Friday, November 20, 2009

Buffett Cuts Sweet Deal for Burlington Northern Loan (BRK.B; BNI)

From DealBook:

It’s no surprise that Warren E. Buffett can command enviable terms when it comes to bank loans. That’s the case with the $8 billion loan he is borrowing to take over the rest of railroad operator Burlington Northern for $26 billion.

Burlington Northern disclosed in a regulatory filing on Thursday that Mr. Buffett’s Berkshire Hathaway is borrowing the $8 billion from JPMorgan Chase (as administrative agent) and Wells Fargo (as syndication agent), paying about 1 percent to 2 percent over the London interbank offered rate, a common base for interest payments known as Libor.

The three-month Libor rate is currently .27 percent, magnitudes better than the 2.22 percent it was one year ago.

How can Mr. Buffett get such a good deal? As Paul Howard, a credit analyst, told Bloomberg News, Mr. Buffett probably has “a Rolodex full of potential creditors,” adding: “If he doesn’t like the terms of one, he’ll call the next one.”>>>MORE (links to Bloomberg story and SEC filing)