Lisa LaMotta, 02.13.09, 03:50 PM EST
Berkshire Hathaway receives a lovely 10% yield on jeweler's notes.
Warren Buffett made a trip to Tiffany just days before Valentine's Day, but the billionaire didn't end up with a little blue box, instead he bought $250.0 million of the company's debt.
According to a filing with the U.S. Securities and Exchange Commission, Tiffany sold the bonds to Buffett'sBerkshire Hathaway
The luxury jewelry retailer will use the proceeds to repay existing debt and for unspecified corporate expenses. Buffett managed to wrangle a better yield on the bonds than usual due to the lack of competition in the lending market, which is only now beginning to loosen from its subprime-induced freeze.
At the end of its third quarter, which was on Jan. 31, Tiffany had $306.2 million of long-term debt, $100.7 million of which is due by the end of January 2010. The company has outstanding notes with interest rates of 6.15% to 7.05% and several foreign-currency obligations at lower rates.
Shares of Tiffany fell 1.9%, or 39 cents, to $20.18, on Friday.
Tiffany hasn't been looking too sparkly of late: The retailer lowered its full-year 2008 guidance after it reported slumping sales during the holiday season of November to December. It has been struggling in the current economic environment as consumers, including affluent customers, cut back on unnecessary spending. Earlier in the week, Stifel Nicolaus analyst David Schick rated the stock a 'Hold' and added that current expectations for the stock are too high. He expects that the company will lessen the amount of stores it opens this year in an effort to combat crumbling sales. (See "Tiffany Loses Its Sheen.")
"Deteriorating global economic conditions were clearly reflected in cautious spending by Tiffany customers across the entire range of jewelry categories and price points. We believe these conditions will continue well into 2009," said Chairman Michael J. Kowalski in mid-January. "Nevertheless, we are committed to maintaining healthy profitability and are reviewing all elements of our cost structure."
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