Goldman Sachs ventures deep

5 March 2016 – by Mike Cobb

GBP

It has issued close to £269m of debt, which was used to buy CarVal’s 50% share of a portfolio of £2.6bn of loans. Those loans were issued and sold by Lloyds Bank and secured against Irish property.

The three-year Goldman Sachs loan, which has a one-year extension option, amounts to 65% of the £414m paid by CarVal.

Loan-on-loan financing has become a lucrative avenue for real estate lending teams at investment banks this cycle, with reduced competition from cheaper clearing banks.

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CarVal and Goldman Sachs’ special situations group together bought the Poseidon portfolio for £827m, reflecting a 68% discount on the face value of the loans.

The sale of the portfolio brought to an end Lloyds’ exposure to Irish property, which dramatically hampered the bank post-crisis. The underlying value of the commercial loans within Poseidon had a face value of £2.6bn, with £2.3bn considered impaired or worse.

The loan to CarVal has a complex structure, giving Goldman security over the entire pool of assets, but only over CarVal’s portion, thus avoiding conflicts with its equity position.

The deal is likely to be syndicated in the coming weeks. Goldman will not be pursuing a securitisation owing to thin investor appetite for CMBS and a series of failed deals in the sector last year.

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