ROSEY OUTLOOK

Last month, Blackstone co-founder Stephen Schwarzman was given the Charlie Rose treatment. Rose is known to America because of The Charlie Rose Show, a high-brow, public television interview programme. Rose interviewed Schwarzman as part of a series of discussions aired from Harvard Business School, the Blackstone CEO's alma mater. Below are excerpts from the conversation, which highlight Rose's often needling interview style and Schwarzman's gift for making complicated matters sound easy:

Charlie Rose: Tell me what private equity is and what it is that you do.

Stephen Schwarzman: What we do is pretty simple. We raise large amounts of money from, principally, institutions – pension funds, endowments. And then we buy companies using those funds. And we basically borrow about $3, sometimes a little more, sometimes a little less, to every $1 of equity that we put up in the deal. We tend to control the deals, we try and improve the companies. And we own them for a while, and then we sell them, and hopefully make a lot of money for our investors. That is what we do.

Rose: When you get up in the morning… is it finding the opportunity that turns you on, is it being introduced to an idea, or is it simply discovering something that you know that a lot of other people are after, and you know that you can make the best deal, that you can pull it off, that you can snatch it away?

Schwarzman: Well, I don't know about snatching.

Rose: You don't do much snatching in private equity?

Schwarzman: We don't do much snatching. We compete but we don't snatch. But part of what is interesting is that besides the individual deals you are talking about, we are building our own firm, Blackstone. So that's quite interesting as well. I get to be sort of a manager and a strategist…

Rose: What's the best deal you've ever made?

Schwarzman: Jeez. Well, I guess everybody's got a good story in life. We could come up with at least one. And I guess the best was really one of our first. It was buying a company that we renamed Transtar, which were a bunch of railroads and barge lines owned by United States Steel Company that we bought when they were having a strike. And it was done in the 1980s, and we leveraged it. Jeez, it must have been, I don't know, a lot. But it was eight to one. And by the time we were finished with the deal, we…

Rose: One dollar of yours and $8 of theirs…

Schwarzman: And we had railroads, basically. And we made 24 times our money. So that was …

Rose: Twenty-four times the money?

Schwarzman: That was a good deal.

Rose: That was a very good deal.

Schwarzman: That was a good deal.

Rose: Do your deals lose money?

Schwarzman: Not often, no.

QUOTABLE
“U2 Rocker Bono was last night locked in a takeover battle for cyber-babe Lara Croft.”

How London tabloid The Sun reported the fact that in late March, a rival bidder emerged to muscle in on Elevation Partners' agreed purchase of struggling UK gaming company and Lara Croft proprietor Eidos. Bono is a partner at Elevation.

“It's remarkable how loose credit became again after the last bubble. In many of the deals being done today you can foresee the debt restructurings to come in a year or two.”

Scott Bok, president of Greenhill & Co, in a Financial Times article exploring the possibility of a crash in the leveraged finance market.

“Risk is becoming almost an ignored term in the quest for yield.”

Billionaire investor Wilbur Ross, quoted in the same article.