Monthly Archives: December 2018

Hedge Fund Opposes Kraft Heinz’s Campbell’s Bid

(BRK.A), (BRK.B)

Unhappy with its large position in Kraft Heinz, Czech Republic-based hedge fund Krupa Global Investments is threatening to wage a proxy fight over a possible Kraft Heinz bid for Campbell Soup Co.’s international business.

Kraft Heinz and Mondelez, along with private equity firms Bain Capital LP, KKR and FinTrek Capital Hong Kong Co., are reportedly the approved bidders for an auction that will see the winner gain Campbell’s Australian cookie brand Arnott’s and its Danish baked-snacks maker Kelsen Group.

“This auction process may be great for Dan Loeb and Campbell’s Soup but it does nothing for Kraft Heinz and its shareholders,” said KGI Chairman Pavol Krupa in a statement. “Campbell’s Soup is selling its international assets for a reason thus we are concerned that these assets could be a drain on Kraft Heinz’s profitability and add to its debt. We strongly oppose Kraft Heinz’s participation in this auction and will organize a strong campaign against it if necessary.”

KGI has been campaigning for an $80/share buyout of public investors by Warren Buffett and Berkshire Hathaway.

KGI cites a recent piece by Daniel Thurecht in Seeking Alpha backing up KGI’s $80/share valuation published on November 20, 2018 and a piece by Lauren Hirsch in CNBC underscoring the benefits of large legacy consumer companies going private published on October 27, 2018.

“We do not believe Warren Buffett wants his career tarnished by the embarrassment of losing Kraft Heinz investors 40 percent of their investments from 2015 prices. We are liaising with Kraft Heinz management, 3G Capital and Berkshire Hathaway to figure out a constructive solution that will benefit Berkshire Hathaway, 3G, Kraft Heinz shareholders, and the Kraft Heinz brand. We believe such a resolution is possible and will not rest until one is achieved,” added Krupa.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BYD Electric Buses Begin Test Runs in Delhi

(BRK.A), (BRK.B)

BYD (Build Your Dreams), a world leader and pioneer in battery and zero-emission vehicles, has begun a three month test run of its pure electric bus in Delhi.

Built in India, the 12-metre pure electric bus, eBuzz K9, has a seating capacity of 35.
The buses are manufactured in New Delhi by Olectra Greentech (formerly known as Goldstone Infratech) in partnership with BYD Auto Industry Co. Ltd.

Olectra-BYD buses are currently running in four states. The company first placed electric buses in service, beginning in September 2017 between Kullu-Manali under the Himachal Roadways Transport Corporation (HRTC), and in September 2018 between the city of Hyderabad and the Rajiv Gandhi International Airport under the Telangana State Road Transport Corporation (TSRTC).

Olectra-BYD’s eBuzz K7 is also in service in Mumbai under the Brihan Mumbai Electricity Supply and Transport Undertaking (BEST).

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkadia Commercial Mortgage, Jefferies and Riverside Capital Facilitate $12.6 Million in Financing for Multifamily Property in California

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Berkadia, Berkshire Hathaway’s joint venture with Jefferies Financial Group, has announced that Berkadia Commercial Mortgage, Jefferies and Riverside Capital have facilitated the financing of Fairwood Apartments, a garden-style multifamily property in Carmichael, California (Sacramento County).

The deal consists of a $12.6 million Tax Exempt Fannie Mae Mortgage Backed (M-TEBS) bond transaction with four percent low-income housing tax credits (LIHTC), which funded approximately $6.4 million in equity. As part of the deal, the project will have a new 20-year HUD rental assistance contract, meaning that none of the 86 households will have to pay more than 30 percent of their income towards rent. The closing of this financing preserves Fairwood Apartments as an affordable housing asset for the long-term.

The financing is the first such transaction involving all three affiliated firms, each playing a critical role in their respective specialty areas. The bonds were issued through the California Housing Finance Agency (CalHFA) for affordable housing developer Orbach Affordable Housing Solutions, LLC (OAHS). A single-purpose corporation controlled by OAHS, called OAHS Fairwood LP, is the owner. The deal closed on November 29.

Berkadia’s Senior Director Gemma Geldmacher and Managing Director Richard Price originated the financing, teaming up with Managing Director Lloyd Griffin, Senior Director Frank Brown and Senior Underwriter Mark Field to underwrite the Fannie Mae M-TEBS DUS loan. Alan Jaffe and Robert Foggio were the lead investment bankers for Jefferies, and Riverside Capital’s team syndicated the tax credits.

The combination of debt and equity raised by the Berkadia-led team will provide sufficient funds to acquire the project and allow for approximately $3.4 million in rehabilitation – including updates to residential units and system upgrades.

“The Fairwood financing was an ‘all hands-on deck’ deal,” said Price. “The team worked hand-in-glove with CalHFA, which demonstrated unwavering support in further fulfilling its preservation of the affordable housing mission. HUD also played a key role in approving the long-term subsidy contract and assigning it to the project.”

