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Berkshire to Sell $500 Million in Notes to Repay Debt

Dec. 7 (Bloomberg) -- Billionaire investor Warren Buffett’s Berkshire Hathaway Inc. plans to sell $500 million of notes to repay debt used by its Clayton Homes manufactured housing unit.

The five-year senior notes may be issued through Berkshire Hathaway Finance Corp. as soon as today and may pay about 87.5 basis points more than Treasuries maturing at about the same time, according to a person familiar with the transaction, who declined to be identified because terms aren’t set. Proceeds will repay the finance arm’s existing 4.2 percent senior notes, the Omaha, Nebraska-based company said in a regulatory filing.

Buffett’s firm sells bonds in part to finance mortgages for people who buy Clayton’s factory-built housing. In a letter accompanying Berkshire’s 2009 annual report, Buffett said Berkshire will continue backing the home-loan program.

“Even today, though job-loss troubles have grown, Clayton’s delinquencies and defaults remain reasonable and will not cause us significant problems,” Buffett wrote.

The housing crisis and U.S. unemployment spurred Standard & Poor’s to cut its outlook on Clayton in April.

Installment loan balances held by Berkshire’s finance and financial products division, which includes Clayton, declined about 2 percent last year to $12.3 billion, according to Berkshire’s annual report.

Notes Coming Due

The finance arm issued $500 million of the 4.2 percent notes in December 2003, and then exchanged the debt for freely tradable securities in May 2004, according to data compiled by Bloomberg.

The notes due on Dec. 15 traded on Nov. 12 at 100.32 cents on the dollar to yield 0.122 percent, or 3.8 basis points less than similar-maturity Treasuries, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. A basis point is 0.01 percentage point.

Goldman Sachs Group Inc. is managing today’s offering, according to today’s regulatory filing. The filing didn’t specify the size, timing or maturity of the offering.

To contact the reporters on this story: Sapna Maheshwari in New York at; Andrew Frye in New York at

To contact the editor responsible for this story: Alan Goldstein at

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