US Dollar Bond House: Goldman Sachs

IFR Review of the Year 2013
4 min read
Natalie Harrison, Shankar Ramakrishnan

Surfing the wave: It was yet another blockbuster year for US dollar bond issuance as companies rushed to refinance debt, return capital and optimise capital structures. In this turbo-charged environment, Goldman Sachs led most of the year’s largest underwritings and snatched market share from its rivals, making it IFR’s US Dollar Bond House of the Year.

Issuance was simply relentless in the US dollar bond markets. Volumes of more than US$1trn were raised in high-grade and high-yield bonds in the review period. Goldman Sachs excelled by consistently generating funding solutions for a variety of clients across ratings and regions thanks to a focused and determined approach to be at the forefront of key trends in the pattern of issuance.

“While trying to participate in the usual flow business, we also try to identify key market themes and position ourselves for business out of it,” said Jonathan Fine, head of debt syndicate at Goldman. “This strategy worked for us this year because we were in front of some significant themes before they became obvious to others in the market.”

Goldman was clearly ahead of the curve when it came to identifying that a number of cash-rich companies would be under pressure to issue bonds to fund capital returns to shareholders.

One of its biggest accomplishments for Goldman this year was the mandate on the mammoth US$17bn six-part trade from Apple in May. That deal tested the bank’s abilities to the extreme. Apple is believed to have mandated Goldman in January to prepare the documentation and ratings groundwork for a deal.

The groundwork to be part of such a critical mandate, however, began much earlier. “The Apple mandate showed how the investment banking team works on long-standing, tried and tested relationships that create opportunities for maybe multiple years down the road – as opposed to only banking clients where we think the payoffs are in the next three to six months,” said Fine.

The deal attracted 2,000 orders from 900 investors, amounting to a then-record US$50.2bn, for six separate tranches spanning three-year and five-year fixed and floating-rate notes, plus 10-year and 30-year fixed-rate bonds.

“It required a lot of preparation, a lot of planning, organisation and team work to make it look as smooth as it did,” said Fine.


Besides the Apple mandate, Goldman was also a leader in the increased US dollar issuance by Asian and European borrowers, being among the active bookrunners on a number of landmark trades out of Asia, including TSMC, 1MDB, BHP Billiton, SMBC, CNOOC, Sinopec and Baidu.

It also found itself leading a number of sovereign issues for the likes of Colombia, Brazil, South Korea and Bolivia. It was a lead on two enhanced equipment trust certificate transactions from US Airways and DNA Alpha, apart from bringing to the US dollar market a number of debut or infrequent issuers.

The bank also made the most of the rise of hybrid issuance which led a wide array of preferred transactions from the likes of Allstate, Wells Fargo, GECC and Prudential Financial.

Its performance was equally impressive in the high-yield bond and leveraged finance space.

“We didn’t grow up as a debt business, but the visibility of the leveraged finance business has never been higher,” said Craig Packer, head of Goldman’s Americas leveraged finance franchise. “When it comes to deploying critical, rescue financing, our balance sheet is as big as anybody else’s.”

One prominent example comes from the acquisition financing for pharmaceutical giant Valeant’s purchase of Bausch & Lomb.

Goldman, which has been banking Valeant when the company just had US$150m Ebitda, committed 100% of the US$9.275bn financing backing the acquisition.

“Valeant may be a well-known name, but this deal doubled its debt stack overnight,” said Kevin Sterling, head of high-yield capital markets at Goldman.

Another fruitful area was PIK toggle issuance. With around US$13bn of PIK toggle volumes – the most seen since the financial crisis – Goldman has led deals for Shelf Drilling, ConvaTec, Capsugel, IMS Health, Burlington Coat Factory, Nord Anglia and Orion.

Clients have reaped the gains, as they have been able to pay themselves dividends with the proceeds and harvest some of the returns from future initial public offerings, while investors have also fared well.

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