Goldman feels the fallout of 1MDB

When Malaysia’s largest sovereign wealth fund asked bankers to pitch for work arranging a $750 million bond sale, one big name was conspicuous by its absence: Goldman Sachs.

The offering omitted the Wall Street firm from the list of banks invited to bid on that and other bond transactions, according to a person familiar with the matter.

During that time, Goldman Sachs slid down the Malaysian deal league tables, cold-shouldered by potential clients concerned about negative publicity from its dealings with 1Malaysia Development Bank.

The bank’s fall from grace in Malaysia stands in stark contrast to its prosperous run under Tim Leissner (below), the former star Goldman Sachs banker who drew many Malaysian clients to the firm and helped oversee three bond offerings for 1MDB in 2012 and 2013.

Chief Executive Officer Lloyd Blankfein guided Goldman deeper into emerging markets over the past decade, arguing that their rising influence in the global economy justified the higher risks involved.

Malaysia, where Goldman Sachs collected eye-popping fees from 1MDB about three years ago, has come to symbolize the potential outsize rewards of developing economies — but also the perils.

The fallout from working with 1MDB, the embattled investment fund at the center of investigations from the US to Singapore, has led to a wider collapse in Goldman Sachs’ once-thriving business in Malaysia, which it said a few years ago offered “very positive” prospects.

Work advising Malaysian clients on mergers and acquisitions, share offerings and bond issues has all but evaporated over the past few years, and several senior bankers involved in Malaysian dealmaking have left since 2013.

“I’m not sure how long it’ll take for Goldman to recover from this,” said Ang Ser Keng, a finance lecturer at Singapore University. “They will definitely hurt from this,” Ang said, referring to Goldman Sachs’ association with 1MDB.