UPDATE 1-Buffett's Berkshire Hathaway buys Tiffany bonds

NEW YORK Fri Feb 13, 2009 9:35pm GMT

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NEW YORK Feb 13 (Reuters) - Warren Buffett's Berkshire Hathaway Inc (BRKa.N)(BRKb.N) has agreed to buy $250 million of debt from luxury jewelry maker Tiffany & Co (TIF.N), the latest in a string of high-yielding investments by the billionaire investor.

New York-based Tiffany said it sold Berkshire $125 million of eight-year notes and $125 million of 10-year notes, all yielding 10 percent. It said it will use the proceeds to refinance debt and for general corporate purposes.

The investment marks at least the seventh time since September that Berkshire has gotten at least a 10 percent payout by buying company bonds, preferred stock, or convertible securities.

Many companies are turning to Berkshire for financing as the global credit crisis makes it too difficult or costly to raise money from institutional investors.

Tiffany lowered its earnings forecast last month for the year ended Jan. 31 after holiday sales dropped 21 percent.

For Omaha, Nebraska-based Berkshire, the investments are a way to generate plenty of income with less risk than by investing directly in common stocks, which are lower in companies' corporate structure.

The average U.S. investment-grade bond yielded 7.37 percent on Thursday, according to Merrill Lynch data.

Since late September, Berkshire has spent $5 billion on Goldman Sachs Group Inc (GS.N) preferred stock, $3 billion on General Electric Co (GE.N) preferred stock, $2.6 billion on Swiss Re RUKN.VX convertible debt and a total of $750 million on securities from motorcycle maker Harley-Davidson Inc (HOG.N), packaging company Sealed Air Corp (SEE.N) and building materials maker USG Corp (USG.N). All of these investments generate annual payouts of 10 percent to 15 percent.

Buffett tends to favor blue-chip companies with market- leading positions, easy-to-follow businesses and strong management. In October, he said he plans to move all his personal holdings, other than Berkshire shares, into U.S. stocks from government bonds.

Tiffany shares closed down 39 cents at $20.18 on Friday. They have fallen 60 percent from their 52-week high set last May 30. Berkshire's Class A shares closed Friday down $1,042 at $88,140. (Editing by Andre Grenon)

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