GS Capital Partners has asked investors in its $20 billion sixth buyout fund to approve a shift in strategy, allowing the firm to invest half of the remaining $9 billion in distressed investments and securities.
Goldman needs the approval of a majority of investors in the fund other than capital invested by the firm itself, which totals about $9 billion, according to a spokeswoman.
The fund, which closed in April 2007, has roughly $9 billion of uninvested capital, of which about $4.5 billion will be used for distressed investments. About $1.5 billion of the fund would go to firms Goldman already owns and $3 billion would go to fresh deals.
Along with distressed investing, Goldman has moved into providing debt as well. The firm closed its $10.5 billion debut debt fund last year to provide secured loans for leveraged buyouts, recapitalisations and acquisitions. GS Loan Partners I consists of equity and leverage and more than $1 billion of the fund was contributed by the firm and its employees.
Several other firms have moved into the distressed investing space, including mega-firm TPG, which closed a $6 billion fund for investments in distressed financial institutions last year. The firm eventually cut the value of the fund down, giving its investors the option to shrink commitments.
Apollo Global Management founder Leon Black admitted at a conference in January that the firm’s move to acquire roughly $15 billion in discounted senior loans last year was “probably a little early”. Black said the firm bought the debt at about 80 cents on the dollar, but it is trading at around 60 cents on the dollar today.