Blackstone Group (BX), the largest private equity firm by assets, has become one of Wall Street’s busiest restructuring advisers, helping companies from casino operators to struggling newspapers renegotiate their debts and raise financing. The latest addition to the client roster: the beleaguered Los Angeles Dodgers, which this week told a bankruptcy court it has enlisted the services of the New York investment firm to fix its balance sheet.
While private equity firms including KKR (KKR) and Carlyle Group have diversified, taking stakes in hedge funds and underwriting stock and bond offerings, Blackstone is the only major buyout firm that advises companies on restructuring. The unit usually doesn’t make a big contribution to earnings: Last year the advisory business had a profit of $83.7 million, about a fifth of what Blackstone earned from private equity. Yet it can prosper during economic slumps when dealmaking slows. The advisory group, which includes the mergers and restructuring teams, was Blackstone’s only profitable business at the peak of the credit crisis in 2008. “Any question about how restructuring fits into Blackstone was answered in the last two years,” says Timothy Coleman, head of the business. “We made a big difference.”
Current assignments include Kerzner International Resorts, the Mashantucket Pequot tribe’s Foxwoods Resort Casino, and the Mohegan Tribal Gaming Authority, which owns the Mohegan Sun casinos. While not in bankruptcy, they are trying to restructure more than $8.5 billion in combined liabilities. Blackstone is also advising Lee Enterprises (LEE), owner of the St. Louis Post-Dispatch, as it tries to refinance debt to avoid bankruptcy.
The Dodgers’ finances have been rocked by the divorce of owners Frank and Jamie McCourt. The team filed for bankruptcy last month after Major League Baseball rejected a television deal with Fox Sports (NWS), leaving the organization unable to meet payroll. Now Blackstone is helping the team fix its finances. Coleman, who joined Blackstone in 1992, says the restructuring work is often more contentious than negotiating mergers. “We work in a tough business where people yell and scream at us all the time,” he says. “To get a restructuring done, you have to have a lot of personality.”