8-KShareholder MattersCorporate ChangesOther Events+1

GOLDMAN SACHS GROUP INC 8-K Report, Rights Modification (Jul 27, 2016)

Filed July 27, 2016For Securities:GSGS-PAGS-PCGS-PDGSCE

Summary

Goldman Sachs Group, Inc. (GS) filed an 8-K on July 26, 2016, reporting the establishment of its 5.30% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series O. This filing details the terms of this new preferred stock, including its liquidation preference of $25,000 per share. Importantly, the issuance of this Series O Preferred Stock has a direct impact on Goldman Sachs' ability to manage its common stock, as it introduces restrictions on dividend payments and share repurchases for common stock in the event of a missed dividend on the preferred series. Furthermore, the issuance of $650 million in aggregate liquidation amount of the Series O Preferred Stock on July 27, 2016, satisfied a crucial financing condition for the company's ongoing cash tender offer. This tender offer, aimed at repurchasing up to $650 million of its "Apex" preferred securities, had its terms and conditions remain unchanged, with the offer set to expire on August 16, 2016, unless extended or terminated.

Key Highlights

  • 1Goldman Sachs issued new 5.30% Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series O.
  • 2The Series O Preferred Stock has a liquidation preference of $25,000 per share.
  • 3Failure to pay dividends on Series O Preferred Stock imposes restrictions on Goldman Sachs' ability to pay common stock dividends or repurchase common stock.
  • 4The issuance of $650 million of Series O Preferred Stock fulfills a financing condition for a concurrent tender offer.
  • 5The tender offer aims to repurchase up to $650 million of 'Apex' preferred securities.
  • 6The tender offer remains subject to its original terms and conditions, with an expiration date of August 16, 2016.

Frequently Asked Questions

The Series O Preferred Stock issuance is primarily for capital management purposes, as indicated by its role in satisfying a financing condition for the company's tender offer. It also establishes a new class of preferred equity for the company.

The most significant impact for common stockholders is the potential restriction on dividend payments and share repurchases of common stock. If Goldman Sachs fails to pay dividends on the Series O Preferred Stock, it may be prohibited from paying common stock dividends or buying back common shares until the preferred dividends are met.

The 'Apex' tender offer is an initiative by Goldman Sachs to repurchase up to $650 million of its 'Apex' preferred securities. The issuance of the Series O Preferred Stock on July 27, 2016, specifically satisfied the financing condition required for this tender offer to proceed under its existing terms. This suggests the company is likely refinancing or restructuring its capital base.

The Series O Preferred Stock is described as '5.30% Fixed-to-Floating Rate Non-Cumulative'. This means it initially pays a fixed rate of 5.30%, which can convert to a floating rate at a future point. Importantly, the dividends are 'non-cumulative,' meaning any missed dividend payments are not carried forward and must be paid in the current period to avoid triggering the restrictions mentioned.