Goldman sells $5 billion stock to repay bailout loan
14 Apr 2009
US banking major Goldman Sachs Group Inc has sold stocks worth $5 billion to repay a federal bailout loan amidst growing concerns about the effectiveness of the US government's Troubled Asset Relief Programme for its failed banks.
Goldman said it has priced a public offering of 40,650,407 shares of its common stock at a price to the public of $123.00 per share for total gross proceeds of approximately $5 billion. In addition, Goldman, Sachs & Co, the sole underwriter, has an option to purchase up to an additional 6,097,561 shares of common stock to the extent that it sells more than 40,650,407 shares.
The sale of 40.65 million shares at $123 each, or 5.5 per cent below the Monday closing price of Goldman shares, gives the bank roughly half the funds it needs to return the $10 billion it took in TRAP loan.
Repaying the TRAP loan would free Goldman from government restrictions, including caps on executive pay. The bank had to lower its chief executive Lloyd Blankfein's compensation to $1.1 million last year from $70.3 million in 2007.
''We never believed the investment of taxpayer funds was intended to be permanent," Goldman CFO David Viniar said on a conference call. ''We view it as our duty to return the funds, as long as we can do it without negatively impacting our financial profile, or ability to act as a central liquidity provider to the global capital markets," he added.
The sale comes a day after Goldman posted better-then-expected quarterly earnings. Goldman on Monday posted a $1.66 billion first-quarter profit after preferred stock dividends, or $3.39 per share. It also said it lost $1.03 billion, or $2.15 per share, in December.
Viniar said profit resulting from payments from ailing insurer American International Group Inc "rounded to zero" in the first quarter.
New York-based Goldman Sachs Group Inc is a leading global financial services firm providing investment banking, securities and investment management services to a diversified client base that includes corporations, financial institutions, governments and high net worth individuals.