Goldman Sachs Offers Triple-Recourse Bonds Targeting AAA Buyers

Goldman Sachs Group Inc. is marketing a new type of bond designed to give investors access to top-rated assets as the supply of covered bonds and other high-grade securities continues to shrink.

The 1 billion euros ($1.3 billion) of notes are provisionally rated AAA by Standard & Poor’s and will be sold through FIGSCO Issuer Ltd., S&P said in a statement. The bonds are secured by fixed-income assets and offer investors three levels of protection in the event of default.

Goldman is seeking to meet investor demand for the safest assets as AAA rated bonds become harder to find in Europe. Redemptions of covered bonds and U.K. RMBS are outpacing new issues in Europe as cheap central bank funding and regulatory pressure prompt lenders to trim balance sheets.

“The current context of the supply/demand imbalance in the markets is well known,” Societe Generale SA analysts led by Jean-David Cirotteau said in a report. “A new senior secured bond backed by a portfolio of financial assets by a large U.S. investment firm is probably a good thing for hungry investors.”

Sophie Ramsay, a spokeswoman for Goldman Sachs in London, declined to comment on the notes.

The collateral backing the AAA bonds will be transferred to FIGSCO through a total return swap with Goldman Sachs Mitsui Marine Derivative Products LP, a joint venture between the U.S. bank and Japan’s Mitsui Sumitomo Insurance Co., according to S&P. The securities offer investors a claim on the assets backing the deal, as well as on Goldman and Mitsui if the joint venture defaults.

The U.S. bank has set up a 10 billion-euro program to sell the debt. Goldman Sachs, Barclays Plc, Credit Agricole SA, Natixis, and UBS AG are holding investor meetings for the bonds this week, a person familiar with the matter said June 23.

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