Goldman Bankers Roll Up Sleeves and Plead for LBOs to Return

Mint

02-06-2025

(Bloomberg) -- Leveraged finance bankers are ready to get to work. They're just waiting on clarity from everyone else: private equity firms, corporate borrowers and the Trump administration.
'Sponsors in the room, we're counting on you guys,' Goldman Sachs Group Inc.'s global head of credit finance, Christina Minnis, said at the firm's 10th annual leveraged finance and credit conference in Dana Point, California, on Thursday.
While mergers and acquisitions have picked up — alongside corporate borrowing — private equity sponsors are still having a tough time offloading their investments. Buyouts are more difficult, too, as global private equity fundraising has plunged. That's left Wall Street banks with fewer deals to finance.
'Sponsors are asking: 'How do I buy something today, and model what my exit looks like in three-to-five years?',' Chris Bonner, Goldman's head of US leveraged finance capital markets, said in an interview with Bloomberg News. 'There are so many things that you have to put into your model that are currently up in the air that is hard to define.'
Private equity sponsors, lenders and credit investors are still trying to parse how tariffs will affect corporate borrowers and which companies will be able to successfully adjust their supply chains or balance sheets to meet the new levies.
Almost two months after President Donald Trump announced sweeping global tariffs, trade is still making up most of the chatter between bankers. At the conference, held at the sprawling beach-side Waldorf Astoria Monarch Beach resort, they all got a sense of just how quickly trade regulations were changing. Some points made at 11:30 a.m. Pacific time were irrelevant just an hour later.
On Thursday morning, many conversations centered around one key question: would a US trade court ruling from the night before striking down the president's tariffs stick? The ruling could be appealed in court, and even if it was upheld, the Trump administration could impose tariffs through other laws.
'The president loves tariffs and hates bilateral trade imbalances,' Jan Hatzius, Goldman Sachs' chief economist, said at the conference.
By lunchtime in Dana Point — where conference-goers feasted on a buffet with everything from pasta salad to shrimp — a US court of appeals had struck down the ruling, pressing play on Trump's tariffs.
In light of tariffs and other inflationary pressures, there's 'a lot of credit dispersion,' Minnis said in an interview with Bloomberg TV on the sidelines of the conference Thursday.
'Big companies will be able to manage this,' Goldman Sachs Vice Chairman Robert Kaplan said during a presentation. 'The only reason they're struggling right now is because it's so abrupt.'
However, smaller companies 'don't have the levers to adjust,' Kaplan said, which will lead to more small ones closing or going out of business by the end of the year.
For credit investors, borrower names and their financials matter more than ever.
Credit investors like 'sleep-at-night' names, and companies that are familiar and resilient in a downturn, Bonner said in a separate interview with Bloomberg TV.
While there's still plenty of cash waiting to be invested, credit investors have less appetite for risk than they did pre-April, Bonner said.
--With assistance from Rene Ismail and Sonali Basak.
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