Goldman cuts debt, looks for assets
(29 September 2008 – USA) Goldman Sachs, after changing status to a bank holding company will raise funds and purchase assets in order to reduce its borrowing levels.
Goldman Sachs has agreed to sell US$5 billion (A$6 billion) worth of preferred shares to Warren Buffett’s Berkshire Hathaway.
Berkshire Hathaway has also secured an agreement to potentially buy the same amount again of Goldman stock.
At the same time, Goldman said it was planning to raise US$2.5 billion from other investors.
Goldman’s new regulator, the US Federal Reserve, has demanded that Goldman Sachs reduce its borrowings, a move with the primary application of increasing investor confidence.
The perpetual preference shares purchased by Buffett will pay out an interest rate of 10 percent. He may gain a further advantage of a 10 percent premium if Goldman chooses to purchase the stock back.
In addition, Goldman Sachs is also looking to buy up to US$50 billion in assets. The bank has planned to talk to US regulators to find assets it could buy from struggling US banks.
The Financial Times reported that Goldman was looking to buy the assets as part of its transition into commercial banking.
It said that those assets would be in addition to the US$150 billion of its own assets it is moving to its Utah industrial loan corporation, a bank regulated in that state.
Berkshire Hathaway has also secured an agreement to potentially buy the same amount again of Goldman stock.
At the same time, Goldman said it was planning to raise US$2.5 billion from other investors.
Goldman’s new regulator, the US Federal Reserve, has demanded that Goldman Sachs reduce its borrowings, a move with the primary application of increasing investor confidence.
The perpetual preference shares purchased by Buffett will pay out an interest rate of 10 percent. He may gain a further advantage of a 10 percent premium if Goldman chooses to purchase the stock back.
In addition, Goldman Sachs is also looking to buy up to US$50 billion in assets. The bank has planned to talk to US regulators to find assets it could buy from struggling US banks.
The Financial Times reported that Goldman was looking to buy the assets as part of its transition into commercial banking.
It said that those assets would be in addition to the US$150 billion of its own assets it is moving to its Utah industrial loan corporation, a bank regulated in that state.
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