Goldman Sachs 2007 Annual Report Download - page 69

Management’s Discussion and Analysis
of Group Inc. The commitments extended by Commitment
Corp. are supported, in part, by funding raised by William
Street Funding Corporation (Funding Corp.), another consolidated
wholly owned subsidiary of Group Inc. whose assets and
liabilities are also legally separated from other assets and
liabilities of Goldman Sachs. With respect to most of the
William Street commitments, SMFG provides us with credit
loss protection that is generally limited to 95% of the first loss
we realize on approved loan commitments, up to a maximum
of $1.00 billion. In addition, subject to the satisfaction of certain
conditions, upon our request, SMFG will provide protection for
70% of the second loss on such commitments, up to a maximum
of $1.13 billion. We also use other financial instruments to
mitigate credit risks related to certain William Street commitments
not covered by SMFG.
Our commitments to extend credit also include financing for
the warehousing of financial assets to be securitized. These
financings are expected to be repaid from the proceeds of
the related securitizations for which we may or may not act
as underwriter. These arrangements are secured by the
warehoused assets, primarily consisting of corporate bank
loans and commercial mortgages as of November 2007 and
residential mortgages and mortgage-backed securities, corporate
bank loans and commercial mortgages as of November 2006.
See Note 6 to the consolidated financial statements for further
information regarding our commitments, contingencies and
guarantees.
The following table sets forth our commitments as of November 2007:
Commitments
Commitment Amount by Fiscal Period of Expiration
(in millions) 2008 2009 – 2010 2011– 2012 2013 – Thereafter Total
Commitments to extend credit
Commercial lending:
Investment-grade $ 4,456 $ 3,108 $ 3,248 $ 907 $ 11,719
Non-investment-grade 2,956 2,969 6,845 29,160 41,930
William Street program 2,571 4,046 16,929 942 24,488
Warehouse financing 3,386 1,224 — — 4,610
Total commitments to extend credit 13,369 11,347 27,022 31,009 82,747
Forward starting resale and securities
borrowing agreements 24,269 3,867 — — 28,136
Forward starting repurchase and securities
lending agreements 15,392 — — — 15,392
Commitments under letters of credit
issued by banks to counterparties 8,281 271 183 12 8,747
Investment commitments 6,180 7,827 1,594 2,157 17,758
Underwriting commitments 88 — — — 88
Total $67,579 $23,312 $28,799 $33,178 $152,868
Our commitments to extend credit are agreements to lend
to counterparties that have fixed termination dates and are
contingent on the satisfaction of all conditions to borrowing
set forth in the contract. In connection with our lending
activities, we had outstanding commitments to extend credit
of $82.75 billion as of November 2007 compared with
$100.48 billion as of November 2006. Since these commitments
may expire unused or be reduced or cancelled at the counter-
party’s request, the total commitment amount does not necessarily
reflect the actual future cash flow requirements. Our commercial
lending commitments are generally extended in connection
with contingent acquisition financing and other types of corporate
lending as well as commercial real estate financing. We
may seek to reduce our credit risk on these commitments by
syndicating all or substantial portions of commitments to other
investors. In addition, commitments that are extended for
contingent acquisition financing are often intended to be short-
term in nature, as borrowers often seek to replace them with
other funding sources.
Substantially all of the commitments provided under the
William Street credit extension program are to investment-
grade corporate borrowers. Commitments under the program
are extended by William Street Commitment Corporation
(Commitment Corp.), a consolidated wholly owned subsidiary
of Group Inc. whose assets and liabilities are legally separated
from other assets and liabilities of Goldman Sachs, William
Street Credit Corporation, GS Bank USA, Goldman Sachs Credit
Partners L.P. or other consolidated wholly owned subsidiaries
67Goldman Sachs 2007 Annual Report