Berkshire Hathaway turns to Europe for dollar refinancing

Warren Buffett's Berkshire Hathaway is planning to raise its first ever issue in the European market, a triple-tranche euro benchmark that will refinance some of its dollar debt. 

PHOTO: BLOOMBERG NEWS

5 Mar6:25 PM

[LONDON] Warren Buffett's Berkshire Hathaway is planning to raise its first ever issue in the European market, a triple-tranche euro benchmark that will refinance some of its dollar debt.

The Aa2/AA rated conglomerate is taking advantage of a strong backdrop and record low yields in the single currency, becoming the latest in a string of US names to cross the pond in recent months.

Lead managers are marketing an eight-year tranche at 35bp area over mid-swaps, a 12-year at 50bp area and a 20-year at 65bp area, implying respective yields of around 0.9 per cent, 1.34 per cent and 1.75 per cent.

Those yields are much lower than the 3.2 per cent coupon on a US$1.7 billion bond that matured on February 11, 2015 which Berkshire is refinancing with this new issue.

The company reported earnings in February, posting a fourth-quarter profit decline of 17 per cent as investment gains declined, but operating results improved.

A hedge fund manager said he expected the deal to go well and replicate the success of a US$8.5 billion transaction priced for Coca-Cola last week.

"Berkshire is a well respected name and well rated," he said.

"Providing they don't print too large a size it should have a good following. Saying that, many insurance companies perceive the issuer to be 'insurance', and may not participate as it would be effectively be financing a competitor."

The influx of US corporates into Europe is showing no sign of abating. More than US$15 billion priced last week alone, despite unfavourable moves in the cross-currency basis swap over the course of the year so far.

Market players say US companies can still save up to 15bp by issuing in euros, particularly in the longer maturities.

Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, and Wells Fargo are lead managers.

REUTERS

      

Former Fed chiefs join call to keep currency rules out of trade pacts

5 Mar11:23 PM

[WASHINGTON] A group of prominent US economists, including former Federal Reserve chiefs, Alan Greenspan and Ben Bernanke, wrote to congressional leaders on Thursday to support key trade legislation but warn against including currency rules in trade deals.

The economists, all former chairs of the President's Council of Economic Advisers, said legislation to streamline the passage of trade deals through Congress "encourages our trade partners to put their best offers on the table."

But in the letter, they said rules aimed at preventing trading partners from deliberately weakening their currencies, which many lawmakers are pushing for, should be avoided.

"This is because monetary policy affects the value of currencies," said the letter, signed by 14 economists including Charles Schultze, Martin Feldstein, and Alan Krueger.

"Attempts to penalize countries for supposedly manipulating exchange rates would thus impose constraints on US monetary policy, to the detriment of all Americans."

REUTERS