Loan House and Americas Loan House: Goldman Sachs

IFR Awards 2021
9 min read
Christopher Mangham, Michelle Sierra, Prakash Chakravarti, Eleanor Duncan

Innovation and execution

In a record year for global loan issuance, one bank distinguished itself from the rest of the pack. For leading the most complex and transformative transactions, particularly in the cross-border leveraged finance market, and for providing creative solutions for its clients while increasing its market share, Goldman Sachs is IFR’s Loan House and Americas Loan House of the Year.

The global loan market bounced back in style in 2021, raising a record US$5.1trn. After 2020 was ravaged by the coronavirus pandemic, Goldman Sachs set out its stall early in the year, positioning itself to take advantage of the renewed appetite from borrowers and lenders alike by quickly recognising opportunities and providing innovative ideas and best execution.

"We transitioned from a defensive Covid protective environment to one that was more strategic and offensive as it relates to our clients," said Christina Minnis, global head of acquisition finance at the bank.

The result was that Goldman added significantly to its market share, winning top-tier lending roles over commercial banks with massive balance sheets by successfully syndicating deals that require thoughtful execution. It also remained competitive compared with increasingly strong private debt lenders.

"We took market share – and you know, and I know, the competitive landscape in the market today is the highest it's ever been, both within the banks and the direct lender community,” said Kevin Sterling, head of Americas leveraged finance.

At US$1.6trn, the global leveraged market in 2021 reached the second highest annual total ever recorded. Goldman ranked fourth in the bookrunner league table for that market, taking a 5.25% market share.

And when it came to leadership roles on acquisition-related deals, the picture looks even better.

In the US, the bank jumped to third in the overall M&A bookrunner league table with an 8.4% market share from fifth in 2020 with a 5.55% share. For LBOs it ranked fourth with a 5.6% share, up from seventh with a 4.3% share a year earlier. And in the US new money bookrunner league table, Goldman re-entered the top five for the first time since 2018 by arranging US$65.8bn for a 5.6% market share.

Goldman’s secret is how well it combines the top-notch capabilities of its different platforms, such as ECM and traditional investment banking, with its DCM division.

"You need to make sure that the story isn't told 80% correctly, or 90% told correctly. You need to tell it at 100% correctly to get this outcome," said Chris Bonner, head of US leveraged finance capital markets.

One highlight came in the first quarter when Goldman was one of two banks that provided aircraft leasing company Aercap with a US$24bn fully underwritten bridge loan backing its US$30bn-plus acquisition of GE Capital Aviation Services.

The banks then launched syndication of a US$19bn capital markets bridge, a US$5bn term loan and US$4bn RCF. Despite some noise surrounding the aircraft sector due to the pandemic, all the facilities were oversubscribed and the RCF was increased to US$4.35bn, justifying the decision to underwrite the financing.

Knowing who they are and how to position themselves has always been one of Goldman’s best assets as the bank strives to provide optimal financings for its clients.

"We're not the 800-pound gorilla in terms of some of the US players," Minnis said. "We try to position ourselves as a mission-critical financing source for clients in times of need but also in times when they have their most important transactions."

The bank prides itself on leading the most complex and transformative transactions, and that was particularly important in the leveraged loan market.

Goldman helped to build the foundations for the barnstorming year, launching a US$3.75bn loan in early February for Thoma Bravo’s US$10.2bn buyout of software company RealPage, the sponsor's largest acquisition.

The bank had already committed to provide an up to US$4bn debt financing to support the deal at the end of 2020, injecting confidence in the market after a torrid few months. The deal was subscribed multiple times and produced the tightest B3-rated LBO term loan pricing since May 2019.

Notably, Goldman also led the way on cross-border leveraged loans, which played a significant part in 2021.

It led a €1.075bn-equivalent dual-currency term loan B for the buyout of German shoe retailer Birkenstock, as well as US$600m and €300m term loan Bs for the acquisition of chemicals company Kraton.

"These are things that you don't get to redo or have a mulligan allowed if it didn't go well," said Sterling. "The firm excelled in marrying up the way to tell stories, the way to position, the way to gain trust from issuers. These are mission critical. Yes, these are well-known brands, but they've never been financed in this capacity."

Goldman was lead-left on another dual-currency loan – for BMC Software. The deal comprised a US$690m first-lien term loan, split between a US$250m tranche and a €375m tranche, as well as a US$475m second-lien term loan that priced at 550bp over Libor – the tightest ever pricing for a Triple C rated second lien.

Euro trail

In Europe, leveraged loan issuance reached US$271.7bn in 2021, the highest since the 2008 credit crisis. LBO volume totalled almost US$70bn, the fourth-highest annual total and the most since 2007.

Goldman was at the forefront of this renaissance.

"This was by far our record year from a profitability standpoint," said Luke Gillam, co-head of EMEA leveraged capital markets.

Goldman led a successful €1.525bn term loan B that backed EQT's acquisition of a majority stake in laboratory services provider Cerba Healthcare. The bank was proactive in educating investors about the specifics of the company's business model and securing a solid oversubscription.

Goldman returned later in the year with a €350m term loan add-on to fund the acquisition of Italian peer Lifebrain. The loan, which was increased by €50m, priced inside guidance and reinforced the bank's strong relationship with Cerba and its shareholders EQT and PSP.

"We've been busy. The market has been busy. Volumes are up massively year on year, particularly from the sponsor side. The number of transactions is up meaningfully, and a good proportion of that was committed acquisition financing debt," said Dominic Ashcroft, co-head of EMEA leveraged capital markets.

Goldman set pricing benchmarks too. The €1.115bn term loan B backing Swedish pharmaceutical company Recipharm's acquisition by EQT priced at 350bp over Euribor, at par, which is the lowest for a Single B loan. A €300m TLB refinancing for Luxembourg-headquartered carbon black producer Orion Engineered Carbons, which also included a US$300m TLB, priced at 250bp over Euribor with a 99.5 OID – the tightest for a Double B euro loan since the start of the pandemic.

In 2021, sustainability-linked leveraged loans accounted for nearly a quarter of the year's total European issuance by deal count. Goldman was at the forefront of this development with landmark deals for Recipharm, Cerba, and Orion and dividend recap loans for Virgin Media and German building materials maker Xella.

Cerba's loan included the first margin ratchet to have a KPI linked to the number of women in management positions.

Goldman also helped to bring new names to the leveraged market, including a €555m buyout TLB for waste management company Beauparc that was increased from €525m and a €1.65bn financing for Finnish paper maker Ahlstrom-Munksjo to back its acquisition by a Bain-led consortium that included a €600m TLB.

"Market volatility was absent in 2020, but we had substantial amounts of volatility in 2021. We haven't seen that for four or five years. But at the end of the year, the vast majority of trades that came to the market went through relatively unscathed," said Ashcroft.

Away from the leveraged market, Goldman was one of two banks that led a £9.355bn bridge loan to finance National Grid's £7.8bn acquisition of UK electricity distribution business Western Power Distribution. It was the largest sterling deal of 2021.

Goldman continued its pursuit of complex event-driven financings in the Asia-Pacific region, particularly in India and Australia where buyout sponsors were especially busy.

The bank was a lead-left on a US$1bn bridge financing for The Carlyle Group's US$3bn LBO of Indian IT firm Hexaware Technologies and was sole lead-left on A$925m-equivalent (US$693m) of loans for the buyout of Australian recycling manager Bingo Industries.

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