Berkshire Hathaway's Swiss Deal

Berkshire Hathaway and Swiss Re have finalized the terms of the funding arrangement initially announced on February 5, 2009. Do you want to take a sample look of what Warren Buffett gets into recently with big corporation such as GE, Goldman Sach and Swiss Re? Why is it worry free even if GE and Goldman Sach's stock price fall to $10.00 and $95, way below the price while Buffett sign the contract at $24.0 and $125?

The Swiss Re convertible preferred security in the amount of CHF 3 billion bears fixed interest rate of 12% per annum and has the following additional terms:

• The security is perpetual and has no maturity date or term.
• Swiss Re has the right to defer interest payments. For all interest not paid on an original interest payment date, an additional amount will accrue on delayed or deferred interest at the rate of 15% per annum.
• Swiss Re has the right to pay interest in shares in lieu of cash and such shares will be valued at 95% of the average daily price per share for the five trading days prior to the interest payment date.
• Berkshire has the right to convert into shares starting three years after the issue date. The conversion price will be CHF 25 per share, which was the price of Swiss Re shares at the time the deal was initially announced.
• Berkshire is protected from a number of potentially dilutive events detailed in the terms sheet.
• Swiss Re has the right to repurchase the security on or after the second anniversary date of issue for a 20% premium. Prior to the second anniversary, Swiss Re would have to pay a 40% premium.

Due to mark-to-market, in short term, if you really love to look at it in short term, those deals may have a negative impact in earnings & equity, but in long term, they are awesome.

Of course, the deals with GE & Goldman Sach are not exactly the same as Swiss Re I mentioned from above, but I hope it will give you a better understand on what BRK is investing recently.