Goldman to buy Buffett's $5 billion preferred shares
Mar 21, 2011 at 5:34 PM
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Photo credit to William Banzai

The Buffett bailout is over.  More to come on this story.


(Reuters) - Goldman Sachs Group Inc will buy back $5 billion of preferred stock from Warren Buffett, ending a costly deal that helped shore up confidence in the bank at the height of the financial crisis.

The buyback has been expected for some time, given the relatively unfavorable terms for the investment bank, which paid Buffett's Berkshire Hathaway $500 million a year in dividends, or more than $15 a second.

The firm is paying a 10 percent premium to buy back the shares, as well as accrued and unpaid dividends, and a one-time preferred dividend of $1.64 billion. Repurchase terms were agreed in September 2008, when the deal was struck.

The transaction is expected to reduce reported earnings per share for the first quarter by about $2.80, plus another 4 cents for accelerated dividends. Certain financial details were outlined earlier in the firm's 10-K report.

"Berkshire Hathaway's 2008 investment in Goldman Sachs was a major vote of confidence in our firm and we are very appreciative of it," Goldman said in a statement.

Buffett lamented the likely redemption of the shares in his annual letter to shareholders last month.

"Goldman Sachs has the right to call our preferred on 30 days notice, but has been held back by the Federal Reserve (bless it!), which unfortunately will likely give Goldman the green light before long," he wrote in the letter.

Buffett also invested $3 billion in General Electric preferred stock with similar terms in 2008. GE Chief Executive Jeffrey Immelt has said he would like to retire the stock as soon as possible, perhaps some time this year.

A spokeswoman for GE did not immediately respond to questions about when the company might redeem the stock, which costs GE about $300 million each year.

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Another Goldman development from last week:

Goldman cuts 5 percent of trading desk

(Reuters) - Goldman Sachs Group Inc (GS.N) laid off 5 percent of its trading desk staff on Tuesday as part of its annual review process, sources familiar with the matter said on Thursday.

There were layoffs in other divisions as well and more are expected in coming weeks, with the goal of trimming the worst-performing 5 percent of Goldman's entire staff, the sources said on condition of anonymity.

The sources did not have an estimate on how many Goldman employees were or will be affected by these cuts. At year-end, Goldman had 35,700 employees, suggesting that 1,785 will be let go in total, not factoring in new hires.

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From last month:

Ken Lewis Paid `Crazy Price' For Merrill Lynch, Buffett Says



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