|Buying the Dip |
Williams over a year
Faced with potential bankruptcy last summer, Williams agreed to pay 34% interest -- and pledge its valuable Rocky Mountain energy assets as collateral -- for an emergency 364-day loan from Buffett's group. The company will repay roughly half that $900 million loan with a smaller loan, also secured by the Rocky Mountain assets, that carries a single-digit interest rate and a more relaxed, four-year payoff schedule. Meanwhile, it will also issue $275 million worth of new convertible securities so it can repurchase convertible preferred stock from Buffett's MidAmerican Energy. Williams will pay the Berkshire Hathaway division $289 million -- or $14 million more than it originally invested -- for the preferred stock. Tulsa money manager Fredric E. Russell said the relationship between Berkshire Hathaway and Williams, now ending, clearly helped both parties involved. "Last July, Williams had to make a trip to the emergency room," said Russell, who had a position in Williams at the time. "And Warren Buffett demanded that Williams pay for that privilege. "But in the end, everything turned out fine." Former industry executive Karl Miller insists that only Buffett scored big in the deal, however.