Berkshire to Raise $8 Billion in Debt

123jump.com Staff
04 Feb, 2010
New York City

Berkshire Hathaway filed to sell $8 billion in debt to fund its purchase of Burlington Northern Santa Fe. Berkshire is using cash new stock and debt to acquire its largest purchase in four decades and spend $26 billion.

[R]10:30 AM New York – Berkshire Hathaway filed to sell $8 billion in debt to fund its purchase of Burlington Northern Santa Fe. Berkshire is using cash new stock and debt to acquire its largest purchase in four decades and spend $26 billion.[/R]

Berkshire Hathaway Inc may sell as early today $8 billion of unsecured notes to finance its acquisition of Burlington Northern Santa Fe Corp.

According to the SEC filings the company is likely to offer five year fixed rate securities, 1-year floating rate debt and 2- and 3-year notes that may pay fixed or floating rate.

JP Morgan Chase & Co. and Wells Fargo & Co. are acting as financial advisors for the offering.

Warren Buffett, chief executive officer of Berkshire is using cash, debt and new stock to fund the largest acquisition in the history of the company to purchase 77.4% of Burlington Northern that it did not own for $26 billion.

Warren Buffett said at the time of acquisition in November last year that the acquisition is “all-in wager” on the U.S. economy and said railroads are efficient way to transports goods between two coasts.

In the last twelve years railroad industry has consolidated significantly and the number of class I railroad operators has dwindled to less than ten. Also, as the crude oil prices increase the railroads have increased freight rates in the last five years.

Burlington has also indicated in various communications that the company has completed majority of its capital expense in the last ten years and does not foresee extraordinary capital expense in the near term.