Goldman Sachs gets $10 billion in fresh capital

Goldman Sachs, scrambling to strengthen a balance sheet questioned by investors, sold $5 billion of common stock in a public …

Goldman Sachs, scrambling to strengthen a balance sheet questioned by investors, sold $5 billion of common stock in a public offering today, twice as much as originally planned.

The offering, on top of Warren Buffett's $5 billion investment in Goldman last night, delivers $10 billion of fresh capital to help reduce the riskiness of the bank's $1.1 trillion balance sheet.

The Buffett investment in a major boost for the Wall Street bank from perhaps the world's best-known investor.

In morning trade, Goldman shares rose nearly 4 per cent to $128.86 on the New York Stock Exchange.

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Mr Buffett's Berkshire Hathaway is buying $5 billion of Goldman "perpetual" preferred shares, which are not convertible into equity but pay a dividend of 10 per cent.

Mr Buffett also received warrants for the purchase of $5 billion of Goldman common stock over five years. Together, the warrants and the bank's public offering boost Goldman's shares outstanding by about 19 per cent, based on the bank's average

Shares outstanding in the third quarter.

Goldman's stock price was hammered last week by investors worried that the highly leveraged Wall Street broker-dealer model was no longer viable. A little more than a week ago, Lehman Brothers Holdings Inc filed for bankruptcy and Merrill Lynch & Co fled to a merger with Bank of America Corp.

Goldman - and rival Morgan Stanley - responded on Sunday by scrapping the investment bank model, changing themselves into bank holding companies under Federal Reserve oversight and securing permanent access to central bank funding.

By raising more than $10 billion of capital in less than 16 hours, Goldman has raised its Tier 1 capital ratio to 14.3 per cent and its total capital ratio to 17.8 percent -- both in excess of regulatory standards.