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Buffett handed over his proxy
The Osprey position
Enron carried out most of its misbehavior through off-balance-sheet entities, and when it collapsed, those entities offered plenty of opportunity. Oaktree became the largest holder of the debt of one of them, called Osprey. Buffett held the second-largest position and let Oaktree run it for him.
A letter from Omaha
Oaktree's Bruce Karsh restructured the company, and the position ended in a big win around 2002. A year or two later, Buffett wrote Karsh a letter praising the job and inviting him to lunch if he ever found himself in Omaha. Karsh wrote back that he and Oaktree co-founder Howard Marks would be in Omaha that week and asked to take Buffett to lunch.
They never did business together after that, because Buffett was always looking for something big to acquire, and Oaktree does not deal in big acquirable things. The friendship went on anyway. In 2009, Marks wrote a memo that mentioned Buffett and sent it to him. Buffett wrote back that he reads the memos, and added that Marks should write a book, with a blurb from him if he did.
How the book began
Marks had always figured he would write a book when he retired. A note like that from Buffett was not one to leave sitting, so he wrote The Most Important Thing.
How did Enron hide debt off its books?
Enron created partnerships and trusts known as special purpose entities and moved debt and troubled assets into them. Under the accounting rules of the time, an entity could stay off the sponsor's financial statements if outside investors supplied at least 3 percent of its equity. That let Enron report far less debt than it actually stood behind. The company filed for bankruptcy in December 2001, and the creditors of those entities became claimants in the proceedings.
Why would a creditor hand over its vote?
In a Chapter 11 bankruptcy, creditors in each class vote on the reorganization plan, and approval requires two thirds of the amount and more than half of the number of claims voting. A holder with a modest position has limited influence and little staff to negotiate terms. Handing a vote to the largest holder lets one party with a legal team represent the whole block. That larger holder then negotiates directly with the company and its other creditors.
Why do giant buyers skip small deals?
Berkshire Hathaway holds a huge pile of cash and investments, so a deal has to be very large to change its overall results. Buffett's annual shareholder letters have long described a search for large acquisitions, which he called elephants. Berkshire completed its purchase of the BNSF railroad in 2010, a deal valued at about $44 billion including debt.
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