Warren Buffett Watch
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Third Shoe Finally Drops: S&P Takes Away Berkshire Hathaway's AAA Rating
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Standard & Poor's dropped its ratings on Berkshire and its core subsidiaries from the top-level AAA to AA+.
S&P says Berkshire's planned acquisition of Burlington Northern Santa Fe prompted the move.
In a statement posted on its web site, S&P says "We believe that the railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity," as Berkshire uses cash and borrowing to help finance the $26 billion deal.
S&P adds: "Investment risk remains very high in our view, compounding the need for extremely strong capital and liquidity given potential investment volatility. A key concern is that BRK's risk tolerances appear to have increased, yet we believe they remain ill defined while the organization increases in complexity."
Another concern, says S&P, is "uncertainty" surrounding who will be running Berkshire Hathaway after "the eventual transition of the company's leadership" from Warren Buffett.
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Today, S&P indicates it doesn't expect to lower Berkshire's rating again anytime soon, as it takes Berkshire off CreditWatch and gives it a stable outlook.
Moody's stripped Berkshire of its AAA last April. (Berkshire is Moody's largest shareholder with a stake of just under 13.5 percent, but Berkshire has been reducing that position over the past half-year.)
Back in March of 2009, Fitch was the first of the big three credit rating agencies to take away Berkshire's triple-A.
Current Berkshire stock prices:
Class A: [BRK.A
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Class B: [BRK.B
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Moody's: [MCO
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