Goldman Sachs BDC amends revolver to OK higher leverage

The New York-based alternative lender won approval from its shareholders in June to tap additional borrowing capacity under new US federal statutes.

Goldman Sachs BDC (GSBD) has amended its revolving credit facility to include provisions allowing the company to elevate its leverage to a 2:1 debt-to-equity ratio, a measure the business development company’s shareholders approved earlier this summer.

For its revolving credit facility, which has a $695 million borrowing base, SunTrust Bank serves as administrative agent and Bank of America as syndication agent. Some $393 million is outstanding. The facility does have an uncommitted accordion feature that would boost the overall facility’s borrowing base to $1 billion.

Earlier this year, the firm received overwhelming approval from its stockholders at a June meeting, with 14.05 million votes supporting the New York-based mid-market lender and 661,566 votes against. In tandem, the firm lowered its management fee from 1.5 percent to 1 percent.

Shortly after GSBD won approval to increase its leverage profile, the firm earned an investment-grade label from Fitch Ratings but was downgraded to speculative status by S&P – and later had its rating withdrawn.

“This amendment to our credit facility marks the last necessary approval in that process, and we look forward to continuing to execute our core strategy of direct lending to middle market businesses, but with the added benefit of a broader product set for borrowers,” Brendan McGovern, GSBD chief executive, said in a Monday statement.

The firm had yet to set a specific new range for its target leverage, though its portfolio’s risk profile will dictate its approach to levering up, GSBD said on its second-quarter earnings call last month. If the BDC holds a larger amount of senior loans in its book, it may take on a greater amount of leverage than if the portfolio held less exposure to senior loans, executive had said.

The maximum leverage that the BDC may take on would be 1.5x, the firm said. That cap is the proportional equivalent to the its maximum leverage profile under a 1:1 debt-to-equity ratio limit, which was 0.75x.