The Williams Cos. (NYSE: WMB) is repaying the money lent to it by Berkshire Hathaway Inc. ; (NYSE: BRK) last year when Williams was teetering on the brink of bankruptcy. The steps will help Tulsa-based Williams pay the high-cost debt with a combination of cash and less-expensive debt. Williams will pay $1.17 billion to retire its $900-million, 364-day loan from a Berskshire-led investor group ahead of the loan's maturity in July. That debt-which carried a whopping 34% interest rate-is secured by substantially all of Williams' E&P interests in the Rockies that were acquired in 2001 from Barrett Resources. Williams intends to refinance a portion of the loan with a new market-level interest rate and a more leisurely pay-off schedule. The company is seeking $400- to $500 million in financing through a four-year, fully funded and prepayable term loan that will be secured with the same E&P interests. Williams is scheduled to close the new E&P loan May 30. The remaining $700 million or so will be paid from available cash from recent asset sales. In addition, Williams will repurchase for about $289 million all of the outstanding 9.875% cumulative convertible preferred shares held by a subsidiary of MidAmerican Energy Holdings Co., a Berkshire Hathaway company. Williams sold the 1.47 million preferred shares to MidAmerican for $275 million in March 2002. To repurchase these shares, Williams is offering $275 million face amount of 5.5% convertible notes due 2033. The notes are not callable for seven years, and may be converted into Williams common at $10.89 per share. Gordon Howald, who covers Williams for Credit Lyonnais Securities, said the cost savings to Williams will be about 31 cents per share on an annualized basis. "We believe the long-term prognosis for Williams remains strong, and would add shares, particularly on weakness," he said in a report.
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