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WSJ: Warren Buffett Profits From Goldman Sachs Rejects

By    |   Thursday, 12 Apr 2012 02:38 PM

Billionaire investor Warren Buffett benefited from leveraged loans unloaded by Goldman Sachs Group Inc. traders, The Wall Street Journal reported, citing people familiar with the matter.

Last year, anticipating new regulatory restrictions on proprietary trading and seeking to reduce the bank's exposure to risky assets, Goldman loan traders unloaded hundreds of millions of dollars of leveraged loans at a loss, people familiar with the matter told the Journal. Many of those loans have since jumped in value.

In one particular trade, Goldman sold about $85 million in loans made to newspaper publisher Lee Enterprises Inc. at about 65 cents on the dollar; the bank sustained a loss of $13 million after it had originally paid 80 cents, the Journal reported.

They were acquired by a unit of Buffett’s Berkshire Hathaway Inc., which has so far made a profit because the loans are now worth 82 cents to the dollar, the newspaper reported.

The sale of the loans came amid discussions of new regulations that Goldman officials worried might restrict its ability to own and trade loans, and concerns within the firm that financial markets could take a turn for the worse after a promising start to the year, the Journal reported.

Goldman, as well, was conducting a broad consolidation of its credit-trading desks as it focused more on facilitating trades between customers, the Journal reported.

Recently, billionaires such as Buffett, Carolos Slim and Gina Rinehart have been increasing investments in newspaper publisher stocks such as Journal Communications, The New York Times and McClatchy Company.

Buffett bought the Omaha World Herald. Slim lifted his New York Times holdings. Rinehart, reportedly the richest person in the history of Australia, has bought heavily into The Sydney Morning Herald and The Financial Review.

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