Goldman Sachs 2015 Annual Report Download - page 186

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The APEX Trusts and the 2012 Trusts are Delaware
statutory trusts sponsored by the firm and wholly-owned
finance subsidiaries of the firm for regulatory and legal
purposes but are not consolidated for accounting purposes.
The firm has covenanted in favor of the holders of Group
Inc.’s 6.345% junior subordinated debt due
February 15, 2034, that, subject to certain exceptions, the
firm will not redeem or purchase the capital securities
issued by the APEX Trusts or shares of Group Inc.’s
Series E or Series F Preferred Stock prior to specified dates
in 2022 for a price that exceeds a maximum amount
determined by reference to the 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 debt in 2004 to
Goldman Sachs Capital I (Trust), a Delaware statutory
trust. The Trust issued $2.75 billion of guaranteed
preferred beneficial interests (Trust Preferred Securities) 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 debt from Group Inc.
During 2014 and the first quarter of 2015, the firm
purchased $1.43 billion (par amount) of Trust Preferred
Securities and delivered these securities, along with
$44.2 million of common beneficial interests, to the Trust
in exchange for a corresponding par amount of the junior
subordinated debt. Following the exchanges, these Trust
Preferred Securities, common beneficial interests and junior
subordinated debt were extinguished. Subsequent to these
extinguishments, the outstanding par amount of junior
subordinated debt held by the Trust was $1.36 billion and
the outstanding par amount of Trust Preferred Securities
and common beneficial interests issued by the Trust was
$1.32 billion and $40.8 million, respectively. 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 junior
subordinated debt at an annual rate of 6.345% and the
debt matures 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
junior subordinated debt. The firm has the right, from time
to time, to defer payment of interest on the junior
subordinated debt, 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 deferral 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.
Note 17.
Other Liabilities and Accrued Expenses
The table below presents other liabilities and accrued
expenses by type.
As of December
$ in millions 2015 2014
Compensation and benefits $ 8,149 $ 8,368
Noncontrolling interests 1459 404
Income tax-related liabilities 1,280 1,533
Employee interests in consolidated funds 149 176
Subordinated liabilities issued by
consolidated VIEs 501 843
Accrued expenses and other 28,355 34,751
Total $18,893 $16,075
1. Primarily relates to consolidated investment funds.
2. Substantially all of the increase from December 2014 to December 2015
relates to provisions for the agreement in principle with the Residential
Mortgage-Backed Securities Working Group of the U.S. Financial Fraud
Enforcement Task Force (RMBS Working Group). See Note 27 for further
information about this agreement in principle.
3. Includes $783 million of liabilities classified as held for sale related to certain
of the firm’s consolidated investments in Europe. See Note 13 for further
information.
174 Goldman Sachs 2015 Form 10-K