Goldman tries to drum up leveraged finance business as trading, stock sales slow

[NEW YORK] Goldman Sachs Group Inc is hosting its first ever leveraged finance conference next week as the Wall Street bank looks to strengthen its position in debt underwriting, where it has traditionally been weak.

The event is a key step for Goldman as it tries to convince clients to turn to it for debt financing rather than bigger competitors like JPMorgan Chase & Co, people familiar with the matter told Reuters.

Goldman is increasingly looking for new avenues of growth as strict regulations have curbed profits in bond trading and volatility has essentially frozen the market for initial public offerings.

Conferences are important for banks to drum up business, because they get clients and bankers in the same place to network, socialize and discuss potential deals. Goldman's conference will be held at an oceanfront resort in Rancho Palos Verdes, California, and features venture capitalist Steve Jurvetson and CNBC television host Marcus Lemonis as keynote speakers.

A Goldman spokesman declined to comment on the event.

Leveraged finance can be lucrative for Wall Street during boom times, but also comes with a good deal of risk when credit markets come under stress and banks can get stuck holding debt they are unable to sell. Deals typically involve private-equity firms - known as "sponsors" - using a lot of debt to buy companies, with the goal of reselling them for a profit.

Goldman usually acts as an advisor to companies being sold in these deals, rather than to buyers. But it is now advising sponsors as part of a broader effort to boost lending, said the sources, who were granted anonymity to discuss internal business plans.

Last week, Goldman and Barclays PLC advised private equity firm Hellman & Friedman in a deal to buy healthcare cost management company MultiPlan Inc for around US$7.5 billion. Goldman also helped finance Silver Lake and Thoma Bravo's US$4.5 billion purchase of software company SolarWinds Inc last year. The bank is now looking to finance smaller deals as well, sources said.

As Goldman delves further into leveraged finance, some other banks are backing away from the business. Nomura Holdings Inc and Jefferies Group LLC are among those that have recently cut staff, Reuters previously reported.

Although Goldman's revenue from debt underwriting and its ranking for US high yield bond issuance both increased significantly during the first quarter, analysts said it was too early to tell if it will be able to compete with larger banks for business.

"They'll probably be successful generating incremental revenue, but will Goldman be able to take all the large clients away (from the bigger banks?)," said Brian Kleinhanzl, an analyst with Keefe Bruyette Woods. "Not necessarily."

REUTERS