Goldman Sachs Group Inc. booked a gain of at least $6 million after breaking from other Wall Street lenders involved in last year’s biggest leveraged buyout, according to people familiar with the transaction.
The bank was left holding about $120 million of $3 billion in risky debt that funded Carlyle Group LP’s takeover of Symantec Inc.’s data-storage unit Veritas Inc., said the people, who asked not to be identified because the transaction was private. Goldman Sachs sold the debt for 85 cents on the dollar this month -- above the lowest value it had assigned to the loans on its own books, one of the people said. Its sale price was below the 90 cents that other banks hoped to sell at.
By going it alone at a lower price, Goldman Sachs forced the other banks in the lending syndicate to cut their asking prices and forfeit money they’d been hoping to recover on a loan they’d all been holding on their books since credit markets seized up late last year.
While Goldman Sachs’s sale may have provided a clearing price for the entire block, it also bucked an informal convention in the syndicated loan market in which lenders agree to act as one when selling to investors. The other banks later offloaded the debt at 85 cents as well.
Goldman Sachs has had a particularly difficult start to the year, reporting its lowest first-quarter revenue in a decade and embarking on the biggest cost-cutting push in years. The company’s share price, which has dropped about 18 percent this year, is trading at 87 percent of tangible book value.
Goldman Sachs made the decision to break from the pack as some of the other banks in the syndicate said they weren’t prepared to sell below 90 cents, said one of the people. At the same time the syndicate led by Bank of America Corp. was marketing the debt at 90 cents, Goldman Sachs attracted investors for its portion of the loans at 5 cents less than the syndicate’s asking price, another person with knowledge said.
Goldman Sachs was concerned that it would take longer to sell the remaining amount and saw a sale of its portion as prudent risk management, the people said.
What’s rankled the lender group is that Goldman Sachs made its move after the syndicate had already garnered enough investor interest to sell more than $1 billion of the loans at the higher price, the person said.
The price mattered because the banks were already holding the loans at a loss. The valuation of the loans varied between the lenders, with at least one bank marking them at more than 80 cents on its books, according to a person with knowledge of the matter. Goldman Sachs’s low valuation for the loans was below 80 cents, another person with knowledge said.
Representatives from Goldman Sachs and Bank of America declined to comment.
Goldman Sachs wasn’t the only one 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 has said. Credit Suisse didn’t participate in the latest loan syndication.