Leveraging its invaluable experience on the first two privatizations of toll roads in the country, Goldman, Sachs & Co. expanded its municipal finance group and changed the group’s management structure in a bid to better respond to client needs, the firm announced yesterday.
Goldman, which served as a financial adviser on the trailblazing $1.83 billion Chicago Skyway privatization and the $3.85 billion lease of the Indiana Toll Road, named Tracy Wolstencroft as head of the municipal finance and infrastructure group. The firm also named Frank Ingrassia, who previously headed municipal finance, as the group’s chairman. Mark Florian, who worked on both toll road deals, became the group’s chief operating officer.
The change comes as Goldman’s financial adviser ranking improved to 10th last year from 16th in 2004, but its senior management rankings slipped to ninth from fourth in 2004 and first in 1996, according to Thomson Financial. The firm is ranked fifth among senior managers so far this year.
Underwriting will remain the group’s core business, but it will also work with the investment bank’s financing group to provide its clients with a broad range of structured products and will continue to expand its presence in the infrastructure area. The firm will be looking to hire new people in the future, Wolstencroft said.
“This is all about Goldman Sachs deepening its investment in the municipal finance area and broadening its product platform for our clients,” he said in an interview. “The core underwriting business of our municipal group will continue. But what we also want to do is work with our clients to solve other issues that might involve using structured products, derivatives, and public-to-private partnerships. Each of those disciplines requires an integrated team approach across divisions of Goldman Sachs.”
Wolstencroft, 47, has been with the firm since 1985 and has served as co-head of investment banking services in the Americas since 2002. He has extensive investment banking experience both in the U.S. and abroad, but this position is his first foray into public finance.“This appointment reinforces the importance of both the municipal and infrastructure businesses to our franchise,” the firm said in an internal announcement.
The changes were announced internally last week and were made public yesterday. Jeff Moslow will continue to lead investment banking services in the Americas. Ingrassia, 52, who is a former chairman of the Municipal Securities Rulemaking Board, will be responsible for driving relationships among municipalities and government agencies. Ingrassia has background in public power and has been with Goldman for almost 25 years.
“It’s a major enhancement of our commitment to the business,” Ingrassia said about the expanded municipal finance and infrastructure group. “We have always had a strong franchise in debt and derivatives, but Goldman Sachs sees an opportunity in the privatization and infrastructure businesses that is broader than traditional financing techniques, and this will give us entirely new products that historically haven’t been available.”
State and local issuers are increasingly looking at opportunities to raise money for budgetary and transportation needs through a long-term lease of public infrastructure facilities to private operators.
Florian, 48, who has worked as a financial adviser on the Chicago Skyway and the Indiana Toll Road privatizations, will lead the firm’s efforts in the public-private partnerships after relocating from Chicago to New York earlier this year.
The 99-year lease of the Chicago Skyway to a consortium of international infrastructure developers was the first such transaction in the U.S., but the structure has been more widely used abroad.
The deal, which closed in January, highlighted the growing appetite among investors for infrastructure projects. It also proved lucrative for advisers, who received about $12 million in fees for their work on the deal.
Indiana followed in Chicago’s steps, while other states are working on legislation that would allow them to enter into public-private partnerships. In a 75-year deal that is scheduled to close in June, Indiana leased the Indiana Toll Road for $3.85 billion to an international consortium, including Australia’s Macquarie Infrastructure Group and Spain’s Cintra Concesiones de Infraestructuras de Transporte SA. Both firms were also involved in the Chicago Skyway deal.
In the internal announcement about the changes within the firm, Goldman said the municipal finance and infrastructure group will “further pursue a prominent position in the growing strategic advisory and principal investing business involving public-to-private partnerships and will partner with the newly-established Infrastructure Fund to source and execute principal opportunities.”
According to news reports, Goldman is raising a $3 billion fund to invest in various infrastructure projects, following similar moves by other banks and private equity groups. The firm did not comment on the fund for this article, but Wolstencroft said Goldman is prepared to work with state and local governments that want to monetize their investments in specific infrastructure assets both “as an adviser and as a principal.”
Florian had previously said that Goldman is a minority equity player in the proposed sale of the Dulles Toll Road in Virginia to Australia’s TransUrban.