Goldman Sachs Group Inc is set to sell significant risk transfer (SRT) tied to a portfolio of approximately $3 billion of leveraged loans, as reported by The Edge Malaysia. This deal involves notes linked to revolving credit facilities and term loans, with terms currently under discussion with potential investors. The announcement was made on September 12, 2024, amid a backdrop of increasing caution among U.S. investors in junk debt regarding leveraged loans due to a slowing economy. Last week, borrowers had already pulled back on leveraged loan deals following disappointing jobs data, with only six loans worth $3.3 billion sold, significantly below the $10 billion weekly average for the year. JetBlue Airways was among the few to complete a transaction, selling a $750 million loan deal. [8aa4c376] [5fa00512] [fd26ca4d]
The leveraged loan market has seen a notable shift, with leveraged loan funds reporting $3.1 billion in outflows, the highest since March 2020. The Morningstar LSTA US Leveraged Loan Index also fell 0.55% on August 5, marking its worst daily performance since the collapse of Silicon Valley Bank. While some opportunistic transactions were put on hold due to market volatility, investor demand for new loan deals has exceeded net loan supply by at least $130 billion this year. The Basel III Endgame rules are expected to increase regulatory capital requirements by 9% for the eight largest U.S. banks, which may further influence the dynamics of the leveraged loan market. SRTs have gained popularity, particularly among European banks, as they typically offer investors a floating-rate coupon with yields often exceeding 10%. [2e6211f7] [8aa4c376]