“In California, homeowners spend the highest amount of their annual income on housing and continually struggle to pay their rent,” said Jay Reinhard, President of OAHS. “This is why we are committed to improving the housing market so that Americans can live without the fear of losing their homes. We are honored to be involved in this great project.”

The pass-thru fixed rate on the bonds was 3.75 percent with a loan term of 15 years underwritten and a 35-year amortization. Fannie Mae yield maintenance premium from closing is through May 31, 2033. Thereafter, a one percent prepayment penalty will apply through August 31, 2033. After this, no prepayment premium will apply. The loan was debt service constrained at 1.15 times the debt service coverage ratio.

Located in the Fair Oaks neighborhood of Carmichael, the project was originally developed in 1981 and has a mixture of one-, two- and three-bedroom units. Carmichael is less than ten miles away from downtown Sacramento in an area that has seen tremendous growth in the past decade.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation (now known as Jefferies Financial Group), Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BYD to List Battery Unit by 2022

(BRK.A), (BRK.B)

BYD (Build Your Dreams), a world leader and pioneer in battery and zero-emission vehicles, has announced plans to list its battery unit by 2022.

The company did not specify the exchange it would be listed on.

The move, which was reported by Reuters out of Beijing, comes roughly six months after BYD opened the world’s largest battery manufacturing plant in the western province of Qinghai. The plant is designed to keep up with the demands of a company that has become the world leader in battery powered cars.

The facility has commenced manufacturing batteries, but the entire facility will not be fully completed until the end of 2019.

The plant opened with a manufacturing capacity of 24 GWh, and BYD aims to increase its total manufacturing capacity to 60 GWh by 2020.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Ajit Jain’s $20 Mil Stock Purchase Shows His Belief in Berkshire Hathaway

(BRK.A), (BRK.B)

Ajit Jain, Berkshire Hathaway’s Vice Chairman of Insurance Operations, has purchased $20 million in Berkshire Hathaway stock.

Jain purchased the stock on December 18, at prices ranging from $295,750 to $297,000 a share for Berkshire Hathaway’s A shares, which had been as high as $335,900 in October.

In January 2018, Jain, who along with Greg Abel, who was elevated to Vice Chairman of Non-insurance Operations, became vice chairmen, a move that puts them in line for the long term leadership of Berkshire Hathaway.

Jain’s stock purchase shows that he not only believes in leading Berkshire, but owning it as well.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Hathaway Exits Home Capital Position

(BRK.A), (BRK.B)

Berkshire Hathaway is substantially exiting its position in Canadian alternative lender Home Capital Group following the completion of the company’s Substantial Issuer Bid process.

In 2017, Berkshire invested in the company and provided financing that helped stabilize the lender, however, shareholders thwarted its plans for more extensive ownership.

“We are delighted to see Home Capital back on its feet with healthy liquidity and a solid capital position,” Warren Buffett said in a statement. “In June of 2017, when some were questioning Home’s staying power, Berkshire agreed to lend the Company $2 billion. The team at Home was a pleasure to deal with and have worked to thoughtfully strengthen Home over the last 18 months. As part of the loan commitment Berkshire also committed to provide $400 million of equity financing to Home – $153 million with the funding of the credit line and an additional $247 million contingent upon shareholder approval; shareholders did not approve the additional investment and, as a result (coupled with a full repayment of Berkshire’s credit line) Berkshire’s investment in Home is now not of a size to justify our ongoing involvement. Although we have decided to substantially exit from our investment, we will continue to cheer from the sidelines for our friends at Home.”

© 2018 David Mazor


Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkadia Announces Freddie Mac Financing for 2,200 Rental Units for Seniors

(BRK.A), (BRK.B)

Berkadia, Berkshire Hathaway’s joint venture with Jefferies Financial Group, has announced the closing of $327 million in fixed and variable rate financing for Brookdale Senior Living, Inc.

Berkadia’s Senior Managing Directors Heidi Brunet and Lisa Lautner of the Seniors Housing & Healthcare team originated the transaction through Freddie Mac’s new Structured Pool Transaction program.

The deal closed on November 16 and will be used to refinance 28 senior housing facilities representing approximately 2,200 units.

The ten-year, non-recourse Structured Pool Transaction features fixed and variable rate loan components and a 30-year amortization schedule. The fixed rate component was $213 million and the variable rate component was $114 million.

The property was financed through Freddie Mac’s Green Advantage program, which provides competitive pricing to finance upgrades that reduce energy or water consumption.

In 2017, Berkadia’s Seniors Housing team completed more than $1.7 billion in loan volume, including closing over $1 billion in financings in a single day.

Berkadia’s Seniors Housing & Healthcare group leads the industry in innovative and comprehensive solutions for even the most complex independent living, assisted living, memory care and skilled nursing projects across the country.

