earned $412 million last year arranging loans for U.S. buyouts, according to data compiled by New York- based research firm Freeman & Co. and Thomson Financial. Banks face a $230 billion backlog of debt they agreed to provide, making them less willing to finance new buyouts.

Black said today that James's comments came as a surprise.

``I had dinner with Tony James last week and he never mentioned that to me,'' Black said. ``You know what? Good luck.''

Leveraged Loans

JPMorgan arranged $170 billion of loans used to finance leveraged buyouts in the U.S. last year, more than any bank and representing 16 percent of the market, according to data compiled by Bloomberg. The company was also the largest underwriter of U.S. high-yield corporate debt, with $20 billion in 2007.

The bank had $21.4 billion of leveraged loans and loan commitments outstanding at the end of January and reclassified $4.98 billion of loans and commitments as ``held for maturity'' on its balance sheet, the bank said in its presentation to investors today. William Winters, co-head of investment banking with Black, said the market for leveraged loans ``continues to deteriorate'' and that markdowns on the portfolio would be $800 million if taken today.

Losses on buyout loans would have been worse if the bank hadn't shunned some transactions last year, he said.

``We said no to 5 of the last 10 deals that were shown to us,'' Winters, 46, said. ``In retrospect we should have said no to 10.''

Black also said today that the firm is considering acquiring a prime brokerage that is for sale. He didn't name the seller. Bank of America Corp., based in Charlotte, North Carolina, said on Jan. 15 that it plans to sell its prime brokerage, which caters to hedge funds.

``There happens to be one for sale and we are looking at it,'' Black said without elaborating.