GS Senior Debt Fund: Welcome Source Of Leverage

Firm: Goldman Sachs

Fund: GS Loan Partners I

Amount Raised: $10.5 billion

Goldman Sachs has closed its first senior debt fund, wrapping up GS Loan Partners I with $10.5 billion in equity and leverage commitments.

Buyout firms starved for senior financing are no doubt cheering the achievement, although it’s not clear what size deals the fund is earmarked for, or on what terms the senior financing would be offered. The fund is earmarked for senior secured loans to finance LBOs, recapitalizations and acquisitions.

“The current environment of constrained balance sheets and declining new leveraged loan issuance has created significant opportunities for GS Loan Partners,” said Thomas Connolly, the managing director in charge of GS Loan Partners, in a statement. “Our unique ability to provide senior debt issuers with commitments in size on known terms and with certainty of financing should allow us to provide investors with attractive, risk-adjusted returns.”

The fund is being managed out of Goldman Sachs’s Principal Investment Area, which has formed a total of 15 funds since 1986. The most recent efforts have been the most audacious, although both date back to the frothy fundraising days of 2007. GS Capital Partners VI, which is focused on global corporate equity deals with investment targets of between $200 million and $800 million, closed with $20.3 billion in commitments in late April 2007. $9 billion of that committed capital came from Goldman Sachs and its employees. GS Mezzanine Partners V was formed in 2007 and its size is estimated at $20 billion, although the fund has yet to close.

In its recently filed 10-Q for the third quarter, Goldman Sachs said its Principal Investment Area business recorded a net loss of $453 million for the third quarter, primarily because of losses from corporate and real estate investments, particularly outside the United States. The assets of the company’s private equity and real estate fund investments stood at $20.64 billion at the end of August, including the interests of its merchant banking funds. This figure is up 27 percent from assets of $16.24 billion as of November 2007.

New York-based Goldman Sachs said that more than $1 billion in equity for GS Loan Partners I came from the firm and its employees.