Goldman Sachs 2003 Annual Report Download - page 54

Management’s Discussion and Analysis
52 GOLDMAN SACHS 2003 ANNUAL REPORT
Short-Term Borrowings
Goldman Sachs obtains unsecured short-term bor-
rowings through issuance of promissory notes, commer-
cial paper and bank loans. Short-term borrowings also
include the portion of long-term borrowings maturing
within one year and certain long-term borrowings that
may be payable within one year at the option of
the holder.
The following table sets forth our short-term borrowings:
SHORT-TERM BORROWINGS
AS OF NOVEMBER
(IN MILLIONS) 2003 2002
Promissory notes $24,119 $20,433
Commercial paper 4,767 9,463
Bank loans and other 8,183 4,948
Current portion of long-term
borrowings 7,133 5,794
Total $44,202 $40,638
Our liquidity depends to an important degree on our
ability to refinance these borrowings on a continuous
basis. Investors who hold our outstanding promissory
notes (short-term unsecured debt that is nontransferable
and in which Goldman Sachs does not make a market)
and commercial paper have no obligation to purchase
new instruments when the outstanding instruments
mature. See “—Risk Management — Liquidity Risk” for
a discussion of the liquidity policies we have in place to
manage the liquidity risk associated with our short-term
borrowings. For a discussion of factors that could im-
pair our ability to access these and other markets, see
“ — Certain Factors That May Affect Our Business.” See
Note 4 to the consolidated financial statements for fur-
ther information regarding our short-term borrowings.
Credit Ratings
Goldman Sachs relies upon the short-term and long-term
debt capital markets to fund a significant portion of its
day-to-day operations. The cost and availability of debt
financing is influenced by our credit ratings. Credit
ratings are important when we are competing in certain
markets and when we seek to engage in longer term
transactions, including OTC derivatives. We believe our
credit ratings are determined primarily based on the
credit rating agencies’ assessment of the external operat-
ing environment, our liquidity, market and credit risk
management practices, the level and variability of our
earnings, our franchise, reputation and management, and
our capital base. See “— Certain Factors That May
Affect Our Business” for a discussion of the risks associ-
ated with a reduction in our credit ratings.
The following table sets forth our credit ratings as of
November 2003:
SHORT-TERM LONG-TERM
DEBT DEBT
Dominion Bond Rating
Service Limited R-1 (middle) A (high)
Fitch F1+ AA-
Moody’s Investors Service P-1 Aa3
Standard & Poor’s A-1 A+
As of November 2003, collateral of $220 million would
have been callable in the event of a one-level reduction in
our long-term credit ratings, pursuant to bilateral agree-
ments with certain counterparties. In evaluating our li-
quidity requirements, we consider additional collateral
that could be called in the event of further reductions in
our long-term credit ratings, as well as collateral that has
not been called by counterparties, but is available to
them. For a further discussion of our excess liquidity poli-
cies, see “— Risk Management—Liquidity Risk —
Excess Liquidity Policies— Maintenance of a Pool of
Highly Liquid Securities.”