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Media General, Inc. Message Board

  • thugwatch666 thugwatch666 Feb 7, 2013 1:19 PM Flag

    Gabelli on the CC- pleading to Buffet

    Read the Seeking Alpha transcript for Gabelli comments. Gabelli , more or less, is asking Berkshire to refinance the $301 mil at 10.5%.. As we all know, Berkshire only handed over (.885)($301mil) or $266.4 mil but are owed $301 mil on which they are collecting $31.6 mil a year in interest.

    Gabelli's thinking is that as Berkshire owns 4.6 mil shs, which they got for free, lowering the interest rate helps the stock price.

    Over the next 7 1/2 years Berkshire collects $237 mil in interest from MEG, plus another min $ 6.75 mil from the 2% revolver fee. Assume no more paydown of the $301 mil. When the loan is due MEG owes Berkshire the full $301 mil.

    If MEG goes bankrupt, Berkshire owns the TV stations along with the 2017 note holders. Gabelli ends up with a goose egg in MEG. In the interim, Berkshire is collecting $32.5 mil a year without a draw on the revolver. The $45 mil revolver earns another 10%(net 8% subtracting the 2% fee).

    Buffet doesn't involve himself with what he calls the small stuff, per that CNBC interview early last summer.. He turns over a few Bil each to 2 managers(forget their names) and will meaure them on ANNUAL RETURNS.

    These 2 managers draw large bonuses if return targets are met.

    It is hard see why to the managers(s) would forego 10.5% on $301 mil, really 11.86% on $266.4mil.

    Call it 10.5% or 11.86%. but those yields are true world beaters when corporations are borrowing money as low as .87%, and typically 2-4%.

 
MEG
11.75-0.09(-0.76%)Aug 31 4:03 PMEDT