Buffett Taps JPMorgan, Wells Fargo for Takeover Loan (Update1)

Nov. 20 (Bloomberg) -- JPMorgan Chase & Co. and Wells Fargo & Co. are arranging an $8 billion loan for Warren Buffett’s Berkshire Hathaway Inc. to help finance the takeover of railroad Burlington Northern Santa Fe Corp.

The banks are providing a one-year loan with an interest rate 1 percentage point to 2 percentage points more than the London interbank offered rate, Fort Worth, Texas-based Burlington said yesterday in a regulatory filing. Three-month Libor, a borrowing benchmark, was set at 0.27 percent yesterday.

Buffett is risking Berkshire’s AAA rating at Standard & Poor’s by taking on debt and drawing down cash holdings to finance the $26 billion acquisition of Burlington. New York- based JPMorgan has 22 percent of the U.S. market for syndicated loans this year, second only to Bank of America Corp., according to Bloomberg data. San Francisco-based Wells Fargo, which counts Berkshire as its biggest shareholder, is ranked fourth.

Buffett has “got to have a Rolodex full of potential creditors,” said Paul Howard, an analyst with Janney Montgomery Scott LLC’s Langen McAlenney division in Hartford, Connecticut. “If he doesn’t like the terms of one, he’ll call the next one.”

Berkshire, which has reported two straight quarterly profit increases, is benefiting from a decrease in its credit-default swaps since March. The decline in the swaps, which protect creditors when borrowers don’t pay, indicates that investors believe Berkshire’s creditworthiness has improved.

‘Not Cheap’

Berkshire’s stock-and-cash bid, announced Nov. 3, values Burlington at $100 a share, 31 percent more than its closing price the day before. Buffett, the second-richest American, is Omaha, Nebraska-based Berkshire’s chairman and chief executive officer.

“It was an opportunity to buy a business that’s going to be around for 100 or 200 years that’s interwoven with the American economy in a way that, if the American economy prospers, the business will prosper,” Buffett said in an interview with Charlie Rose broadcast last week on PBS. Still, he said, the price Berkshire was paying for the railroad was “not cheap.”

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Emre Peker in New York at epeker2@bloomberg.net.

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.