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As Dealmaking Increases, Goldman Sachs Seeks To Broaden Its Private Equity Credit Lines

As Dealmaking Increases, Goldman Sachs Seeks To Broaden Its Private Equity Credit Lines
In an attempt to fill the hole left by unrest at regional banks and the sale of Credit Suisse, American investment bank Goldman Sachs is pushing its way into the lending market for asset managers and private equity. The company is also looking to expand internationally.
In this $800 billion to $1 trillion sector, the Wall Street bank is ramping up in competition with competitors JPMorgan Chase and PNC Financial Services, as record-high fund-raising is likely to drive up private equity transaction activity. These loans have a reduced risk because they are short-term and asset-based.
Goldman purchased a $15 billion lending facility portfolio from the defunct Signature Bank last year at an auction held by the Federal Deposit Insurance Corp (FDIC).
"The focus is to lend to large alternate asset managers, private equity sponsors," Maheshwar Saireddy, Goldman Sachs' global head of mortgage and structured products, said.
"One of the big initiatives we've been working on is to create more stable revenue in our global banking and markets businesses," he said.
In order to service these loans, Goldman has hired people in Dallas and Bangalore and intends to grow in Europe, the UK, and Asia after strengthening its U.S. business, according to Saireddy. He did not say when the expansion will happen.
Known as capital call facilities or subscription line loans, the Signature portfolio featured loans to venture capital funds and private equity companies, which constituted a significant portion of its clientele, for the purpose of managing their working capital.
Subscription lines, also known as credit facilities, are loans obtained primarily by closed-end private market funds that are backed by the pledges made by fund participants. It needs to be paid back over a certain time frame.
According to Saireddy, the company's expanding finance operations in fixed income, currency and commodities (FICC) and stocks is facilitated by asset-secured lending.
"We've grown our deposit base tremendously over the past five to seven years," Saireddy said. "And as our deposits are growing so we are trying to line up assets to match those deposits."

Christopher J. Mitchell

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