Blackstone's Credit Revision Is Raising $12 Billion In Case Of Recession

Andrew Wagner

Blackstone is expected to raise $12 billion for direct lending this year to protect themselves in case of bankruptcy.

GSO Capital Partners, Blackstone's credit arm, has a new leader and will now focus on direct lending, according to Business Insider.

GSO Capital Partners is a credit hedge fund that was acquired by Blackstone in 2008 in the attempt to profit from the credit crisis. Since paying $930 million for GSO, the fund is now a $140 billion fund with 400 professionals operating on the team a drastic increase from the previous $10 billion fund operated by 100 professionals.

By the end of this year, all three of GSO's founders will be retired. Dwight Scott is the new leader of GSO. "We have a big and growing team and a big and growing business," Scott said.

GSO's entering new pools of business and expanding its credit has increased confidence that GSO could perform well in a recession. Since 2008, GSO has had an annualized return of 10.2 percent.

To continue to get high returns, Scott has looked to limit risk amid rising concern of an economic downturn in the near future. Expanding Blackstone's direct lending business is the way, as it is a type of loan that helps protect the firm from losing money. The concept of the direct loan is that Blackstone would be a senior creditor, so they would likely be paid out if the company declared bankruptcy.

Blackstone's credit branch GSO is attempting to enter new pools of business in direct lending to protect the firm from losing money and plans to raise $12 billion in credit by the end of the year.

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