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Rating Action:

Moody's lowers Goldman's hybrid securities ratings

25 Feb 2010

Approximately $13 billion of hybrids affected

New York, February 25, 2010 -- Moody's Investors Service downgraded its ratings on certain Goldman Sachs Group hybrid securities in line with its revised Guidelines for Rating Bank Hybrids and Subordinated Debt published in November 2009. Moody's downgraded Goldman's junior subordinated debt securities with cumulative deferral features to A3 from A2. Goldman's cumulative preferred securities were downgraded to Baa1 from A3, and its non-cumulative preferred securities were downgraded to Baa2 from A3. Also, Goldman Sachs Capital Trust II and III, which have issued trust preferred securities that eventually convert to non-cumulative preferred securities, were downgraded to Baa2 from A3. This concludes the review for possible downgrade that began on November 18, 2009. The rating outlook for Goldman and its subsidiaries remains negative.

Prior to the global financial crisis, Moody's had incorporated into its ratings an assumption that support provided by national governments and central banks to shore up a troubled bank would, to some extent, benefit the subordinated debt holders as well as the senior creditors. The systemic support for these instruments has not been forthcoming in many cases. The revised methodology largely removes previous assumptions of systemic support, resulting in today's rating action. In addition, the revised methodology generally widens the notching on a hybrid's rating that is based on the instrument's features.

RATING ACTION IN DETAIL

The starting point in Moody's revised approach to rating hybrid securities is the Adjusted Baseline Credit Assessment (Adjusted BCA). The Adjusted BCA reflects a bank's standalone credit strength, including parental and/or cooperative support, if applicable, but excludes systemic support. The starting point for Goldman Sachs Group's ratings is the Adjusted BCA of A1 for Goldman Sachs Bank, which is then adjusted for structural subordination for securities issued by the holding company or its subsidiaries.

The ratings on the following hybrid securities are affected:

Goldman Sachs Capital I trust preferred securities were downgraded to A3 due to their junior subordinated claim in liquidation and cumulative deferral features.

Goldman Sachs Series G cumulative preferred securities were downgraded to Baa1 due to their deeply subordinated claim in liquidation and cumulative coupon skip mechanism.

Goldman Sachs Series A, B, C, and D non-cumulative preferred securities were downgraded to Baa2 due to their deeply subordinated claim in liquidation and non-cumulative coupon skip mechanism.

Goldman Sachs Capital II and III trust preferred securities were downgraded to Baa2 due to their eventual conversion to preferred securities, which have a deeply subordinated claim in liquidation and a non-cumulative coupon skip mechanism.

PREVIOUS RATING ACTIONS AND MOODY'S METHODOLOGIES

The previous rating action on Goldman Sachs was on November 18, 2009, when Moody's placed on review for possible downgrade the hybrid securities of Goldman Sachs and its subsidiaries.

The principal methodologies used in rating Goldman Sachs were Moody's "Global Securities Industry Methodology", published in December 2006, and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", published in March 2007, Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt published November 17, 2009, which are available on www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Please visit www.moodys.com to access the following documents for additional information:

Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt -- November 17, 2009

Frequently Asked Questions: Moody's Guidelines for Rating Bank Hybrid Securities and Subordinated Debt -- November 17, 2009

The following ratings were affected:

Issuer: Goldman Sachs Group, Inc. (The)

..Downgrades:

....US$750M Preferred Stock Series A, CUSIP 38143Y665, Downgraded to Baa2 from A3

....US$800M Preferred Stock Series B, CUSIP 38144X500, Downgraded to Baa2 from A3

....US$200M Preferred Stock Series C, CUSIP 38144X609, Downgraded to Baa2 from A3

....US$1350M Preferred Stock Series D, CUSIP 38144G804, Downgraded to Baa2 from A3

....US$5000M Preferred Stock Series G, CUSIP n.a., Downgraded to Baa1 from A3

.... Cumulative Preferred Shelf, SEC Registration 333-154173, Downgraded to (P)Baa1 from (P)A3

.... Non-cumulative Preferred Shelf, SEC Registration 333-154173, Downgraded to (P)Baa2 from (P)A3

Issuer: Goldman Sachs Capital I

..Downgrades:

....US$2750M Preferred Stock, CUSIP 38143VAA7, Downgraded to A3 from A2

Issuer: Goldman Sachs Capital II

..Downgrades:

....US$1750M Preferred Stock, CUSIP 381427AA1, Downgraded to Baa2 from A3

.... Preferred Stock Shelf, SEC Registration 333-154173, Downgraded to (P)Baa2 from (P)A2

Issuer: Goldman Sachs Capital III

..Downgrades:

....US$500M Preferred Stock, CUSIP 38144QAA7, Downgraded to Baa2 from A3

.... Preferred Stock Shelf, SEC Registration 333-154173, Downgraded to (P)Baa2 from (P)A2

Issuer: Goldman Sachs Capital IV

..Downgrades:

.... Preferred Stock Shelf, SEC Registration 333-154173, Downgraded to (P)A3 from (P)A2

Issuer: Goldman Sachs Capital V

..Downgrades:

.... Preferred Stock Shelf, SEC Registration 333-154173, Downgraded to (P)A3 from (P)A2

Issuer: Goldman Sachs Capital VI

..Downgrades:

.... Preferred Stock Shelf, SEC Registration 333-154173, Downgraded to (P)A3 from (P)A2

New York
Peter E. Nerby
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
David Fanger
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's lowers Goldman's hybrid securities ratings
No Related Data.
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