By Katy Burne
Goldman Sachs Group Inc. is signaling it is closer to listing
its specialty finance company, two years after forming the
unit.
The New York firm has made a series of amendments to its
regulatory paperwork ahead of the proposed stock sale, saying in a
March 3 filing that it plans to list the specialty lender on the
New York Stock Exchange under the ticker symbol GSBD.
A slate of underwriters for the transaction appeared on a Feb.
11 filing for the unit, but no set date was given. Goldman said it
would manage the sale alongside joint book-runners Bank of America
Merrill Lynch, Morgan Stanley, Citigroup, Credit Suisse AG and
Wells Fargo Securities.
Goldman unveiled the lender in early 2013 as a so-called
business-development company, a type of tax-advantaged entity that
is managed similarly to mutual funds, with a finite number of
shares that can trade privately or publicly on stock exchanges.
The unit, now called Goldman Sachs BDC Inc., targets U.S.
borrowers with no credit ratings and earnings by one measure of
between $5 million and $75 million annually.
Goldman also recently disclosed a new partnership with
University of California's Board of Regents, a committee that has
fiduciary responsibility for a more than $90 billion pool of
pension, endowment and other assets.
In July, the university's regents and Goldman each put up $100
million through a Delaware limited liability company, under an
agreement that will see Goldman source senior middle-market loans
for a 50/50 joint portfolio, subject to a quorum of a six-member
board review.
The University of California's Board of Regents, known as Cal
Regents, has invested alongside Goldman before, in assets ranging
from real estate to private equity, the group said, and Goldman
manages money the university has already invested in publicly
traded debt securities, including from below-investment-grade
borrowers.
"We wanted to partner with Goldman, so we can to some degree 'go
to school' on their credit process," said Randy Wedding, senior
managing director overseeing about $25 billion of fixed income at
the university, in an interview. He said senior loans are
attractive assets because their rates float above a moving
benchmark and "when rates go up, these [loans] will be insulated to
some degree."
A spokeswoman for the bank declined to comment.
BDCs have mushroomed in recent years, as regulations have
decreased banks' capacity to hold high-risk loans on their balance
sheets and private-equity firms have sought to enter the fray.
The companies, created in the 1980s as a way to expand credit
privately to businesses that weren't able to access the public debt
markets, now have a combined market cap of more than $40 billion,
according to Greg Mason, analyst at Keefe Bruyette & Woods.
Mr. Mason said the environment for BDC listings had been
challenging due to a recent bout of weakness, triggered by a host
of factors, including their 7% exposure to oil and gas companies
and a change in their index status causing them to lose 11% of
their shareholder base.
A group of BDCs he tracks is now trading on average at 98% of
its book value, he said, whereas often the shares trade above the
worth of their investments, at 105% to 110% of their book
value.
Goldman owns 19.85% of its BDC, which has more than 700 private
shareholders and is advised by Goldman Sachs Asset Management LP.
As of Dec. 31, the net asset value of the BDC was $574.58 million,
equivalent to $19.56 per share.
It was the first but not the only bank to have looked at a BDC,
as earlier reported by the Wall Street Journal. Credit Suisse
recently launched one to invest in the unrated debt of small or
midsized companies, and has been pitching stakes to outside
investors in a bid to raise $500 million, the Journal reported last
month. Morgan Stanley also has been weighing a BDC launch.
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