Goldman Sachs 2009 Annual Report Download - page 128

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Goldman Sachs 2009 Annual Report
126
Notes to Consolidated Financial Statements
Subordinated Borrowings
As of December2009 and November2008, unsecured long-
term borrowings were comprised of subordinated borrowings
with outstanding principal amounts of $19.16billion and
$19.26billion, respectively, as set forth below, of which
$18.87billion and $18.79billion, respectively, has been issued
by Group Inc.
Junior Subordinated Debt Issued to Trusts in Connection
with Fixed-to-Floating and Floating Rate Normal Automatic
Preferred Enhanced Capital Securities. In 2007, GroupInc.
issued a total of $2.25billion of remarketable junior subordinated
debt to GoldmanSachs CapitalII and GoldmanSachs CapitalIII
(APEX Trusts), Delaware statutory trusts that, in turn, issued
$2.25billion of guaranteed perpetual Normal Automatic
Preferred Enhanced Capital Securities (APEX) to third parties
and a de minimis amount of common securities to Group Inc.
Group Inc. also entered into contracts with the APEX Trusts
to sell $2.25billion of perpetual non-cumulative preferred
stock to be issued by Group Inc. (the stock purchase contracts).
The APEX Trusts are wholly owned  nance subsidiaries of the
rm for regulatory and legal purposes but are not consolidated
for accountingpurposes.
The  rm pays interest semi-annually on $1.75billion of
junior subordinated debt issued to GoldmanSachs CapitalII
at a  xed annual rate of 5.59% and the debt matures on
June1,2043. The  rm pays interest quarterly on $500million
of junior subordinated debt issued to GoldmanSachs
CapitalIII at a rate per annum equal to three-month LIBOR
plus 0.57% and the debt matures on September1,2043.
In addition, the  rm makes contract payments at a rate of
0.20%per annum on the stock purchase contracts held by the
The  rm enters into derivative contracts to effectively convert a substantial portion of its unsecured long-term borrowings which
are not accounted for at fair value into  oating rate obligations. Accordingly, excluding the cumulative impact of changes in
the  rm’s credit spreads, the carrying value of unsecured long-term borrowings approximated fair value as of December2009
and November2008. For unsecured long-term borrowings for which the  rm did not elect the fair value option, the cumulative
impact due to the widening of the  rm’s own credit spreads would be a reduction in the carrying value of total unsecured long-
term borrowings of less than 1% and approximately 9% as of December2009 andNovember2008, respectively.
The effective weighted average interest rates for unsecured long-term borrowings are set forth below:
As of
December2009 November2008
($ inmillions) Amount Rate Amount Rate
Fixed rate obligations
Group Inc. $ 1,896 5.52% $ 1,863 5.71%
Subsidiaries 2,424 5.46 2,152 4.32
Floating rate obligations (1) (2)
Group Inc. 173,189 1.33 156,609 2.66
Subsidiaries 7,576 1.20 7,596 4.23
Total $185,085 1.42 $168,220 2.73
(1) Includes  xed rate obligations that have been converted into  oating rate obligations through derivative contracts.
(2) The weighted average interest rates as of December2009 and November2008 excluded  nancial instruments accounted for at fair value under the fair
valueoption.