Buffett’s Railroad Bonds Cheap to U.S. Peers: Corporate Finance
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In Warren Buffett, Burlington Northern Santa Fe has one of the biggest safety nets in corporate America. You wouldn’t know it from the way the railroad’s bonds trade.
While Buffett’s Berkshire Hathaway Inc. doesn’t officially guarantee debt of the railroad operator it bought in 2010, the parent would still probably offer support to BNSF should financial trouble arise, according to Joel Levington, who follows industrial borrowers for Bloomberg Industries. That means securities including BNSF’s $1 billion of 4.9 percent notes due in 2044, which yield more than similar-maturity bonds of lower-rated competitor Norfolk Southern Corp., may be cheap.