Goldman Sachs Helps a French Utility Tap the US Commercial Paper Market

ThemeS: Clients | Innovation

Électricité de France power plant.

Just over a century after Goldman Sachs began dealing in commercial paper, the firm leads a commercial paper issuance for state-owned electric utility Électricité de France in 1974, the first ever in the United States on behalf of a foreign government entity.

The commercial paper market in the United States was large and rapidly growing in the high-interest-rate environment of the 1970s. In 1974, the volume of commercial paper issued exceeded past highs, as short-term borrowers found commercial paper rates as much as two percentage points below the prime rate charged by commercial banks. At the time, Goldman Sachs was the world’s largest commercial paper dealer and held approximately 40 percent of the domestic market.

When French state-owned utility Électricité de France (ÉdF) sought funds for a nuclear power construction program that year to lessen its dependence on foreign oil, Goldman Sachs—along with Crédit Lyonnais and Morgan Guaranty Trust Co.—privately arranged a 10-year US$500 million Eurodollar revolving credit line for ÉdF.

A few months after the loan was underwritten, ÉdF began issuing commercial paper in New York. Goldman Sachs managed the commercial paper sale for ÉdF—the first ever in the United States on behalf of a foreign government entity. The paper, which carried French government backing, offered ÉdF a lower short-term borrowing cost than the prevailing Eurodollar rate (near 12.5 percent versus around 13.75 percent for 90-day paper). 

The ÉdF issuance underscored Goldman Sachs’ leadership position in the commercial paper market globally and served as another example of the firm’s innovative financing approaches. Goldman Sachs also helped several US companies issue commercial paper for the first time in 1974, among them Carrier Corporation, Federated Department Stores, Inc., and Minnesota Mining and Manufacturing Company (now 3M).

Goldman Sachs would go on to work with ÉdF in the years that followed on other financings, including a twelve-year syndicated bank loan for US$1.1 billion in 1979.