Goldman to be paid $1bn if CIT fails

By Henny Sender and Saskia Scholtes in New York

http://www.ft.com/cms/s/9170b5f2-b1....com/vb/showthread.php?t=79743&nclick_check=1

Published: October 4 2009 22:30 | Last updated: October 4 2009 22:30

Goldman Sachs stands to receive a payment of $1bn – while US taxpayers would lose $2.3bn – if embattled commercial lender CIT files for Chapter 11 bankruptcy protection, people familiar with the matter said.

The payment stems from the structure of a $3bn rescue finance package that Goldman extended to CIT on June 6 2008, about five months before the Treasury bought $2.3bn in CIT preferred shares to prop it up at the height of the crisis. The potential loss for taxpayers would be the biggest to crystalise so far from the government’s capital injection plan for banks.

The agreement with Goldman states that if CIT defaults or goes bankrupt, it “would be required to pay a make-whole amount” that totals $1bn, the people familiar with the matter said.

While Goldman is entitled to demand the full amount, it is likely to agree to postpone payment on a part of that sum, these people added. A CIT filing last week said that it was in negotiations with Goldman “ concerning an amendment to this facility”.

Goldman said: “This would not be a windfall payment. The make-whole payment is simply the present value of the spread to be earned over the life of the facility.”

CIT declined to comment. In an effort to prevent bankruptcy, it is working on a debt exchange offer that would virtually wipe out equity holders. In the event of bankruptcy, Goldman would reap more than $1bn because it also holds credit insurance that would be paid off.

Goldman said: “The credit default swaps Goldman Sachs purchased to prudently manage the risk associated with the CIT financing are not a directional ‘bet’ on CIT, but were bought to protect against the possibility of a precipitous decline in the value of the collateral.”

 

I'm sure the members at Goldman have already arranged the BK of CIT, by the way.

 

$1 billion is chump change to goldman. Traders and Management at Goldman would be insulted if they get less than $1 billion in their bonus pool.

 

Thanks for keeping up with the GS rhetoric. In case you still fail to see the brilliance then you are simply dumb (which you showcased you probably are ;-)

 

Suck my nutsack, piker.

You are a truly pathetic individual, and must cream your pants whenever Goldman Sachs goes on a rape and pillaging (of the U.S. taxpayer) spree.

 

GS got their hands on this company way before the Gov. did. CIT agreed to the deal so I don't see how you can associate the U.S. taxpayers into this equation.

 

Goldie wouldn't have even survived without the 14 billion they pocketed from the Paulson bailout of AIG, nor the tens of billions of taxpayer-extracted money the government gave other Goldman counterparties.

 

Goldman Sachs is a cancer on this country.

 

someone with logic, something that seems to be a rare commodity these days...

 

lol, and even if that was true (which it was most probably not) you are claiming GS is not allowed to make profitable deals anymore for the rest of its life? Seriously, WHAT IS YOUR FUCKING POINT???