Goldman Sachs (NYSE:GS) is reportedly eyeing a big payday from its purchase of the US$1.8bn bond portfolio that sparked Silicon Valley Bank's (SVB) collapse.
According to a New York Times report citing DealBook, in exchange for buying US$21.4bln in debt from SVB, Goldman Sachs (NYSE:GS) is likely to make more than US$100mln.
During SVB’s final days, Goldman Sachs (NYSE:GS) wore multiple hats.
Firstly, it acted as SVB’s advisor during an attempted last-ditch US$2.25bln stock sale last week.
However, the capital raise was unsuccessful as depositors and investors alike fled from the bank, leading to the fire sale of its bonds.
Goldman Sachs (NYSE:GS) also purchased some of the bank’s debt in the bond portfolio transaction that led to its downfall, SVB revealed on Tuesday.
The assets sold to Goldman Sachs (NYSE:GS) on March 8 mostly consisted of US Treasuries and had a book value of US$23.97bln, SVB said.
The transaction was carried out “at negotiated prices” and netted the bank proceeds of US$21.45bn.
But with Goldman Sachs (NYSE:GS) acting as SVB’s advisor and its expected US$100mln payday from its purchase of the bank’s bond portfolio, questions have been raised over the firm’s actions, specifically, whether its 'ethical wall' compartmentalisation was sufficient.
In the case of Goldman Sachs, its bond purchase from SVB was handled by a division that was separate from the one that handled the bank’s stock sale, Reuters said citing a source familiar with the matter.
Per the New York Times, Goldman Sachs offered SVB the opportunity to hire another advisor to work on the bond deal, but the lender declined.
A Goldman Sachs spokesperson declined the publication’s request for comment.
Contact the author at emily.jarvie@proactiveinvestors.com
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