8-KOther EventsExhibits & Filings

GOLDMAN SACHS GROUP INC 8-K Report, Corporate Update (Dec 1, 2011)

Filed December 1, 2011For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

On November 29, 2011, The Goldman Sachs Group, Inc. (GS) announced that Standard & Poor’s Ratings Services (S&P) downgraded its credit ratings. The long-term debt rating was lowered to 'A-' from 'A', and the short-term debt rating to 'A-2' from 'A-1'. The rating outlook was revised to 'Negative' from 'Stable'. This downgrade reflects S&P's ongoing review of the creditworthiness of major financial institutions amid a challenging economic environment. In addition to the credit rating action, the filing also notes the issuance of $7,325,000 in Currency-Linked Notes due 2014 by GS on November 30, 2011. These notes were issued under the company's automatic shelf registration statement, indicating ongoing capital market activities. While the downgrade itself is a key event, investors should also consider the company's continued access to capital markets, as evidenced by the new debt issuance.

Key Highlights

  • 1Standard & Poor’s downgraded Goldman Sachs Group Inc.'s long-term debt rating to 'A-' from 'A'.
  • 2The short-term debt rating was lowered to 'A-2' from 'A-1'.
  • 3The rating outlook for GS was revised to 'Negative' from 'Stable' by S&P.
  • 4The downgrade is part of S&P's broader review of large financial institutions.
  • 5Goldman Sachs Group Inc. issued $7,325,000 in Currency-Linked Notes due 2014 on November 30, 2011.
  • 6The debt issuance occurred under an automatic shelf registration statement, indicating ongoing capital raising activities.

Frequently Asked Questions

The downgrade is part of Standard & Poor’s ongoing review of the credit ratings of a number of the largest financial institutions, reflecting the challenging economic environment at the time.

The new ratings as of November 29, 2011, are: Short-Term Debt 'A-2', Long-Term Debt 'A-', Subordinated Debt 'BBB+', Trust Preferred 'BB+', and Preferred Stock 'BB+'. The outlook is 'Negative'.

The filing indicates that Goldman Sachs Group, Inc. issued $7,325,000 in Currency-Linked Notes due 2014. This issuance, under an automatic shelf registration statement, suggests the company continues to access capital markets, which is a normal part of corporate finance, rather than necessarily indicating immediate financial distress.

A credit rating downgrade can potentially increase borrowing costs for the company, affect its ability to enter into certain transactions, and impact investor confidence. The 'Negative' outlook suggests that further downgrades are possible if market conditions or the company's financial performance do not improve.