The Federal Reserve stuck it to Warren Buffett today when it gave Goldman Sachs the greenlight to buy back the $5 billion of preferred stock Berkshire Hathaway bought when things got tense in 2008. As Goldman and Wall Street were in a bit of a bind at the time, Buffett was able to demand a set-up that made him more than $15 a second, or 12 pigs in a blanket from Omaha Steaks. Goldman was and is extremely appreciative of the help but now that things have calmed down and the firm is back to making it rain ka-ching on each other’s faces and the terms of the investment (special dividend payments of 10% a year on the bank’s preferred stock, plus warrants to buy shares of Goldman at $115/share) are, how to put this in a way WB will understand, like having the twin Geico cavemen play tug of war with your testicles– nice/somewhat intriguing under extraordinary circumstances/unusual dry-spells but fairly uncomfortable and not a place you want to be after the first or second yank, Lloyd and Co are happy to put the experience behind them.
The purchase includes a 10 percent premium on Buffett’s original $5 billion investment, a $125 million first-quarter dividend, and $24 million in accelerated dividends, said Stephen Cohen, a spokesman for the New York-based company. The redemption will cut first-quarter earnings per share by $2.84, the bank said in a statement today...The repayment to Buffett will also free Goldman Sachs’s top executives from a requirement that they retain 90 percent of their stock.
Being an Oracle, Buffett knew this was a long time coming, telling shareholders in his latest letter to brace themselves for the gravy train to be over but it doesn't mean he has to like it.