Berkshire and 3G acquired one-half of the common stock of Parent for $4.12 billion each, with Berkshire also purchasing $8 billion in 9% preferred stock issued by Parent, bringing the total cash injection to $18.24 billion. The preferred stock has an $8 billion liquidation preference (i.e., assurance that holders are paid before common shareholders), pays and accrues a 9% dividend, and is redeemable at the request of the Parent or Berkshire under certain circumstances. The use of preferred stock has been a hallmark of Berkshire deals and has often included warrants to buy common stock.

Parent used the $18.24 billion cash injection from Berkshire and 3G (i.e., $14.12 from Berkshire + $4.12 from 3G) to acquire the common shares. J.P. Morgan and Wells Fargo provided $14.1 billion of new debt financing. The debt financing consisted of $8.5 billion in dollar-denominated senior secured term loans, $2.0 billion of Euro/British Pounds senior secured term loans, a $1.5 billion senior secured revolving loan facility, and a $2.1 billion second lien bridge loan facility. Total sources of funds equal $32.34 billion, consisting of $18.24 in equity plus $14.1 billion in debt financing.

The deal does not contain a go shop provision, which allows the target to seek other bids once they have reached agreement with the initial bidder in exchange for a termination fee to be paid to the initial bidder if the target chooses to sell to another firm.

(1) What might be the purpose of the $1.5 billion senior secured revolving loan facility, and the $2.1 billion second lien bridge loan facility as part of the deal financing package?

(2) What might motivateBerkshire Hathaway to receive preferred rather than common stock in exchange its investing $8 billion?