Berkshire Hathaway Inc. will terminate $8.25 billion in credit default swap protection it has sold on municipal debt, more than half of a total $16 billion in protection it has sold on bonds of states, cities and towns, Reuters reported yesterday. Buffett said last month that the bankruptcies of three California cities in as many weeks was making traditionally objectionable chapter 9 municipal bankruptcy filings more palatable to local governments in financial crises. Berkshire sells protection against the default of states, towns and cities using credit default swaps. In these contracts the company would be required to reimburse its counterparty for debt losses in the event of a municipal bankruptcy. Berkshire said in a regulatory filing that it reached an agreement with a counterparty to terminate $8.25 billion of the CDS portfolio, which references more than 500 state and municipal debt issuers. It did not name the counterparty to the trades.
