Goldman Sachs Launches First-of-its-Kind Bond Securitization

Posted on January 2nd, 2025 at 11:40 AM
Goldman Sachs Launches First-of-its-Kind Bond Securitization

From the desk of Jim Eccleston at Eccleston Law

Goldman Sachs recently introduced a $475 million asset-backed securitization (ABS) deal backed by capital-call loans, a type of financing Goldman provides to fund managers for immediate capital access. According to the Wall Street Journal, the bond securitization is designed to secure funds for private equity and private debt firms, reflecting the growing demand for innovative financial products on Wall Street.

Capital-call loans, similar to credit cards for private-fund managers, allow funds to borrow capital quickly for investments in private debt, real estate, and infrastructure. When institutions - often large pensions or insurance companies - fulfill their cash commitments to the funds, they repay the loans. With defaults on these capital-call commitments historically near zero, the Wall Street Journal reports that the bonds are seen as highly secure.

Goldman’s deal involves over 150 private funds with commitments from approximately 4,000 clients, including large sovereign wealth funds and U.S. pension systems. Credit-rating agency Morningstar DBRS gave a triple-A rating to $450 million of the bonds, with the remaining $25 million rated double-A.

However, as demand for alternative lending structures rises, concerns have emerged over the potential for broader financial risks, reminiscent of past ABS booms. Skeptics worry that future deals could involve riskier assets, potentially increasing investor exposure.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

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