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Goldman Builds Ambitious Role In Buyout Realm - WSJ.com
October 31, 2006 | WSJ | By HENNY SENDER

Goldman Builds Ambitious Role In Buyout Realm
Loans to Private-Equity Firms Edge Out Commercial Bankers; Wearing Hat as Investors, Too

Investment banks are building their financing capabilities as they build their own buyout, or private-equity, businesses....Goldman's footprint has been especially deep on complicated deals like Texas Genco. The power company was bought by the four buyout firms -- Blackstone Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. and Texas Pacific Group. When those private-equity firms won Texas Genco in a hotly contested auction, they counted on Goldman for several aspects of their offer.

In addition to arranging the loans, Goldman arranged derivatives transactions that protected the new owners against the possibility of a plunge in energy prices. This hedge gave comfort to other lenders, making the financing less costly than it would otherwise have been.

Similarly, in 2005, when Cerberus Capital Management LP bought paper and timber operations from MeadWestvaco for $2.3 billion, Goldman led the financing and arranged hedges for the new owners against fluctuations in the prices of pulp, natural gas and currencies.

"If a deal requires creativity, Goldman will figure out how to make it work," says Scott Sperling of private-equity firm Thomas H. Lee Partners LP in Boston.
buyouts  private_equity  Goldman_Sachs  funding  LBOs  Cerberus  investment_banking  creativity  derivatives  hedging  owners 
april 2012 by jerryking
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