Goldman Sachs Saves the Teamsters?

This is a strange story. Bloomberg headlined, Goldman Sachs Helps YRC Avert Bankruptcy Following Hoffa’s Plea as if Goldman Sachs saved America's largest trucking company from default.

Goldman Sachs Group Inc. helped YRC Worldwide Inc. complete a debt swap to avert bankruptcy after the Teamsters union said the bank was trying to profit from a failure of the largest U.S. trucker by sales.

A group consisting of Goldman Sachs, Deutsche Bank AG, Aristeia Capital LLC, Silverback Asset Management and a Smith Management LLC unit, “got us over the goal line by going into the market, buying bonds and tendering them,” YRC Chief Executive Officer Bill Zollars said yesterday.

YRC extended the deadline for the bond exchange six times in December as it sought to overcome resistance from bondholders owning derivatives that would pay out if the company defaulted. YRC, which has posted $1.7 billion in losses in the past five quarters, needed to complete the exchange by Dec. 31 to avoid a bank payment that would have left the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said in a regulatory filing two weeks ago.

International Brotherhood of Teamsters President James Hoffa said in letters last month to regulators and lawmakers that Goldman Sachs and Deutsche Bank were among banks that “have a history of making markets in these types of derivative financial products.”

Goldman Sachs spokesman Michael DuVally said Dec. 17 that the bank was “actively exploring ways to help” YRC.

Yet just a few days ago, the Teamsters President, Hoffa, requested the SEC look into YRC's credit default swaps:

International Brotherhood of Teamsters President James Hoffa is asking the U.S. Securities and Exchange Commission and New York State Attorney General Andrew Cuomo to review “questionable promotion” of credit- default swaps tied to trucking company YRC Worldwide Inc.

I guess a bunch of bond holders were using derivatives to possibly destroy the trucking company. YRC had $19 million in fees and interests due to pay for a CDS if the company defaulted, which would have wiped them out.

Here's the meat of the issue:

Facing a slump in freight demand, YRC is locked in a struggle with a group of bondholders who own derivatives that would pay out if the company defaults.

So, a bunch of derivatives traders had placed bets YRC would default in the form of our favorite derivative, credit default swaps.

It also appears Goldman Sachs was trading these bets for YRC's demise:

Goldman Sachs sent e-mails to debt investors on Dec. 16 offering pricing levels on YRC bonds and credit-default swaps and saying that $25 million of the bonds and swaps were “trading here,”

So, YRC managed to get a debt for equity exchange to advert bankruptcy at the 11th hour and will now survive.

But did Goldman Sachs really help YRC or did they begrudgingly do something for a company who could offer up quite a bit of testimony in Congressional hearings?

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GS avoidance

It sounds like GS is attempting to save their butts from more highly factual negative publicity about their chronically criminal behavior.

One wonders if any of their limo drivers are Teamsters? Either way, I doubt the Mary Schapiro-compromised SEC will do anything other than their usual feckless behavior, especially as that "law enforcer" they recently appointed was from Goldman Sachs to begin with!

Nope, the only way to respond to GS is the old Hoffa way.....

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also AFL-CIO testimony

was incredibly damning on GS and derivatives in general.

So, yes, I think this was due to the PR/press that would have ensued had it come out that GS helped destroy a real company providing real jobs...

but destroying real companies with real jobs has been going on since the 1980's.

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