Goldman Sachs 2012 Annual Report Download - page 174

Notes to Consolidated Financial Statements
The firm has the right to defer payments on the junior
subordinated debt, subject to limitations. During any such
extension period, the firm will not be permitted to, among
other things, pay dividends on or make certain repurchases
of its common or preferred stock. If the firm were to defer
payment of interest on the junior subordinated debt and the
2012 Trusts were therefore unable to make scheduled
distributions to the holders of the senior guaranteed trust
securities, under the guarantee, Group Inc. would be
obligated to make those payments to the holders of the
senior guaranteed trust securities.
The APEX Trusts and the 2012 Trusts are wholly-owned
finance subsidiaries of the firm for regulatory and legal
purposes but are not consolidated for accounting purposes.
In connection with the APEX issuance, the firm covenanted
in favor of certain of its debtholders, who were initially and
are currently the holders of Group Inc.’s 6.345% Junior
Subordinated Debentures due February 15, 2034, that,
subject to certain exceptions, the firm would not redeem or
purchase APEX or shares of Group Inc.’s Series E Preferred
Stock or Series F Preferred Stock prior to the date that is ten
years after the applicable stock purchase date, unless the
applicable redemption or purchase price does not exceed a
maximum amount determined by reference to the aggregate
amount of net cash proceeds that the firm has received from
the sale of qualifying securities.
Junior Subordinated Debt Issued in Connection with
Trust Preferred Securities. Group Inc. issued
$2.84 billion of junior subordinated debentures in 2004 to
Goldman Sachs Capital I (Trust), a Delaware statutory
trust. The Trust issued $2.75 billion of guaranteed
preferred beneficial interests to third parties and
$85 million of common beneficial interests to Group Inc.
and used the proceeds from the issuances to purchase the
junior subordinated debentures from Group Inc. The Trust
is a wholly-owned finance subsidiary of the firm for
regulatory and legal purposes but is not consolidated for
accounting purposes.
The firm pays interest semi-annually on the debentures at
an annual rate of 6.345% and the debentures mature on
February 15, 2034. The coupon rate and the payment dates
applicable to the beneficial interests are the same as the
interest rate and payment dates for the debentures. The firm
has the right, from time to time, to defer payment of interest
on the debentures, and therefore cause payment on the
Trust’s preferred beneficial interests to be deferred, in each
case up to ten consecutive semi-annual periods. During any
such extension period, the firm will not be permitted to,
among other things, pay dividends on or make certain
repurchases of its common stock. The Trust is not
permitted to pay any distributions on the common
beneficial interests held by Group Inc. unless all dividends
payable on the preferred beneficial interests have been paid
in full.
172 Goldman Sachs 2012 Annual Report