Published April 01, 2013
NEW YORK – Goldman Sachs Group Inc has registered a fund that invests in risky credit products as a publicly traded business development company, a way for the bank to avoid some regulations that would otherwise limit its activity.
Goldman's Liberty Harbor Capital LLC unit will invest in middle-market companies that have weak credit ratings and are underserved by banks, according to a registration filing on Friday with the U.S. Securities and Exchange Commission.
Liberty Harbor typically invests in bonds and loans that are not rated by credit ratings agencies, but would be considered less than investment-grade.
Reuters first reported on Goldman's plans for the Liberty Harbor business in January.
Goldman does not expect Liberty Harbor to be subject to the Volcker rule, which would restrict its ability to sponsor or invest in such funds, the bank said in the filing.
Business development companies are specifically exempt from the Volcker rule.
Liberty Harbor also qualifies as an "emerging growth company" under the JOBS Act, which will allow it to "take advantage of...reduced reporting and other burdens" that would otherwise be applicable to a publicly traded firm.
Liberty Harbor will mainly invest in companies with adjusted earnings of $5 million to $75 million a year, across a variety of sectors. Its investments will range in size between $5 million and $50 million, and last from three to 10 years.
Goldman provided seed funding to the business on November 15, and since then Liberty Harbor has invested about $73 million in eight companies.
(Reporting By Lauren Tara LaCapra; Editing by Leslie Adler)