Buffett Cuts Sweet Deal for Burlington Northern Loan
November 20, 2009, 11:11 am 


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 he is borrowing to take over the rest of the railroad operator Burlington Northern Santa Fe for $26 billion.

Burlington Northern disclosed in a regulatory filing on Thursday that Mr. Buffett’s Berkshire Hathaway was 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 .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.”

Still, it’s a big amount to borrow, even for Mr. Buffett’s still-AAA-rated Berkshire. He’s conceded that the deal for Burlington is “not a bargain.”