Screw the banks. Blackstone thinks they don't need them. According to Blackstone President Hamilton James, they'll find their own sources of cash to fund their LBOs. That's gonna mean lower fees to Wall Street banks..
The firm is contacting hedge funds and mutual funds to provide loans for takeovers, James said after a panel discussion today at the Super Return conference in Munich. Other firms may follow New York-based Blackstone's lead, he added.
``We're bypassing the banks,'' James said. ``There's still ultimately demand for this paper out there if you can go directly to the buyers.''
The move may cut fees for Wall Street firms led by JPMorgan Chase & Co., which earned $412 million last year arranging loans for U.S. buyouts, more than twice its takeover advisory fees, according to data compiled by New York-based research firm Freeman & Co. and Thomson Financial. Banks are trying to cut a $230 billion backlog of debt they agreed to provide, making them less willing to back new buyouts.
``They found themselves holding the baby,'' Alchemy Partners LLP founder Jon Moulton said at the conference today. ``The banks aren't coming back for a while.''