Williams ( WMB) is losing its most distinguished investor.

Berkshire Hathaway ( BRK.A) -- which last year swooped in to save Williams from bankruptcy -- will soon pick up its winnings and move on. The firm, led by legendary value investor Warren Buffett, is about to collect on a high-interest loan extended to Williams during the company's darkest days last summer. The investment firm also plans to sell a big slug of preferred stock back to the company.

In the end, Buffett's firm will walk away from Williams with a final $1.17 billion payment on a $900 million loan that carried a 34% interest rate, a $14 million profit on preferred convertible stock viewed as worthless last summer, and the valuable Kern River pipeline. That asset, snatched up for a song in early 2002, was what brought Buffett to the table in the first place.

Williams plans to use proceeds from asset sales and a new convertible securities offering to satisfy its obligations to Buffett ahead of a July deadline. The company, desperately strapped for cash less than a year ago, expressed strong appreciation when announcing the early payoff Monday.

"This group's demonstrated faith in Williams' fundamental strengths and, importantly, our future, helped us weather a severe financial crisis," said Williams CEO Steve Malcolm. "That fact that, short of a year after the ... loan, Williams is in a position to redeem and repay these investments on attractive terms is evidence, in and of itself, of the significant progress we're making toward strengthening our company and narrowing our focus."

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.

"To protect their jobs, Williams management agreed to pay exorbitant premiums to finance the company in 2002," said Miller, who now leads an energy-related acquisition firm. "Buffett shareholders, on the other hand, have gained tremendously through the very generous returns offered on very secure asset-backed loans.

"Something is wrong with that model."

Williams' stock, in fact, slid on the latest financing news. The stock, which has already doubled this year, was off 3.7% at $7.57 Tuesday morning.