Goldman Sachs in moving to pay off an expensive 2008 investment from Warren E. Buffett, has officially put one of the most difficult periods in its history behind it. The Federal Reserve on Friday blessed the balance sheet of the Wall Street firm, paving the way for it to pay back the $5 billion investment, made during the darkest days of the financial crisis.
The deal was a lifeline for Goldman but it came at a hefty price, namely a 10 percent annual dividend that amounted to about $500 million a year.
Goldmans payoff means that Mr. Buffett will get his principal back and a $500 million bonus because the firm is paying back the investment early. It was due to expire in 2013. He will also receive dividends earned in recent months for a total payment of $5.64 billion.
Still, he stood to make much more without an early redemption. Indeed, Mr. Buffett often joked that should Goldman call to let him know it wanted to pay off the investment early, he would dodge the call.
In total, the investment netted the billionaire investor $1.7 billion, or roughly $190,000 a day.
Goldman to Pay Back Warren Buffett - NYTimes.com
The deal was a lifeline for Goldman but it came at a hefty price, namely a 10 percent annual dividend that amounted to about $500 million a year.
Goldmans payoff means that Mr. Buffett will get his principal back and a $500 million bonus because the firm is paying back the investment early. It was due to expire in 2013. He will also receive dividends earned in recent months for a total payment of $5.64 billion.
Still, he stood to make much more without an early redemption. Indeed, Mr. Buffett often joked that should Goldman call to let him know it wanted to pay off the investment early, he would dodge the call.
In total, the investment netted the billionaire investor $1.7 billion, or roughly $190,000 a day.
Goldman to Pay Back Warren Buffett - NYTimes.com