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Berkshire Hathaway (BRK.B) is set to raise capital, filing a shelf offering to issue an...

Berkshire Hathaway (BRK.B) is set to raise capital, filing a shelf offering to issue an as-of-yet undisclosed amount of senior unsecured debt. The company plans to undertake the issuance on February 1. The plans for the proceeds are up for speculation.
Comments (12)
  • James Duade
    , contributor
    Comments (303) | Send Message
     
    Elephant hunting anyone?
    29 Jan 2013, 09:55 AM Reply Like
  • JDrake
    , contributor
    Comments (4) | Send Message
     
    Can't make much of that announcement (brokerspeak). I guess what they are trying to say is that they are broke and need some money.
    29 Jan 2013, 10:03 AM Reply Like
  • stout
    , contributor
    Comments (13) | Send Message
     
    Brk had previously announced stock buyback plan. The buyback will allow BRK to absorb the shares as Warren B unwinds his estate, and this offering would be a way to fund that. ???
    29 Jan 2013, 10:12 AM Reply Like
  • SA Editor Samir Patel
    , contributor
    Comments (163) | Send Message
     
    I don't think buyback is likely; while imo it's still a bit undervalued, it's not as close to book value as Buffett typically likes to buy back at. It's not 100% out of the question for them to be buying back, but they certainly wouldn't be issuing debt to do it. To me, this sounds like what James suggested above - elephant hunting. Taking advantage of very low interest rates to make a very big, very accretive acquisition.
    29 Jan 2013, 11:10 AM Reply Like
  • SA Editor Samir Patel
    , contributor
    Comments (163) | Send Message
     
    correction - didn't realize quite how far BRK.B had rallied in the past month or two. they wouldn't be buying back at these levels, I don't think.
    29 Jan 2013, 11:31 AM Reply Like
  • Matthew Lewis
    , contributor
    Comments (355) | Send Message
     
    They can't buy back shares at over 1.2 times book value. They are above that now. I would guess its a large acquisition (>$25 billion).
    29 Jan 2013, 10:18 AM Reply Like
  • stout
    , contributor
    Comments (13) | Send Message
     
    Good point, however, the stock price is not a static figure, so could fall to the 1.2 times, and, Mr. Buffett/his estate may very well accept an offer that is 1.2 x book regardless of the current market value. I dare say Mr Buffett would still have a sizeable gain on his shares.
    29 Jan 2013, 10:38 AM Reply Like
  • centenint
    , contributor
    Comment (1) | Send Message
     
    The simple explanation may be that BRK anticipates an increase in interest rates and wants to borrow while rates are still low.
    29 Jan 2013, 10:43 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    BRK has lots of cash, they don't actually NEED it.
    I think they just see this as a great opportunity to get cheap cash.

     

    At current rates I think they could easily reinvest it for a nice gain, even if it's simply a share repurchase.
    29 Jan 2013, 10:47 AM Reply Like
  • cgm
    , contributor
    Comments (147) | Send Message
     
    I doubt Buffett would sell any shares. His favorite holding period is "forever". He would rather hold onto his shares and have his heirs take their shares with a stepped-up basis so there is not capital gains tax. It looks like they want to take advantage of low rates now so they are ready to pounce on a large acquisition if the opportunity presents itself.
    29 Jan 2013, 11:40 AM Reply Like
  • MrMatt
    , contributor
    Comments (1320) | Send Message
     
    Except the money is going to charity, not a huge tax problem there.

     

    As far as borrowing, it's better to have the money before you find the deal, not after.
    29 Jan 2013, 12:19 PM Reply Like
  • slash32is4
    , contributor
    Comments (137) | Send Message
     
    its not just to borrow while rates are low... rates dont get lower than the money he gets from his insurance companies... he has to be on the hunt for a company...
    29 Jan 2013, 12:04 PM Reply Like
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