Goldman Sachs Group Inc (NYSE:GS) said that, in last week it has wrongly added approximately $1.5 million of interest costs to a Ford Motor Company (NYSE:F) bond sale by using the incorrect Treasury note as a benchmark for the security during transaction.
As compensation, the auto maker was charged a minor underwriting fee for the bid of $1 billion of 5 year, 2.875% notes from the company finance division, according to unnamed source.
The automaker paid 0.1% lower in fees as compare to last two sales of same-maturity debt, regulatory filings revealed.
The New York-based bank which is in 2013 has considered as sixth-largest underwriter of corporate bonds internationally, took the auto maker public in 1956, during this time John Thornton, ex- executive at the bank, was a part of the auto company’s board.
Ashish Shah, of head of global credit Alliance Bernstein Holding LP (NYSE:AB) has said this kind of mistakes by Goldman Sachs is unusual in capital markets, who wasn’t drawn in the sale. He also added, he can’t remember this kind of error in his life. As this is a human mistake so almost certainly this kind of mistake won’t be repeated for a long time at the company.
Margaret Mellott a spokesman for Ford and Michael DuVally, a spokesman for Goldman Sachs has said they will not provide details of the bond sale.
But according to the report of Bloomberg, in 2013 the New York-based bank has raised $141.3 billion for firms in debt offerings. The auto maker 26 September offering, the bank added a 1.45% spread to the 1.375% Treasury note to be paid until September 2018 that was auctioned on 25 September.
Normally, banks locate the price of fresh corporate securities by using Treasury bonds with same kind of maturities. If the U.S. government release notes in during the week, underwriters will no longer use that security as a standard until the next Monday. Goldman Sachs Group Inc (NYSE:GS) shares dropped -1.24% to $156.65 in current session.
Ford paid 0.25% or $2.5 million, of the bond’s value, to underwrite the sale in contrast with a 0.35% in last two issues in five-year. Ford Motor Company (NYSE:F) shares fell -1.28% to $16.99 in current session.