Brief: Goldman Sachs Group Inc. boosted the size of a new credit fund to $14 billion in what is shaping up to be one of the largest debut investment vehicles ever raised. The bank, which set out with a target of $5 billion to $10 billion, is now expecting to finish fundraising with a $14 billion war chest to pour into companies in need of fresh liquidity. A Goldman representative confirmed the goal for the first in a new family of funds, called West Street Strategic Solutions Fund I. The $14 billion mark is notable for the first iteration of a fund series new to investors. Such funds seldom crack $10 billion on their first go-round barring one exception: the $100 billion SoftBank Vision Fund, which is in a league of its own. The Goldman credit fund will provide a boost to the bank’s goal of raising $100 billion for investing in what’s known in the industry as alternatives. Instead of guiding client cash into plain-vanilla asset classes such as stocks and bonds, the funds are focused on seeking outsize returns in less-trafficked corners of the market including distressed credit, real estate and private equity. Fundraising success will also help cement Julian Salisbury’s profile as one of Goldman’s most powerful executives. The 48-year-old Brit has climbed rapidly, from running a secretive and successful group betting Goldman’s money inside its trading group, to now helping run a newly created division that rivals the firm’s dealmaking group in size and profitability, second only to the markets division.
Brief: Private equity firms TPG and Onex Corp. are preparing bids for bankrupt Hertz Global Holdings Inc.’s car leasing business Donlen, according to people with knowledge of the matter. TPG and Onex are working on offers that could value Donlen at about $1 billion, said the people, who asked not to be identified because they weren’t authorized to speak publicly. Rivals of Hertz are also considering bids, the people said. A representative for TPG declined to comment. Representatives for Onex and Hertz didn’t respond to requests for comment. Donlen performs fleet management functions such as vehicle leasing, maintenance and registration, according to its website. Hertz sees the business as non-core and is willing to sell it to help pay down debt, the people said. Hertz listed $24.4 billion in debt when it filed for bankruptcy in May. The company is negotiating with its creditors for financing after months of funding itself during bankruptcy, people with knowledge of the talks said last month. It’s considering two tentative loan offers of $1 billion to $1.5 billion, which could help bolster operations that have been hurt by the coronavirus pandemic and slump in travel, according to one of the people. Donlen made about $100 million in earnings before interest, taxes, depreciation and amortization last year, Bloomberg News has reported. Hertz bought the Bannockburn, Illinois-based business for $947 million including debt in 2011.
Brief: A research report commissioned by SDL, the intelligent language and content company, reveals that more than half (52 per cent) of European asset management firms have implemented client engagement, and digital marketing and communications technology, sooner than anticipated due to the Covid-19 pandemic. The pan-European research, conducted by WBR Insights, also discovered that almost a third (32 per cent) of firms admitted experiencing technical problems while implementing new digital technology during the pandemic. “There is no doubt that the pandemic focused hearts and minds on the protection of clients and their investments,” says Christophe Djaouani, EVP Regulated Industries, SDL. “It’s been a wake up moment for the industry, and they know they need to implement more robust client engagement and communications technology if they want to stay ahead of the increasing demands of anxious clients.” Asset management firms also plan to embrace digital marketing communications much more with nearly half (48 per cent) expecting to implement their initiatives across all their available digital channels this year, according to the research. Almost a third (27 per cent) admit that ROI is the key driver that led their firm to adopt digital communications to meet their clients’ needs.
Brief: More than half of companies plan to shrink their offices as working from home becomes a regular fixture after the Covid-19 pandemic ends, according to a survey by Cisco Systems Inc. Some 53% of larger organizations plan to reduce the size of their office space and more than three quarters will increase work flexibility. Almost all of the respondents were uncomfortable returning to work because they fear contracting the virus, the poll found. Cisco, the largest maker of networking equipment, recently surveyed 1,569 executives, knowledge workers and others who are responsible for employee environments in the post-Covid era. The findings suggest many of this year’s radical changes to work life will remain long after the pandemic subsides. The poll, conducted for Cisco by Dimensional Research, concluded that working from home is the “new normal.” More than 90% of respondents said they won’t return to the office full time. 12% plan to work from home all the time, 24% will work remotely more than 15 days of each month, while 22% will do that eight to 15 days every month. Cisco’s Webex video conferencing service has benefited from lockdowns that have kept millions of people working and studying from home. It’s also faces rising competition from Zoom Video Communications Inc.
Brief: When it comes to post-pandemic deal-making, blank-check companies and other alternatives are winning out over traditional mergers and acquisitions, according to a survey from consulting firm Deloitte published on Tuesday. A record number of special purpose acquisition companies (SPACs), which raise money in an initial public offering to be used for any type of acquisition, have gone public this year, with business titans including Bill Ackman and Reid Hoffman, co-founder of LinkedIn, creating huge pools of capital to be invested. Forty-five percent of U.S. corporate executives said they are most interested in pursuing SPACs, alliances, and joint ventures, while only 35 percent cited traditional acquisitions or merging with another company, according to Deloitte, which polled 1,000 executives at companies and private equity firms… Deloitte had seen the trend toward alternatives in M&A before the Covid-19 pandemic struck in March, but the economic impact of the virus has forced companies to consider every option given the low-growth environment, said Mark Purowitz, principal, Deloitte’s mergers and acquisitions consulting practice, and leader of the firm’s Future of M&A initiative, in an interview.
Brief: The Securities and Exchange Commission today published a staff report titled U.S. Credit Markets: Interconnectedness and the Effects of the COVID-19 Economic Shock, which focuses on the origination, distribution and secondary market flow of credit across U.S. credit markets. The staff report also addresses how the related interconnections in our credit markets operated as the effects of the COVID-19 pandemic took hold. In addition, staff will host a Roundtable on Interconnectedness and Risk in U.S. Credit Markets to discuss the issues raised in the report on the afternoon of Oct.14. In the U.S. credit markets, banking and non-banking entities and intermediaries are intricately and inextricably interconnected. These interconnections are essential for the functioning of the markets, the provision of credit and the distribution of risk. These interconnections can also transmit and amplify risks in times of stress. The report identifies these interconnections and, with that framework, discusses how the COVID-19 economic shock reverberated through the credit markets in March and April 2020. The principal purpose of the report is to identify and place in context key structural- and flow-related interdependencies in the U.S. credit markets as well as areas of stress revealed by the COVID-19 shock, with an eye toward informing policymakers as they seek to improve the functioning and resilience of our financial markets. The report does not make policy recommendations. The report is accompanied by a cover letter from SEC Chairman Jay Clayton and SEC Chief Economist S.P. Kothari and will be discussed at the roundtable, which includes policymakers and market participants, on Oct. 14.