Buffett’s Berkshire Returns to Once-Shunned Muni Market

Warren Buffett’s municipal-bond insurer, which has shunned the market since 2009, returns this week backing part of a debt deal for a development around one of his company’s Nebraska Furniture Marts planned near Dallas.

Berkshire Hathaway Assurance Corp. will back a $106.9 million bond issue scheduled this week by entities tied to The Colony, according to bond documents. The sale is one of several to finance land purchases and development that includes a furniture store about 27 miles (43 kilometers) north of Dallas.

It’s the first deal backed by the insurance unit since November 2009, when it covered debt sold by Bexar County, home to San Antonio, according to data compiled by Bloomberg. Buffett, 82, got into the business in 2007, the year the subprime mortgage market began to implode, triggering the worst financial crisis since the Depression. He said last year that bankruptcy filings by San Bernardino and Stockton, California, reduced the stigma of debt default.

“Once people find that the city works the next day, it makes it easier for the city council next time they have a problem with pensions -- or whatever it is -- just to say, ‘well, we’ll declare bankruptcy,’” Buffett said in July 2012 on Bloomberg Television’s “In the Loop with Betty Liu.”

Berkshire-Owned

Buffett, the chairman and chief executive officer of Omaha, Nebraska-based Berkshire Hathaway Inc. (BRK/A), didn’t immediately respond to a question sent to an assistant about whether the company plans to write more municipal-bond insurance. Berkshire owns both the insurer and about 80 percent of Nebraska Furniture Mart, also based in Omaha.

The plan to back the sale in Texas was first reported by The Wall Street Journal.

The muni-debt insurance unit generated $595 million in sales in its first year of operation, yet the company scaled back the business in 2009 because of “changing market conditions,” according to an annual report.

Entities tied to The Colony are selling bonds for a $1.5 billion mixed-use master-planned development on 433 acres that will be anchored by a Nebraska Furniture Mart (FURN) enclosing almost 1.9 million square feet of space, according to a statement from the company.

To contact the reporters on this story: Darrell Preston in Dallas at dpreston@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net.

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