Goldman Splits From Bank Group Selling Hung Buyout Loan

Goldman Sachs Group Inc. is causing headaches for fellow Wall Street banks that are trying to offload $3 billion of risky debt that funded last year’s biggest leveraged buyout, according to people with knowledge of the matter.

Goldman Sachs sold about $100 million of the loans last week at 85 cents on the dollar, 5 cents lower than where a group of lenders led by Bank of America Corp. were marketing the debt at the same time, said the people, who asked not to be identified because the transaction wasn’t public. The bank group is now offering the larger chunk of the debt at a similar discount after some investors pushed for matching concessions, the people said.

The bank’s decision is a break from a common industry practice where lenders that commit to fund large corporate transactions pool their efforts to find investors for the debt. Carlyle Group LP’s purchase of Symantec Corp.’s Veritas data-storage unit was the biggest casualty of credit market seizure last year, which prompted the banks to scrap the debt offering and fund the deal themselves.

A spokeswoman for Goldman Sachs declined to comment. Representatives for Bank of America and Carlyle also declined to comment.

New Offer

Bank of America is now offering the loan at around 85 cents on the dollar, a person with knowledge of the matter said. The offering has also been tweaked to cut the U.S. portion by about $200 million and a euro portion by $39 million, the person said.

The banks started bringing the debt back to capital markets last month after a resurgence in sentiment for lower-rated securities. In May, banks led by Morgan Stanley sold about $450 million of unsecured bonds to investors at less than 90 cents on the dollar, a person with knowledge of the matter said at that time. In addition to the $3 billion of loans, a $700 million secured-bond deal also needs to be sold.

Goldman isn’t the only bank to go its own way in offloading debt from the Veritas deal. Earlier this year, before the bank group revived the debt sale, Credit Suisse Group AG sold its exposure to the buyout, a person with knowledge of that transaction said. Credit Suisse isn’t participating in the latest loan syndication.

Leveraged loans have gained more than 7 percent since credit markets bottomed in February, according to the S&P Leveraged Loan 100 Index. The average price on the largest, most frequently traded loans have climbed to 91.4 cents on the dollar from a six-year low of 85.9 cents, according to the benchmark gauge.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE