Warren Buffett awaits $8bn of ‘bad news’ with Kraft payment

SEATTLE: Warren Buffett is about to get back the $8 billion — plus a little extra — that his Berkshire Hathaway Inc invested in Kraft Heinz Co.

“That will be good news for Kraft Heinz,” he wrote in his most recent annual letter to shareholders, “and bad news for Berkshire.”

It’s easy to see why. The packaged food giant is paying Buffett’s company 9%, or $720 million annually, on the stake — an attractive return at a time when the billionaire has struggled to find large investments, and the cash on Berkshire’s balance sheet earns almost nothing.

Kraft has already moved to lower its financing costs. Last week, the company sold $7 billion bonds in euros and dollars with interest rates that ranged from 1.5% to 4.375% for the longest-term debt.

CEO Bernardo Hees has been shutting factories and slashing jobs to cut $1.5 billion in annual costs by 2017, following a playbook he used at H.J. Heinz to produce some of the industry’s best margins.