Buffett & Berkshire Hathaway Retiring Debt, With Debt (BRK-A, BRK-B)

Warren Buffett is raising capital.  Berkshire Hathaway Inc. (NYSE: BRK-A) has just filed with the SEC to raise up to $1 billion via a sale of debt securities.  It is selling its own equivalent of a long-bond: Senior Notes due 2040, up to $750 million.  It is also selling up to $250 million in Floating Rate Senior Notes due 2012.   The notes will be senior unsecured indebtedness of Berkshire Hathaway Finance Corporation and will rank equally with all its other existing and future senior unsecured debt.

The guarantee will be a senior unsecured obligation of Berkshire Hathaway Inc. and will rank equally with all of its other existing and future senior unsecured obligations.

The sole book-running manager is listed as J.P. Morgan, while the joint lead manager is Wells Fargo Securities.  As far as the use of funds, this is for debt retirement: We intend to use all of net proceeds that we receive from the sale of the notes to satisfy and retire BHFC’s existing 4.125% Senior Notes due 2010.

This sounds almost like a big event on the surface.  Unfortunately it is not.  This is debt used to redeem debt even considering that Buffett and friends are selling 30-year debt.  But these seem to be redeemable, meaning they are callable at Berkshire Hathaway’s option.

A billion dollars for Warren Buffett and Berkshire Hathaway just isn’t what it used to be.

JON C. OGG
January 6, 2010