New ABACUS details Reuter’s reporter Matthew Goldstein revealed in his latest story suggest that Goldman went into the ABACUS deal keeping in mind self-interests that were beyond just collecting a fee from Paulson.
Reuters dug into the ABACUS prospectus and found documents that show that, at least at first, Goldman planned to include Greywolf CLO 1 in the collateral for ABACUS. Greywolf CLO 1 is a security Goldman had underwritten earlier that year in 2007.
In short, the potential inclusion of Greywolf in ABACUS could raise the possibility of Goldman’s self dealing. Perhaps Goldman wanted to get crap off their balance sheets in addition to just doing a solid for their client, John Paulson, for whom ABACUS was created.
Greywolf was founded by a group of ex-Goldman distressed bond traders and underwritten by Goldman Sachs. In the instance that the institutional buyers were concerned about Goldman’s not disclosing some material detail (like if they thought that Greywolf’s being underwritten by Goldman was material), it could prove problematic – maybe. Big maybe though.
Greywolf was actually quite a better investment than ABACUS was. Morgan Stanley repackaged some of its pieces into a new $130 million CLO in 2009, by which time ABACUS was long dead. So Greywolf’s investors weren’t crushed like ABACUS’s and they are less likely to file something against Goldman.
Another reason we think it could be a non-issue is that the Greywolf offering documents probably (we don’t have a copy, though it was apparently attached to the ABACUS prospectus originally) had the same disclosure as ABACUS, which said that Goldman Sachs might have access to “non-publicly available information” about the collateral and, because of that, “this presentation may not contain all information that would be material to the evaluation of the merits and risks of purchasing the notes.”
They say up front, “we might not be including material information.” That pretty much covers their bases.
Now judge for yourself if Goldman did anything wrong in the full timeline of the ABACUS deal –>
Read the full Reuters scoop on Greywolf –>
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