Bloomberg – Goldman Sachs Group Inc.GS) partnered with Blackstone Inc (BX) to packaging private equity loans into bonds, a new type of debt that banks may try to sell more of in the future.
Both sold last week US$475 million in bonds backed by loans that banks provide to investment fundsaccording to a person familiar with the matter. These loans exist because venture capital funds and other investment vehicles raise money in the form of promises from investors to deliver money when the fund calls for it. Loans can help money to delay asking its investors for liquidity, which able to boost the fund’s profitability metrics.
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Goldman Sachs pooled these loans and packaged them into asset-backed securities. Blackstone bought the riskiest part of the jobsaid the person, who asked not to be identified discussing a private matter.
This security forms a bridge between the world of asset financing and the public market for asset-backed securities, a link that is expected to be strengthened. Adam Zotkow, Goldman’s head of US asset financing, said: A capital call security gives the bank a new way to make more of these loans. It is expected that the bank will occasionally use this source of money in the future.
“We have opened up a new asset class with historically low losses for asset managers and to insurance companies,” Zotkow said.
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Although capital call collection rights have never been packaged into widely traded asset-backed securities, the asset class has had low credit risk, according to Stuart Rothenberg, senior vice president president at Morningstar DBRS, which rated the highest as AAA.
The set of capital demand lines of the activity is connected to several thousand limited partners, including Singapore sovereign wealth fund and Abu Dhabi Investment Authorityaccording to investor materials seen by Bloomberg.
Singapore’s sovereign wealth fund and the Abu Dhabi Investment Authority did not immediately respond to requests for comment.
As part of the agreement, Blackstone is injecting capital in exchange for a share of the cash flows thrown up by the promises of the underground investors, according to the person in the know. Blackstone declined to comment.
New equity loans will be added to the structure over the first 18 months as existing loans are repaid, according to the DBRS report. The Wall Street Journal first reported the deal on Thursday.
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The surgery takes place at a time when Banks increasingly partner with private sector lenders to share their balance sheets while maintaining relationships with borrowers. Popular technology, so-called synthetic risk trendshas become popular over the past year as banks look for ways to reduce their risk capital exposure under the Basel III regulations. Several of these deals have focused specifically on capital-to-money call lines, including a $2 billion deal in July with Goldman Sachs.
Loans against capital rescue lines are a market of approximately US$ 900,000 millions, law firm Cadwalader was rated earlier this year. That market was disrupted last year by the bankruptcy or takeover of regional lenders Silicon Valley Bank, First Republic and Signature Bank, all active lenders. Goldman is among the big banks that received some of the underwriting assets of those smaller lenders as a result of the crisis.
“The subscription line business has been a major focus for us,” Zotkow said. The agreement “allows us to expand lending while partnering with investors who want access to this growing segment of the fund’s financing market.”
Read more on Bloomberg.com
2024-10-19 01:44:00
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