Goldman Sachs Group Inc., which yesterday reported its secondquarterly loss in 12 years, sold $500 million of 50-year unsecuredbonds in a transaction aimed at individual investors.

Goldman Sachs sold the debt in increments of $25 at a yield of6.5 percent after doubling the size of the offering, according todata compiled by Bloomberg. The New York-based firm has the optionto redeem the bonds at par after five years, according to a filingwith the Securities and Exchange Commission.

The transaction was the second Goldman Sachs has targeted atindividual investors, allowing the firm to diversify its sources ofcapital while locking in “attractive” borrowing costs, said JamesLeonard, a credit analyst at Morningstar Inc. in Chicago. GoldmanSachs issued $1.3 billion of 6.125 percent notes with a similarstructure a year ago, Bloomberg data show.

“It's a great deal for Goldman,” Leonard said in a telephoneinterview. “They're sitting in a win-win situation, because ifinterest rates stay low they can call them, but if rates go upthey've got 50 years of funding.”

Leonard said he wouldn't recommend individual investors buy thenotes because of the difficulty of valuing Goldman Sachs's optionto redeem them after 2016.

Michael DuVally, a spokesman at Goldman Sachs, declined tocomment.

Goldman Sachs's third-quarter loss of $393 million, or 84 centsper share, compared with a profit of $1.9 billion, or $2.98, a yearearlier, the company said yesterday in a statement.

Credit Swaps Fall

The cost to protect Goldman Sachs's debt for five years usingcredit-default swaps fell 24 basis points to 321 basis points,according to London-based data provider CMA. It reached 410 basispoints on Oct. 4, the highest since October 2008.

Credit-default swaps pay the buyer face value if a borrowerfails to meet its obligations, less the value of the defaulteddebt. The contracts, which investors use to hedge against losses oncorporate debt or to speculate on creditworthiness, decline asinvestor confidence improves and rise as it deteriorates.

'Confused and Disappointed'

David Viniar, Goldman Sachs's chief financial officer, toldanalysts on a conference call yesterday that a widening of thefirm's credit spreads over the last six weeks has had a “minimal”impact on its business. He said the firm, which yesterday reportedits second quarterly loss in 12 years as a public company, hasabout $5 billion of debt maturing by year end and “we'll decide asthe quarter goes on whether we want to replace it or we want towait for a better time.”

Goldman Sachs executives have been “confused and disappointed”by the rising prices on the firm's credit-default swaps, Viniarsaid, which investors use to hedge against losses on the company'sdebt or to speculate on its creditworthiness.

“Given how strong our capital is, our liquidity is, the maturityof our funding, the balance sheet, we kind of scratch our heads alittle bit,” Viniar said. “But it really hasn't affected anythingother than our emotions. We don't like seeing it but it hasn't hada big effect.”

Goldman Sachs fell 1.5 percent to $100.79 in New York afterreaching $102.25 yesterday, the highest since Sept. 20.

Bloomberg News

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