North America Financial Bond House: Goldman Sachs
Showing its chops A remarkable investment-grade bond market that traded at post-financial crisis tights for most of the year gave underwriters the opportunity to push the envelope for their financial clients. For stretching the potential of US capital markets in 2024, Goldman Sachs is IFR’s North America Financial Bond House of the Year.
Debt bankers like to point out that the leading underwriters in the financial bond business lean on their advisory capabilities and not their balance sheets to win market share. In that sense, Goldman Sachs had a standout year in 2024, leveraging the receptive investment-grade market to wheel out debt structures that ordinarily would have been a difficult sell.
“Our clients remember us as the bank that thinks about not necessarily what is the easiest trade, but what is the best trade,” said Stephen Conigliaro, Goldman’s head of US FIG IG syndicate.
Yet even as the US investment bank delivered on its reputation for leading the financial industry’s most complex offerings, Goldman was able to show its prowess in vanilla corners of the market too, helping it to retain its position in the top five underwriters of US financial bonds in 2024.
One area of focus was issuance from private credit vehicles in the form of business development companies. In 2024, BDCs capitalised on tighter spreads to sell more than US$20bn of bonds to bolster their fire power.
“For all the discussions about how private credit might be taking potential issuance volumes away from public investment-grade bond markets, those private credit providers are actually huge clients of the investment-grade bond market,” said Jonny Fine, global head of investment-grade debt.
Goldman helped further the sector’s maturation by leading Blackstone Private Credit Fund’s US$600m 10-year senior bond offering in November, the first time since 2021 the BDC has issued the long-dated maturity. Previously, BDCs had been limited to using short-dated tenors for funding.
The bank also maintained its longstanding franchise in the market for funding agreement-backed notes, a key tool insurers use to raise cash. Though highly rated instruments, FA-backed notes are sensitive to market conditions due to their illiquidity and 2024 provided a ripe opportunity to issue them.
Athene, Mutual of Omaha and Corebridge Financial were among the insurers that turned to Goldman for such transactions.
“Those are folks that are looking for market colour and advice, and we give that really well,” said John Sales, head of IG debt syndicate in the Americas.
The bank’s consistent advice has meant insurers have trusted Goldman with their more difficult trades. The bank was one of three leads on Equitable’s US$600m P-cap transaction, which is IFR’s North America Financial Bond of the Year.
An area where Goldman’s creativity shines is subordinated bond transactions for regulatory capital, arguably its banking clients’ most important offerings.
Goldman helped TD Bank deliver an unusual US dollar 10-year non-call five subordinated note in September – a format for Tier 2 paper mostly seen in Europe – after leading the Canadian lender’s Yankee AT1 sale in June.
“There’s a lot of bookrunners out there that would basically say [a 10-year non-call five] is a tough deal,” said Conigliaro. “Ultimately, it priced through where we thought and was an excellent result.”
Goldman was at the forefront of the Canadian banking industry’s efforts to take advantage of a vibrant Yankee AT1 market. Its role in Bank of Montreal’s US$750m offering of a limited recourse capital note, an AT1 structure unique to Canada, showed how it can overcame investor concerns around tight back-end spreads, which had compressed due to demand for subordinated debt offering chunky yields.
“One of the key conversations was, ‘we are certainly in very low territory when it comes to resets. How do we get past the inevitable investor pushback to these low back-ends?'” said Conigliaro.
Goldman knew investors were comfortable locking in AT1 yields for an extended period despite their subordinated position in the capital structure. It leveraged that understanding to print the first Yankee LRCN in a non-call 10 structure for BMO in July. The Canadian bank had also trusted Goldman to lead its shorter non-call five AT1 trade in February.
Goldman’s close dialogue with investors also helped it deliver for the bank’s own corporate treasury.
The US investment bank sold an eye-catching US$2bn perpetual non-call 10 preferred issue in September that left other bankers talking enviously about the 240bp reset spread it achieved, around 40bp lower than Goldman’s previous record. And it was the first of the big US banks to reopen the ultra-long end of the senior bond market in 2024, which drew follow-on issuance from its peers.
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