Berkshire News Briefs - 7/21/13

The Press of Atlantic City to be purchased by Warren Buffett's BH Media Group (Press of Atlantic City)

The Press of Atlantic City will be sold to Warren Buffett’s BH Media Group by ABARTA, a private holding company based in Pittsburgh, Pa., interim Publisher James W. Hopson announced Thursday. [...] The Press of Atlantic City is a 67,000 daily and 77,000 Sunday circulation newspaper that serves Atlantic, Cape May, Cumberland and Ocean counties. The newspaper’s Web site, pressofAtlanticCity.com , reaches 700,000 unique visitors each month. The Bitzer/Taylor family, owners of ABARTA, has owned The Press since 1951.

The Not-So-Dirty Secret Behind Warren Buffett's Recent Buy (Fool)

Back in late May, MidAmerican Energy, a subsidiary of Warren Buffet's Berkshire Hathaway, made a $5.59 billion offer to buy NV Energy. On the surface, this seems like the prototypical Warren Buffett kind of acquisition. If you dig deeper, though, there is one lesser known area that could make this purchase an even bigger win. [...] The biggest upside for the NV Energy lies not in its current customers or its generation capacity, but in the other market that it could serve: California.

Buffett’s Tulsa World Is Latest Berkshire Newspaper to Cut Staff (Bloomberg)

Warren Buffett’s Berkshire Hathaway Inc., acquirer of more than 25 daily newspapers in the last two years, is eliminating about 50 jobs at the Tulsa World in Oklahoma after making cuts at other publications. A dozen positions in the administrative, information technology and production departments were cut immediately, according to a report posted today on the newspaper’s website. The World announced other changes including the creation of distribution centers where carriers will pick up newspapers, eliminating transportation costs for the company.

Berkshire Hathaway HomeServices brand announces first 9 affiliates (Inman News)

Berkshire Hathaway HomeServices, the new HomeServices of America franchise brand, has announced the first nine Prudential Real Estate affiliates that will transition to the brand this fall. The nine firms joining Berkshire Hathaway HomeServices this fall represent about 20 percent of the roughly 50,000 agents currently affiliated with the Prudential brand. Under the terms of a 2011 sale of the Prudential Real Estate brand to Brookfield Asset Management, the brand is slated to fade away when the last rights expire to it in the late 2020s.

Berkshire Hathaway to End India Insurance-Distribution Deal (WSJ)

Two years after Berkshire Hathaway Inc. launched an online insurance-distribution business in India, it is stopping sales of the only products it had been dealing with in the country. [...] Berkshire had launched its India insurance venture, Berkshireinsurance.com, in March 2011, with a big splash by timing it with Chairman Warren Buffett's first visit to India. Berkshire didn't underwrite insurance, but sold mostly vehicle- and travel-insurance policies of Bajaj Allianz, via the website.

What's Behind Berkshire Hathaway Inc's Big DaVita Buy? (Minyanville)

Berkshire has been building a position in DaVita since the fourth quarter of 2011. The stage was set for Berkshire's latest big purchase, however, on July 1, when the Centers for Medicare & Medicaid Services (CMS) unexpectedly announced a proposed rule to cut payments to large dialysis companies by as much as 12% starting in 2014. If approved, the move could close the doors of some smaller dialysis facilities. After the announcement, many DaVita shareholders headed for the exit. By July 2, its share price had dropped by 6% from the day earlier, and by about 13% from the yearly high reached in May. That day, Berkshire portfolio manager Ted Weschler, known for finding value in distressed companies, moved to buy another 639,400 shares of DaVita, boosting its stake to 14.8%, for a total transaction value of $73.37 million.

Warren Buffett sees 'betrayal' as hospital drains big endowment (CNBC)

Donald and Mildred Othmer made a lot of money investing with Warren Buffett. When they died, they wanted their Buffett profits to be given back to the community. They probably never imagined what would happen next. In what it calls a "cautionary tale for wealthy investors who hope their gifts will make a long-term impact," The Wall Street Journal reports on the destruction of a $135 million hospital endowment created less than 20 years ago by the Othmers. Buffett tells the Journal that if the donors were alive, "I would think...they would feel betrayed."

Special Section: Berkshire's Exposure to Detroit Bankruptcy

Buffett Insurer Wrap Firms Up Detroit Debt (Bond Buyer)

In the sea of junk-rated Detroit debt trading for 30 to 40 cents on the dollar, a small piece of the city’s defaulted pension certificates continue to see retail bids of nearly 90 cents on the dollar. The higher valued debt features an insurance pledge from Berkshire Hathaway Assurance Corp., the government bond insurer controlled by financier Warren Buffett. [...] Though Buffett has repeatedly expressed caution about insuring tax-exempt bonds, BHAC has about $400 million in exposure to Detroit’s tainted debt, most of which is sewer bonds. All the BHAC insurance is a wrap on top of an original guarantee from Financial Guaranty Insurance Co. BHAC’s secondary insurance gives additional comfort to investors and means BHAC would only have to pay if the issuer defaults and then the original insurer can’t meet the obligation — a scenario not too far off for Detroit creditors.

Detroit's bust could ripple back to Berkshire (Omaha World-Herald)

Detroit has filed for bankruptcy to reduce its debts, and Berkshire Hathaway Inc. of Omaha insures about $700 million worth of Detroit's sewer and water bonds. It's unclear whether the bankruptcy case would let Detroit default on the bonds or pay only part of what it owes, which could prompt the bond holders to file insurance claims against Berkshire. [...] The bonds insured by Berkshire are being repaid from sewer and water fees, not city taxes pledged to Detroit's “general obligation” bonds. Detroit is seeking to pay only a portion of its general obligation bond debt, along with other debts the city owes. Revenue bonds, such as the sewer and water bonds insured by Berkshire, generally are repaid as long as the revenue continues, and sewer and water fees generally are regarded as a steady source of money. That difference might be enough to prevent a claim against Berkshire.

Special bonds have better chance of being paid (Crain's Detroit Business)

While Detroit's bondholders will be hat-in-hand fighting for owed debt, holders of the city's special revenue bonds have a better prospect of payment through the Chapter 9 process. Detroit's special revenue bonds, including the $5.9 billion bond debt of the Detroit Water and Sewerage Department, are protected under Section 922 D of the U.S. Bankruptcy Code. Payments on a special revenue bond are guaranteed solely from revenue generated from an entity -- such as the water department -- rather than from taxes, as is the case with other bonds. [...] But legal arguments will be raised and those payments will be attacked by other bondholders, said Timothy Wittebort, a partner at Howard & Howard Attorneys PLC in Royal Oak. Wittebort said Detroit's pensioners will argue that the Michigan Constitution protects their pensions and go after the revenue-generating assets.