Banking & Finance

GE To Buffett: "Thanks, Take Your Preferred Shares Back!" (GE, BRK-A, GS, BAC)

Jon C. Ogg

General Electric Co. (NYSE: GE) is making good on a promise it made earlier this year: it is paying back Warren Buffett.  An SEC filing after the closing bell shows that GE mailed to Berkshire Hathaway Inc. (NYSE: BRK-A) a redemption notice for the $3 billion in preferred shares that Buffett invested during the peak of the financial crisis.

The filing notes: “On September 13, 2011, General Electric Company (the “Company”) mailed notices of redemption to Berkshire Hathaway Inc. stating that the Company would redeem in full the Preferred Shares held by Berkshire Hathaway Inc. for the stated redemption price of $3.3 billion (which includes a 10% redemption premium), plus accrued and unpaid dividends to the redemption date. The redemption date will be October 17, 2011.”

This was a $3 billion investment and the $3.3 billion is to reflect that penalty.  If you recall, Goldman Sachs Group Inc. (NYSE: GS) made more or less the same sort of repayment earlier this year.  Hopefully, Bank of America Corporation (NYSE: BAC) will get to make the same sort of announcement down the road.  BofA’s recent borrowing sounds cheap because Buffett got both G.E. and Goldman at 10% on the preferred shares.

There is only one thing investors should take from this: G.E. is simply paying down more of its expensive borrowings.