WALL STREET JOURNAL: Berkshire to Sell $8 Billion of Debt

FEBRUARY 4, 2010, 12:09 P.M. ET

By KELLIE GERESSY-NILSEN

NEW YORK—Berkshire Hathaway Inc., Warren Buffett‘s investment holding company, is selling $8 billion of debt to help finance its purchase of railroad Burlington Northern Santa Fe Corp.

The issue will include one-year floating-rate notes and five-year fixed-rate notes. In addition, the company will offer two- and three-year fixed or floating-rate notes or both.

Warren Buffett

The offering, expected to be priced later Thursday, would be more than double the size of Berkshire’s largest U.S.-marketed investment-grade bond, a $3.75 billion deal sold on Jan. 4, 2005. Berkshire was most recently in the market with a $1 billion deal last month, according to data provider Dealogic.

It comes at the same time that Kraft FoodsInc. is selling a $9.5 billion bond to fund its nearly $19 billion acquisition of Cadbury PLC.

According to the preliminary prospectus filed with the Securities and Exchange Commission, Berkshire intends to use the net proceeds “as part of the cash consideration to be paid to the stockholders of BNSF in connection with our acquisition, through merger, of BNSF.” The company adds that if the conditions for the acquisition are not met, “we expect to use the net proceeds for general corporate purposes.”

Berkshire agreed to purchase the remaining 77.4% of BNSF that it didn’t already own last year in a transaction valued at approximately $34 billion. The company had said it planned to fund the BNSF purchase via a combination of cash and stock.

“Knowing that Warren Buffett is behind the offering is about all the research an investor would need to do when considering this deal,” according to Margie Patel, a senior portfolio manager at Evergreen Investments.

Ms. Patel predicted that the Berkshire issue will meet great demand for several reasons, including that it presents a chance for investors to diversify their portfolios. Recent issuance has been dominated by the banking and financial sectors.

“The Berkshire deal presents a good opportunity for investors to own a good quality credit and diversify their portfolios, while adding more yield as opposed to Treasury securities,” she said. “It will also be attractive as it’s a great quality credit and when deals are that large they are generally priced to move, so it will present good value for buyers.”

The offering has been rated Aa2 by Moody’s Investors Service and AAA by Standard & Poor’s.

J.P. Morgan Chase and Wells Fargo Inc. are in charge of the sale.

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