Buffett Watch

Buffett's Berkshire Backs Over 100 Muni Bonds In Last Two Days

Warren Buffett's new bond insurance company has backed more than 100 municipal bonds in the past two days, according to Reuters

The wire service quotes a Moody's Investor Services spokesman as saying, "We have rated approximately 112 Berkshire Hathaway Assurance Corp-insured issues between yesterday and today."

Reuters calls it a "development that shows just how fast the new unit is growing in a field where rivals are struggling."

Ambac and MBIA have been on the brink of losing their own AAA ratings from Moody's, Standard and Poor's and Fitch due to exposure to potentially big losses from risky investments like collaterialized debt obligations (CDOs).  In the last few minutes, however, CNBC's Charlie Gasparino reported that banks working on a bailout for Ambac could announce a dealMonday or Tuesday.

Even though BHAC doesn't have its own AAA credit rating yet, the bonds it guarantees are getting the top rating from Moody's Investors Service.

In a news release, Moody's says BHAC's guarantees are backed by Berkshire-owned National Indemnity Co. (NICO), which does have its own AAA credit rating.  VP Bruce Ballentine, co-author of a new Moody's report on BHAC says in the release, "Moody's Aaa insurance financial strength rating on NICO reflects its superior capitalization, its unique ability to assume large and unusual risks, its expertise in managing long-tail portfolios, and the implicit support from Berkshire."  (I found a link to the report, but it's a bit expensive.)

Buffett revealed the creation of his new bond insurer just about two months ago.  It's in the process of getting a "streamlined" nationwide application for licensesto sell in all 50 states.

Earlier this month, during a live appearance on CNBC's Squawk Box, Buffett offered to reinsure $800 billion dollars worth of municipal bonds now backed by Ambac, MBIA and FGIC. 

That offer was not well received, with Ambac's CEO telling CNBC's Erin Burnett it's "laughable."  The insurers don't like the deal partly because it would, in effect, skim the "good" stuff while leaving them stuck with the "bad" CDOs.

Berkshire Hathaway does own 48 million shares, now worth about $1.8 billion, in Moody's.  (See our new Berkshire Hathaway Portfolio Tracker.)  That's about 19 percent of its outstanding stock, making Berkshire the biggest Moody's shareholder.   Current price for Moody's:

This week, the New York Post saidthat "allegations of conflicts came from insurance industry sources" because Moody's "began pulling the rug out from under (Buffett's) rival insurers to force them into 'egregious' deals with Buffett."  That is, the argument goes, by threatening their AAA credit ratings, Moody's is trying to force Ambac and MBIA to accept Buffett's reinsurance offer.  The Post did not identify the source of what it called the "cries of foul."

Berkshire Hathaway's current price:

Questions?  Comments?  Email me at buffettwatch@cnbc.com