8-KFinancial EventsExhibits & Filings

BERKSHIRE HATHAWAY INC 8-K Report, Financial Obligation (May 17, 2005)

Filed May 17, 2005For Securities:BRK-BBRK-A

Summary

Berkshire Hathaway Inc. (BRK-B) filed an 8-K on May 17, 2005, detailing a significant debt issuance by its wholly-owned subsidiary, Berkshire Hathaway Finance Corporation (BHFC). BHFC, with an unconditional guarantee from Berkshire Hathaway Inc., is issuing $700 million of 4.75% Senior Notes due 2012 and $800 million of Floating Rate Senior Notes due 2008, totaling $1.5 billion in new debt. This move indicates the company's strategy to raise capital through debt markets to support its operations or potential acquisitions, a common practice for large, financially sound entities like Berkshire Hathaway. These Notes are being offered to qualified institutional buyers and non-U.S. persons, relying on exemptions from SEC registration. Berkshire Hathaway has committed to filing a registration statement to allow for an exchange of these notes for registered securities or to register their resale. The filing also outlines the terms and conditions of the debt, including interest rates, maturity dates, and events of default under the governing Indenture, providing transparency to investors regarding the company's financial obligations and risk factors.

Key Highlights

  • 1Berkshire Hathaway Finance Corporation (BHFC), a subsidiary, is issuing $700 million in 4.75% Senior Notes due 2012.
  • 2BHFC is also issuing $800 million in Floating Rate Senior Notes due 2008, with interest tied to LIBOR plus a spread.
  • 3Berkshire Hathaway Inc. is providing an unconditional and irrevocable guarantee for all of BHFC's obligations under these notes.
  • 4The total debt issuance amounts to $1.5 billion.
  • 5The notes are offered to qualified institutional buyers in the U.S. and non-U.S. persons outside the U.S., under specific regulatory exemptions (Rule 144A and Regulation S).
  • 6Berkshire Hathaway will file a registration statement to facilitate the exchange of these notes for registered securities or to register their resale.
  • 7The debt issuance is governed by an Indenture dated December 22, 2003, and includes standard events of default.

Frequently Asked Questions

While the specific purpose is not explicitly stated in the 8-K, such debt issuances by large corporations like Berkshire Hathaway are typically used to raise capital for general corporate purposes, which can include funding operations, acquisitions, or refinancing existing debt. The substantial amount suggests a strategic financial maneuver.

The 4.75% Senior Notes due 2012 will mature on May 15, 2012, and carry a fixed interest rate of 4.75% per annum, paid semi-annually. The Floating Rate Senior Notes due 2008 will mature on May 16, 2008, and their interest rate will reset quarterly at a rate equal to LIBOR plus 0.06% per annum, paid quarterly.

The notes are being offered under Rule 144A (for qualified institutional buyers in the U.S.) and Regulation S (for non-U.S. persons outside the U.S.). This is a common practice for large debt issuances to expedite the process and reduce registration costs, as these buyers are considered sophisticated enough to handle unregistered securities. Berkshire Hathaway has committed to providing registered notes later through an exchange offer or resale registration.

Berkshire Hathaway Inc.'s unconditional and irrevocable guarantee significantly strengthens the creditworthiness of these notes. It means that if BHFC were unable to meet its obligations, Berkshire Hathaway Inc. itself would be legally obligated to pay the principal and interest on the notes, providing a high level of security to investors.