Wall Street giant Goldman Sachs Group Inc. (GS) has had a volatile year to date, with equity shares opening in January near $90, reaching a high of almost $130 in late March, and then falling to yesterday's $100 range. Economic analysts at the firm are bullish on U.S. macroeconomic prospects over the next quarter, citing "acceleration in consumer spending, an ongoing housing recovery, expanding industrial activity, steady employment growth, and continued disinflation" as reasons to be optimistic.
New fixed note issues from the firm, though, merit a closer look. Bond offering period for the notes in question is from July 31, 2012 to August 6, 2012; the bonds being offered by the firm range in maturity from 2018 to 2033, are non-callable, and are taxable. The notes with latest maturity mature on August 15, 2033, with CUSIP 38141EE88. Carrying ratings of A3/A-, these notes carry a monthly coupon of 4.75%. First coupon payment is on September 15, 2012; yield to maturity thus is 4.75%. Settlement date for investors taking part in this new issue offering is August 9, 2012, and the bonds are being offered for 100 cents on the dollar.
Examining the final prospectus for these bonds, it appears that interest payments on each tranche of notes will be made on a monthly basis on the 15th of each month until maturity. The notes also feature the survivor's option, which, in Goldman Sachs' own words, is as follows:
If requested, we will redeem the notes prior to their stated maturity date upon the death of a beneficial owner who has owned the notes for at least six months. We call this feature the survivor's option. The survivor's option is subject to a limit of $250,000 on the permitted principal amount exercisable by the estate of the deceased beneficial owner in any calendar year and to a limit of two percent of the principal amount of all outstanding notes of a tranche offered by this pricing supplement in any calendar year. We may waive those limits in our discretion. Any notes accepted for repayment through the exercise of the survivor's option will be repaid on the earlier of the June 15 or December 15 interest payment date that occurs 60 or more calendar days after the date of acceptance.
For investors who desire similar notes with more recent maturity, there are also three other titles being offered in the same package: the 3.25% notes due August 15, 2018 (CUSIP: 38141EE54); the 3.75% notes due August 15, 2020 (CUSIP: 38141EE62); and the 4.25% notes due August 15, 2024 (CUSIP: 38141EE70). All these fixed issues are denominated in $1,000 units. For those interested in more specifics, the full prospectus for these bonds can be found here.
Fixed-income investors should conduct their own due diligence on all potential investments before making final investment decisions. Investors should remember that the notes are not bank deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency. For investors looking to invest in corporate debt in the same sector, but who are uncertain about the prospects of this particular large investment bank, the debt of peer firms such as Bank of America (BAC), Citigroup (C), Credit Suisse, JPMorgan Chase & Co (JPM), Morgan Stanley (MS), Deutsche Bank AG (DB), and others might be examined.
Disclosure: I am long BAC.