US High-Yield Bond House: Goldman Sachs

IFR Americas Review of the Year 2015
5 min read
Davide Scigliuzzo

Brave leader

For guiding issuers through times of extraordinary volatility in the leveraged finance market, for stepping up its game against competitors by deploying its balance sheet when most needed by issuers, and for delivering strong execution across industry sectors, Goldman Sachs is IFR’s US High-Yield Bond House of the Year.

As the US high-yield market suffered its most volatile year since 2011, with weakness spreading from the battered energy sector to investor darlings in the pharmaceutical and telecoms space, Goldman Sachs demonstrated unparalleled commitment to borrowers.

Issuance volumes declined in the year due to limited refinancing opportunities and softer conditions for leveraged buyouts, but the bank continued to grow its market share without compromising the quality of execution.

It remained a trusted partner for multi-billion M&A financings, helped opportunistic issuers take advantage of short issuance windows and – most importantly – stood ready to deploy its balance sheet to support issuers’ financing plans even in times of acute volatility.

“It’s not just about showing up with some capital and some advice,” said Kevin Sterling, US head of capital markets at the bank. “You have to know your client and understand the areas of concern for the market and how to address those concerns in a proactive and meaningful way.”

That was particularly evident in the second half of the year, when the average yield on the main US high-yield index widened by as much as 200bp , with the Triple C segment blowing out to 15% by the end of November.

Before volatility started to pick up in late August, Goldman provided commitments for and quickly executed a US$2.725bn bond and loan financing backing medical devices maker Hill-Rom’s acquisition of rival Welch Allyn .

And in the midst of a sharp sell-off across global markets in early September, the bank still committed north of US$8bn on a sole basis to finance acquisition deals for Concordia Healthcare and Solera .


Goldman was quick to recognise opportunities in the market even before the tide turned, under the direction of co-head of leveraged finance Craig Packer.

It encouraged a number of borrowers to bring refinancing deals to market when high-yield indices were at their tightest levels of the year and helped issuers such as IMS Health, VWR and Huntsman take advantage of a significant arbitrage opportunity in the swap market in February and March to raise funds in euros .

Goldman also demonstrated strong execution capabilities in the challenging space of leveraged buyouts.

The bank was the lead underwriter on the bond deal backing the US$5.3bn acquisition of business data integration provider Informatica by Permira and the Canada Pension Plan Investment Board.

The Triple C-rated US$650m eight-year non-call three issue was priced at 7.125%, which was the tightest yield ever achieved by a software LBO since the financial crisis, and well inside the initial 7.5% area whispers.

The deal was also priced 125bp inside a similar LBO bond for security software company Blue Coat, which had cleared the market two weeks earlier and had a similar leverage profile.

Goldman also successfully pushed through the market LBO bonds for fitness company Lifetime – a debut issuer – and fuel tanker company Kenan Advantage.

The former tapped the high-yield market at a time of heightened concerns around health club businesses and was marketed as one of its close competitors saw its bonds plunge by 15–20 points after posting disappointing results.

The latter managed to execute its transaction in the middle of the Greek bailout discussions and was able to tighten pricing on its offering even as other issuers opted to sit out the volatility in the market.


Some of the bank’s other deals admittedly faced an uphill battle to clear the market, especially in the second half of the year, when conditions worsened.

Concordia, for example, had to fight against a wave of negative headlines surrounding the pharmaceutical sector amid a political uproar regarding pricing practices and accusations that Valeant had been artificially inflating its revenue figures. Investors who had bought the Concordia bridge eventually ended up holding the bag when the bond could not be priced at market levels.

In the troubled energy sector, meanwhile, it took American Energy four weeks, a consent solicitation on its outstanding notes and a widening of 400bp from the original whispers to get a new secured bond offering over the line at a yield of 13%.

But in spite of these challenges, Goldman – unlike some of its rivals – stood by clients, even during the most difficult moments of the year.

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North America High-Yield Bond House: Goldman Sachs
North America High-Yield Bond House: Goldman Sachs cartoon