Warren Buffett's Warrants Shine in Media General Deal

NEW YORK (TheStreet) - As Media General (MEG) works to merge with LIN Media (LIN), forming the nation's second largest pure-play TV broadcasting company, Berkshire Hathaway (BRK.B) continues to make money off of a newspaper deal it cut with Media General in 2012.

In May 2012, Berkshire Hathaway bought 63 newspapers from Media General for $142 million in cash and agreed to provide the nationwide TV broadcaster with a $400 million term loan and a $45 million revolving credit line, as the company worked to repair its balance sheet.

As part of the newspaper purchase and its loan to Media General, Berkshire also received penny warrants for approximately 4.6 million of Media General's Class A shares, about 20% of its outstanding stock at the time.

Berkshire's loans, which carried an interest rate of 10.5%, and its warrants, quickly paid off.

The Warren Buffett-run company converted its penny warrants to Media General common stock in the third quarter of 2012, filings with the Securities and Exchange Commission show.

In August 2013, Media General and Young Broadcasting agreed to a merger that refinanced the company's outstanding debts at far lower interest rates than its deal with Berkshire Hathaway. In the refinancing, Media General took out a $60 million five-year revolving credit facility and a $885 million seven-year term loan at an interest rate of LIBOR plus 3.25%, with a 1% LIBOR floor.

The deal appears to have cut Media General's financing costs by as much as 50% -- it also paid off for Berkshire.

If you liked this article you might like

Your Complete Guide to Living Like Billionaire Warren Buffett

Kraft Heinz's New CFO Is Just 29

How to Get Rich Using Warren Buffett's Favorite Stock Market Indicators

How to Make Your Life Successful Just Like Billionaire Warren Buffett

How to Live Just Like Billionaire Warren Buffett