Headline: Buffett Tells CNBC 'This Isn't 2008' As Bank of America Gets $5B Loan at Just 6%
Warren Buffett tells CNBC's Becky Quick "this isn't 2008" and that's why Bank of America is getting better terms for its $5 billion loan today from Berkshire Hathaway, compared to what General Electric and Goldman Sachs paid for similar loans almost three years ago at the height of the credit crisis.
Buffett is also stressing the investment was his idea, perhaps to downplay any fears that Bank of America is desperate for a cash infusion.
This morning, Bank of America announced that Berkshire will use cash to buy 50,000 shares of preferred stock with a liquidation value of $100,000 per share in a private offering.
That is, in effect, a loan to the bank, in which it will pay around $300 million in dividends each year to Berkshire. BofA can pay back that loan at any time, but it will have to make an additional 5 percent dividend payment to do so.
The interest rate on the loan is 6 percent, well below the 10 percent that Buffett got from GE and Goldman almost three years ago, but not at all bad with 10-year Treasuries just above 2.2 percent.
Source: finance.yahoo.com
