On Mar 19, Reuters reported that Goldman Sachs Group Inc. (GS) has issued additional debt of $750 million in senior notes in order to reopen existing notes in the market. This has increased the size of Goldman’s senior note offering from the previously planned issue of $500 million. As a result, the current outstanding amount of senior note offering totals $2.75 billion.
Accordingly, Goldman’s note offering includes $750 million of notes at an issue price of $99.812, maturing on Mar 15, 2020. These notes are projected to have a spread of 175 basis points over the U.S. Treasury, bearing a fixed interest rate of 5.375% and yield rate of 5.399%. Interest on the notes is payable semi-annually, in equal installments, commencing Sep 15, 2010, settlement being on Mar 26, 2010.
The debt issue carries a rating of “A1″, “A“, “A-Plus” from Moody’s, Standard & Poor’s and Fitch, respectively. Goldman has appointed itself as the sole book-running manager for the sale. The net proceeds from debt offering are expected to be utilized for general corporate purposes, repayment of short-term debt and capital expenditure among others.
Estimate Trend Revision
Over the last month, 1 of 17 analysts covering the stock lowered expectation for the first quarter of 2010, while no upward revision was witnessed. Currently, the Zacks Consensus Estimate for first quarter is operating earnings of $4.22 per share, which would be down by 24.5% from the year-ago quarter.
The absence of upward estimate revisions for the first quarter indicates a likelihood of downward pressure on the performance of the stock in the near term.
With respect to earnings surprises, the stock has been steady over the last four quarters, with all four positive surprises. The average remained positive at 41.8%. This implies that Goldman has surpassed the Zacks Consensus Estimate by 41.8% over that period.
The downside potential for the estimate for the first quarter, essentially a proxy for future earnings surprises, currently stands at 26.5%.
However, we believe that Goldman has performed better than market expectations and survived the financial crisis. The company benefited from its low exposure to toxic mortgage-backed securities and increased client activity.
Although current litigation issues on consumer lending and higher bonus payments continue to bother Goldman, we believe the company is poised to grow significantly with its well-diversified business model and a more conducive operating environment.
Read the full analyst report on “GS”
Zacks Investment Research