Goldman’s BDC Raises $120M

The tax-advantaged specialty finance company will target middle-market companies with pre-tax earnings of $5 million to $75 million.
Katie Kuehner-HebertMarch 19, 2015
Goldman’s BDC Raises $120M

Goldman Sachs BDC opened trading on the New York Stock Exchange Wednesday after raising $120 million in an initial public offering. The firm is the latest business development company (BDC) backed by a Wall Street investment bank that will lend to businesses that do not have a credit rating.

The shares were trading on the New York Stock Exchange at $20.72 early Thursday afternoon, up 3% from the the stock’s first trade price.

In a press release announcing the pricing of the IPO at $20 per share, GS BDC said that it was an externally-managed specialty finance company formed by Goldman Sachs Group to invest primarily in U.S. middle-market companies with pre-tax earnings of $5 million to $75 million.

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“GS BDC seeks to generate current income and, to a lesser extent, capital appreciation through direct originations of secured debt, including first-lien, first lien/last-out, unitranche, and second-lien debt; unsecured debt including mezzanine debt; and, to a lesser extent, investments in equities,” the company said.

Goldman Sachs BDC said some of the IPO’s net proceeds would go toward repaying a portion of its outstanding senior unsecured revolving debt.

BDCs have pass-through tax structures, meaning as long as they distribute at least 90% of taxable income as dividends to investors they pay no corporate tax.

A Wall Street Journal article Wednesday said the Goldman BDC’s listing Wednesday “is the latest move by Wall Street to counter tighter rules on high-risk loans.”

“Rules adopted in the wake of the financial crisis restrict large financial firms’ capacity to make such loans and hold them on their balance sheets, a bid by regulators to reduce the risk of repeating the 2008 meltdown,” the WSJ wrote. “A host of private-equity firms and other big-name players in debt markets have been using BDCs to fuel a surge in nonbank lending.”

Credit Suisse also has a BDC, according to the WSJ.

In September, the company transferred a $221 million loan portfolio to a private fund managed by Credit Suisse Asset Management, and then at the start of the year, converted that fund to Credit Suisse Park View BDC Inc.

The Credit Suisse BDC is waiting for regulatory approval to begin operating, but in the meantime, Credit Suisse is “pitching stakes” in the new company, according to the WSJ.