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Credit Crunch: Goldman Raises $10 Billion Fund To Finance Its Own LBOs

20 August, 2008

As the credit crisis had dried up the loans to finance leveraged buyouts (LBO), Goldman Sachs has decided to fill the gap by raising a $10 billion fund that will invest in such loans. Following the credit crisis, the LBOs had taken a knock as there were no loans available to fund the buyouts. The Financial Times reported that Goldman Sachs is raising the fund to invest in loans backing LBOs. The “fund will buy senior loans” (which are paid off before other debts), the report said. Goldman already has a $20 billion fund that invests in “mezzanine” or junior debts, which are paid off only after the senior debt.

A report by TheDeal.com says the fund “will be used primarily as a financing vehicle” to finance the deals cut by Goldman’s private equity arm. The fund will be apparently run by the investment bank’s private equity unit, Goldman Sachs Principal Investment Area.

The new fund will give Goldman Sachs’s PE arm an edge over other LBO firms as it will have a ready lender vis-a-vis other firms which will have to haggle with lenders for better deals. Moreover lenders like Citigroup Inc., Merrill Lynch & Co., Bank of America Corp., J.P. Morgan Chase & Co. and UBS, all are facing severe balance sheet issues themselves causing crisis in the LBO market.


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Credit Crunch: Goldman Raises $10 Billion Fund To Finance Its Own LBOs

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