In addition to deep market knowledge, the group offers a full set of advisory, underwriting, loan origination services and products including FHA, Fannie Mae, Freddie Mac, Life Company, Proprietary Bridge Lending and Capital Markets Advisory Services.

Last year, the team expanded its capabilities by adding an investment sales presence, rounding out its full-suite of services.

About Berkadia

Founded in 2009 as a 50/50 joint venture between Berkshire Hathaway and Leucadia National Corporation, Berkadia is a third-party commercial mortgage servicer, as well as an approved lender for Fannie Mae, Freddie Mac, and HUD/FHA.

The company is among the top Freddie Mac and Fannie Mae multifamily lenders.

Berkadia owes its origins to GMAC Commercial Mortgage Corporation, which was acquired in 2009 by Kohlberg Kravis Roberts & Co., Five Mile Capital Partners LLC, and Goldman Sachs Capital Partners. Christened Capmark Financial, the company had $10 billion of originations in 2008 and a servicing portfolio of more than $360 billion before running into bankruptcy in October 2009.

In a deal approved by the bankruptcy court, Capmark sold its mortgage loan and servicing to the newly formed Berkadia in a deal worth $515 million.

The deal brought Berkshire into the heart of the commercial loan serving business, and the company has one of the largest commercial real estate servicing portfolios.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Ecuador City Vies to Have First All-Electric Mass Transit

(BRK.A), (BRK.B)

The city of Guayaquil, Ecuador may soon have the honor of being the first in the world to have an all-electric mass transit system.

The port city, which is known as “the Gateway to the Galapagos,” is swapping its entire fleet of diesel transit buses for pure-electric buses.

The move comes after a five month pilot program proved the viability of the buses. The test bus ran an average of 250 kilometers per day.

BYD’s K9 buses feature air conditioning and Wi-Fi, and will have a dramatic impact on air pollution and fuel costs.

The buses are projected to reduce 12.8 tons of CO2 and 2.9 million gallons of diesel annually.

The buses are scheduled to be in service by March 2019.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Marmon Holdings Gets New CEO

(BRK.A), (BRK.B)

Angelo V. Pantaleo will become Chairman and CEO of global industrial conglomerate Marmon Holdings, Inc., a subsidiary of Berkshire Hathaway Inc., effective January 1, 2019.

His promotion was announced by Greg Abel, Vice Chairman of Berkshire Hathaway.

Pantaleo, currently President of Marmon Holdings, will succeed Frank S. Ptak, who as previously announced is retiring at the end of 2018 after leading Marmon for 13 years. “I am delighted to pass the Marmon baton to Angelo,” Ptak said. “He was my choice as successor and our friends at Berkshire wholeheartedly agreed. I expect him to build upon what we have accomplished together and take Marmon to the next level of success.”

Marmon Holdings comprises more than 100 autonomous manufacturing and service businesses whose diverse products range from railroad tank cars and platform trailers, to shopping carts and commercial beverage dispensers, to screws and work gloves. Marmon has operations in 23 countries, with about 20,000 employees and projected 2018 revenues of more than $8 billion.

Pantaleo joined Marmon in 1991 as president of the company’s industrial water filtration business and advanced to serve as group president over all of Marmon’s water treatment and consumer products businesses worldwide. During this period, he led numerous Marmon acquisitions in Asia, Europe, and North America. On his watch, Marmon Water earned the leading market share position at retail in North America and Europe, and became the fastest growing consumer water treatment company in China.

In 2014, Pantaleo was asked to lead the Berkshire Hathaway transition team responsible for integrating Duracell, a multi-billion-dollar global battery business, into Berkshire. Upon completion of the Duracell acquisition, Pantaleo become CEO of Duracell. He returned to Marmon as president in late 2017 with the announcement of Ptak’s planned retirement.

Before joining Marmon, Pantaleo spent 11 years in progressive roles with DuPont. He holds a B.S. in Chemical Engineering and an M.B.A. in Finance.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

BYD Hires Former Tesla Executive

(BRK.A), (BRK.B)

BYD (Build Your Dreams), a world leader and pioneer in battery and zero-emission vehicles, has added a former Tesla executive to its U.S. operations.

Sam Jammal was hired by BYD as Senior Manager of Government Relations for the Western United States.

Jammal comes to BYD from SolarCity and Tesla. Before that he held several high-level jobs in the federal government, including Chief of Staff in the U.S. House of Representatives and Presidential Appointee (Obama) at the U.S. Department of Commerce.

BYD and Berkshire Hathaway

In 2008, Berkshire Hathaway bet on BYD’s potential, purchasing 225 million shares. It’s an investment that has paid off handsomely. Berkshire’s original investment of $230 million has grown in value almost ten-fold, and is now worth roughly $1.96 billion.

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.