Grenville

Nice article. Thanks for posting!

dcollon, Thank you for posting the letter. I don't care much for Alice's commentary, but the letter provides us insight on Sokol and how he's dealing with a sticky situation at Netjets. I see nothing wrong in his letter if it is real. He's laying out the facts in a clear manner and those current employees are undermining the brand and the business. I like how he's clearly identified Berkshire's initial investment.

Nice article. Provides a better idea on how the deflation protection is structured. Also good press for the Fairfax team!

Valuegeek, Thank you for your comments!

that's hilarious!

Sandridge's share price movement is scary the last few days. Not knowing much about the company, it reminds me of the liquidity pressure some of the banks faced during the financial crisis where it just fed on itself into a downward spiral. It's also interesting to remember that FFH transferred their ownership to preferred from the common. If they need any additional financing, FFH has plenty of cash to invest in the form of an additional preferred offering.

93% hedged! "Fairfax holds significant investments in equities and equity-related securities, which the company believes will significantly appreciate in value over time. In response to the significant appreciation in equity market valuations during 2009 and the first half of 2010 and uncertainty in the economy, the company continued hedging its equity investment exposure by entering into total return swaps referenced to the Russell 2000 index (at an average Russell 2000 index value of 646.5) in addition to its existing swap contracts referenced to the S&P 500 index (at an average S&P 500 index value of 1,062.5). At June 30, 2010, these hedges represented approximately 93% of the company's equity investment exposure. The market value and the liquidity of these investments are volatile and may vary dramatically either up or down in short periods, and their ultimate value will therefore only be known over the long term." Also another company bought in runoff through TIG. http://www.marketwire.com/press-release/Fairfax-Financial-Holdings-Limited-Second-Quarter-Financial-Results-TSX-FFH-1297790.htm

Thanks!

I was just about to fax in the Fibrek forms (where I state my accredited investor status) for the rights offering to my broker, when they notified me that if I exercise the rights then the shares will be mailed to me in certificate form! That would be a hassle -- I don't want physical certificates. The broker said they can't hold these certificates for me -- it was Interactive Brokers. If any of you US investors out there exercised your rights, keep an eye on the mail! I wound up buying shares in open market instead, and selling the rights I hold at Interactive Brokers. Then I went to my Fidelity account (my other account) and tried to sell the rights I have there, but they claim the cutoff for selling them was yesterday -- they don't think they would get the trade settled in time if I sold them today. That's a strike against Fidelity. Thanks for the color on the two brokers. I got a bit of a run around at Scottrade. First they said I would not get the rights, because I was an "Ineligible Holder". Then I faxed over the prospectus and the US form letter from computershare. Then they told me that they weren't a CDS participant. They could do it if I set up an account with some company they do business with. Essentially, incomplete information and a big run around. In the end, scottrade is a discount broker not built for foreign securities. I am going to open a Interactive Brokers account. The whole rights offering experience was important for me. A lot of details that will be useful to know down the road! I don't hold much FBK, so the loss on not selling the rights sucks, but is bearable.

WOW!

Very interesting. Thanks for posting! A little more color on the investment: http://economictimes.indiatimes.com/personal-finance/insurance/insurance-news/Buffett-takes-agency-route-to-enter-Indian-insurance/articleshow/6072882.cms "According to sources, Berkshire is using this route because the low foreign direct investment limits in all other insurance business make it unattractive to the US giant. Whether it is life or general insurance or even insurance broking, current regulations do not permit foreign investors to hold more than 26% equity stake in the business. Corporate agency is, however, an exception. Under current regulations, any entity, including a foreign bank or any foreign-owned finance company can become an insurance agent by acquiring a corporate licence. A corporate agency, however, has its limitations. For one, every individual selling insurance in a corporate agency firm has to undergo training. Secondly, the agency can sell products for only one company. A corporate agency can, however, look forward to decent margins with commissions going up to 15% of the premium amount. " I'm curious about the corporate agency route vs the route Fairfax has taken with ICICI Lombard.

Buffett's Letter: My Philanthropic Pledge http://givingpledge.org/Content/media/My%20Philanthropic%20Pledge.pdf

Hi Grenville, I am not trying to rationalize this or defend it but I think we need to view it in context. The time when they needed the cash was right in the middle of the credit crisis. If they had issued an open rights or warrant offering, or an IPO, the stock would have really been hammered and the dilution may well have been much greater. By doing it this way they contained the damage and were still able to proceed with the new build program. This was only a month or so after Buffett loaned GS and GE money at similarly lucrative terms. So, if the Washington Family wanted to make a similar deal somewhere else they could have. Rather they chose to invest in the company they know so well which is a vote of confidence, or desperation. FFH has done similar deals right at the bottom of the market that have pissed me off such as selling a huge number of common shares to MKL and Longleaf at insanely low prices. They never phoned and offered me the same deal. In that case though poetic justice came into play and I was able to by a flier on the stock at prices around what their friends paid. Al. Hey Uccmal, I appreciate hearing your viewpoint on the transaction! Good points and I agree context is key. I'm going to look at the details of the offering a little closer and go back and look at the FFH equity raise. I just want to think about these financing deals the right way. -G

