It seems just yesterday that Textron was getting some love from Goldman Sachs. It took less than two weeks for the company to turn around and reciprocate the favor, by issuing $600 million in new notes, on new and improved sentiment for pent up private jet demand courtesy of Goldman, and allotting the 85 Broad Street based hedge fund a juicy place in the ranks of Joint book runners.
But luckily, Goldman expressely highlighted this upcoming conflict of interest at the time when it upgraded the company:
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Textron Inc. ($15.50)
Another potential conflict to be aware of: looking at the Uses of Funds, one uncovers the following: "We plan to use the net proceeds from the issuance of the notes for general corporate purposes, which may include the repayment or repurchase of certain of our debt."
And just who are the Lead Arrangers and Joint Bookrunners as disclosed on Textron's most recent $750 Million Credit Agreement from October 26, 2007: why Citi, Bank of America and, you guessed it, Goldman Sachs (each responsible for $250 million of the total amount). And what were the particular uses of that specific Credit Agreement you may ask. It appears the funds raised were simply meant to buyback stock. Time for another reminder: whose prop desk is a big holder of TXT stock? Time to take a look at the Goldman conflicts disclosure one more time:
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be aggregated under US securities law) as of the second most recent month end: Textron Inc. ($15.50)
But at least President Obama is asking Wall Street bankers to look deep inside and find their conscience, so as not to repeat the mistakes of the past in the absence of any form of credible regulation. With such actions, Goldman is clearly on its way to finding its inner beauty.