Warren Buffett's $8 billion loan
Buffett's Berkshire Hathaway gets a short one-year term at very low rates. Why not longer?
The loan isn't a surprise, especially for a $26 billion purchase. But what has some people puzzled is the loan's term: one year. Why so short?
The interest rate is 1 percentage point to 2 percentage points more than the London interbank offered rate, which is down to about 0.27 percent.
"Isn't borrowing short-term at a low interest rate to buy a long-term asset what caused a lot of problems for housing buyers?" asks Robert Wenzel of EconomicPolicyJournal.com. "I certainly hope Buffett isn't expecting interest rates to be lower one year out."
Wenzel guesses that Buffett's going to free up some other cash to pay the debt, and is using the one-year loan as a bridge in the meantime.
Buffett has “got to have a Rolodex full of potential creditors,” one analyst told Bloomberg. “If he doesn’t like the terms of one, he’ll call the next one.”
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