http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100527006538&newsLang=en Kennedy Wilson Announces Plan for up to $250M Investment Partnership with Fairfax Financial Fairfax and Kennedy Wilson Team up to Acquire Commercial Real Estate Assets with a Focus in California BEVERLY HILLS, Calif.--(BUSINESS WIRE)--International real estate investment and services company Kennedy Wilson (NYSE: KW) today announced the planned formation of a new partnership with Fairfax Financial Holdings Limited (TSX: FFH) (TSX: FFH.U) (“Fairfax”) to pursue acquisitions of commercial real estate assets, including purchasing loans and real property. Fairfax will provide up to a $250 million capital commitment. This news follows the recent announcement of Fairfax’s purchase of up to $100 million of Kennedy Wilson convertible preferred stock. “Fairfax is such a well respected company with an extraordinary reputation worldwide.” “We are extremely pleased about working with Fairfax on both the corporate level and deal level,” said William McMorrow, chairman and CEO of Kennedy Wilson. “Fairfax is such a well respected company with an extraordinary reputation worldwide.” Kennedy Wilson will lead the sourcing and negotiation of investment opportunities in addition to holding key responsibility for due diligence, financing, property management, asset management and disposition. Chairman and CEO of Fairfax, Prem Watsa, commented, “Kennedy Wilson’s strong investment track record and exceptional ability to source, manage and sell properties, make them a unique partner and an excellent choice for Fairfax in pursuing current value in the commercial real estate sector, particularly in California.”

Thanks for posting!

I found a quote through my brokerage scottrade for the wells fargo warrants. You need to do a symbol lookup under wells fargo and find the symbol for the warrants. The symbols are funny and can be specific to the brokerage house you use. I haven't found a symbol on google finance yet.

Watsa, Nice idea! Thanks for sharing.

Thanks for the ticker! Here's the prospectus: http://www.sec.gov/Archives/edgar/data/72971/000119312510126208/d424b5.htm Wells Fargo bought about 70mil of the warrants leaving about 40mil outstanding.

Yes, I agree too. I was speaking more to the Q2 outlook above (short term). In regards to operating costs, I'm not sure that SFK can align their input costs quick enough under the current structure? SFK entered into a fiber supply agreement with ACCC that became effective on Sept 1, 2009. The contract is a 3 year contract so that won't end until Aug 31, 2012. The contract with ACCC supplies SFK with 2/3rds of St. Felicien's required fiber at market prices. So, 2/3rd's of their fiber costs are locked into a contract at market prices. Even with $1000/tonne pulp prices, they are barely getting into the black in Q2 with the current costs of fiber. If pulp prices begin to retreat over the coming quarters (expected) then fiber costs must decline too to hold the margins and keep the company profitable. Annually, SFK requires 775,000 tonnes to operate to capacity. So, in terms of tonnes, SFK gets 520,000 tonnes from ACCC and the remaining 255,000 tonnes from other suppliers in the area. The AIF actually says, "The remaining required volume of wood fibre for 2010 is currently contracted with other suppliers in the region." Does the wood fiber supply agreement get renegotiated in a change of control scenario? Are they required to buy through the agreement if a wood chip supplier is involved in some sort of combination?

thanks for posting!

I may have asked board members before, but I can't remember the answer or the logic. How do you guys feel about the preferred offering Seaspan did in 2009? It doesn't give me a ton of confidence in management when they sold such a nice chunk of the company to insiders. The terms of the offering were $200 million of prefs that pay 12% interest payable in shares and a conversion price of $15. It's a nice vehicle to compound ownership interest. Based on the interest of the board in SSW at current prices, it doesn't seem like the conversion price of $15 was set high. I just wouldn't be happy if a company like Fairfax did the same sort of deal with insiders getting such great terms unless they were offered to other shareholders. I'm curious to learn how you guys think about the offering and your confidence in the future with regards to management and the large shareholders. http://ir.seaspancorp.com/releasedetail.cfm?ReleaseID=360939

SD, I think this is the post you're referring to. If this is the case, how do they plan on setting the subscription price on the offering? No where have they stated how they are going to set the price for the rights offering except in the reference to the standby agreement with Fairfax. <IV, Thanks for checking. Hopefully you'll get clarification on how the price will be set.

From the SFK Sedar Standby Agreement with Fairfax: "AND WHEREAS any holder of Common Shares who exercises his right (the "Basic Subscription Right") to subscribe for all of the Common Shares that can be initially purchased upon exercise of all Rights issued to such holder shall be entitled to subscribe for, at the Subscription Price per share, additional new shares (the "Additional Subscription Privilege") in the manner set forth in National Instrument 45-101 – Rights Offering;" ... "Subscription Price" means the price at which each Common Share is issuable upon the exercise of Rights pursuant to the Rights Offering; .... 2.2 Price Determination. (a) The Subscription Price shall be equal to the lesser of: (A) the volume-weighted average price of the Common Shares (or the Fund's units, as the case may be prior to the Conversion) on the TSX for each of the trading days on which there was a closing price during the five (5) trading days immediately preceding the date of filing of the Final Prospectus, less a discount of 20% and (B) the volume weighted average price of the Common Shares (or the Fund's units, as the case may be prior to the Conversion) on the TSX for each of the trading days on which there was a closing price during the forty (40) trading days immediately preceding the date of filing of the Final Prospectus (the "Trading Observation Period"), less a discount of 20%; (b) Immediately following completion of the Trading Observation Period and prior to the filing of the Final Prospectus, the Corporation will determine the Subscription Price and shall provide Fairfax with written notice thereof. " From reading this, the subscription price will be at a 20% discount regardless of whether Fairfax takes up any of the additional unsubscribed rights offerings.

Summary of changes: http://holdings.nasdaq.com/asp/OwnerPortfolio.asp? FormType=OwnerPortfolio&CIK=0000915191&HolderName=FAIRFAX+FINANCIAL+HOLDINGS+LTD/+CAN Interesting to see the investment in Citigroup.

Oldye, Where did you find this information? Was it disclosed in the annual report or quarterly report for FFH?