Goldman Gets Buffett Aid in $7.5 Billion Fundraising

Sept. 24 (Bloomberg) -- Goldman Sachs Group Inc. won the backing of Warren Buffett, the world's preeminent stock-picker, as the Wall Street firm seeks to raise cash from investors whose faith in the investment-banking business model has been shaken.

The bank soared 11 percent to $138.17 in German trading today. For Goldman, the endorsement came at a price. Berkshire Hathaway Inc., led by the 78-year-old billionaire, is buying $5 billion of perpetual preferred stock with a 10 percent dividend. Berkshire also gets warrants to buy $5 billion of common stock at $115 a share at any time in the next five years. The common stock closed yesterday at $125.05, providing Buffett with an instant paper profit of $437 million.

``It's a hell of a deal for Buffett,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. who rates Goldman stock ``market perform.'' ``The key thing for Goldman is making it through the credit cycle, and they're doing the right stuff.''

Goldman Chief Executive Officer Lloyd Blankfein is turning to Buffett, the second-richest American after Microsoft Corp. founder Bill Gates, to boost market confidence even though the investment bank hasn't reported a quarterly loss since it went public in 1999. The bankruptcy of Lehman Brothers Holdings Inc. and emergency sale of Merrill Lynch & Co. to Bank of America Corp. on Sept. 15 have fueled fears about firms that rely on bond markets for funding.

Goldman advanced to $138.17 by 9:15 a.m. in Germany from its close at $125.05 in New York yesterday.