Goldman Sachs 2009 Annual Report Download - page 129

Goldman Sachs 2009 Annual Report
127
Notes to Consolidated Financial Statements
APEX Trusts. The  rm has the right to defer payments on
the junior subordinated debt and the stock purchase contracts,
subject to limitations, and therefore cause payment on the
APEX to be deferred. During any such extension period,
the  rm will not be permitted to, among other things, pay
dividends on or make certain repurchases of its common or
preferred stock. The junior subordinated debt is junior in
right of payment to all of Group Inc.’s senior indebtedness
and all of Group Inc.’s other subordinated borrowings.
In connection with the APEX issuance, the  rm covenanted
in favor of certain of its debtholders, who are initially
the holders of GroupInc.’s 6.345% Junior Subordinated
Debentures due February 15, 2034, that, subject to
certain exceptions, the  rm would not redeem or purchase
(i)GroupInc.’s junior subordinated debt issued to the
APEXTrusts prior to the applicable stock purchase date
or (ii)APEX or shares of GroupInc.’s SeriesE 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  rm has received from the sale of
qualifying equity securities during the 180-day period
preceding the redemption or purchase.
The  rm accounted for the stock purchase contracts as equity
instruments and, accordingly, recorded the cost of the stock
purchase contracts as a reduction to additional paid-in capital.
See Note9 for information on the preferred stock that GroupInc.
will issue in connection with the stock purchase contracts.
Junior Subordinated Debt Issued to a Trust 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 that, in turn,
issued $2.75billion of guaranteed preferred bene cial interests
to third parties and $85million of common bene cial
interests to Group Inc. and invested the proceeds from the
sale in junior subordinated debentures issued by Group Inc.
The Trust is a wholly owned  nance subsidiary of the  rm
for regulatory and legal purposes but is not consolidated for
accounting purposes.
The  rm pays interest semi-annually on these 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 bene cial interests are the same as the
interest rate and payment dates applicable to the debentures.
The  rm has the right, from time to time, to defer payment
of interest on the debentures, and, therefore, cause payment
on the Trust’s preferred bene cial interests to be deferred, in
each case up to ten consecutive semi-annual periods. During
any such extension period, the  rm 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 bene cial interests held
by Group Inc. unless all dividends payable on the preferred
bene cial interests have been paid in full. These debentures
are junior in right of payment to all of Group Inc.’s senior
indebtedness and all of Group Inc.’s subordinated borrowings,
other than the junior subordinated debt issued in connection
with the APEX.
Subordinated Debt. As of December2009, the  rm had
$14.07billion of other subordinated debt outstanding, of
which $13.78billion has been issued by Group Inc., with
maturities ranging from 2012 to 2038. The effective weighted
average interest rate on this debt was 1.51%, after giving effect
to derivative contracts used to convert  xed rate obligations
into  oating rate obligations. As of November2008, the  rm
had $14.17billion of other subordinated debt outstanding,
of which $13.70billion has been issued by Group Inc., with
maturities ranging from  scal 2009 to 2038. The effective
weighted average interest rate on this debt was 1.99%, after
giving effect to derivative contracts used to convert  xed rate
obligations into  oating rate obligations. This debt is junior in
right of payment to all of the  rm’s senior indebtedness.