Buffett Buys Billions in TXU Bonds

According to Fortune this morning, Warren Buffett's holding company -- Berkshire Hathaway -- bought $2 billion worth of TXU junk bonds late last week, helping TXU pay down some of the so-called bridge loans accrued during the Dallas-based energy provider's $45-billion sale to Kohlberg Kravis Roberts. Reports Peter Eavis, Berkshire "purchased $1.1 billion of 10.25% bonds at 95 cents on the dollar to give Buffett an effective yield of 11.2%. And Berkshire bought $1 billion of 10.5% PIK-toggle bonds (bonds whose interest can be paid out in cash or more bonds) for 93 cents on the dollar, producing an effective yield of 11.8%."

What's that mean? I don't really know, as I got into journalism because I was told there'd be very little math on the test, but Jeffrey Cane at seems to have some idea. As in, "Buffett's purchase may be a sign that investor appetite for riskier debt is returning." I totally knew that. --Robert Wilonsky

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