Goldman Sachs plans rights issue to repay $10-billion Treasury loan

13 April 2009

Goldman Sachs, the sixth biggest bank in the US in terms of assets, is preparing to issue new shares worth $6 billion to shareholders to repay the $10 billion it was given by the US government as part of the Treasury's $700 billion bailout scheme.

Several small US banks have already repaid their loans. These include the Signature Bank of New York ($120 million), Old National Bancorp of Indiana ($100 million), Iberiabank of Louisiana ($90 million), and Bank of Marin Bancorp of Novato, California ($28 million).

All the banks paid 5 per cent interest on the money they had received.

The details of the cash call would most likely come after the banking group reveals its first quarter figures in New York tomorrow, which are expected to show a return to profitability following its first quarterly loss at the end of 2008.

A 47-per cent gain in the Goldman share price this year and a return to profitability in the first quarter might help the bank's chief executive officer Lloyd Blankfein raise new money, analysts said.

Also, Goldman is understood to be confident that it will pass the stress test and is therefore keen to get the $6 billion rights issue out of the way as quickly as possible.