Warren Buffett's Berkshire Hathaway could be stripped of its one remaining top-grade AAA credit rating.
Standard & Poor's Ratings Services says in a news release today that it has put Berkshire on "CreditWatch with negative implications" in the wake of its announced deal to buy all of Burlington Northern Santa Fe.
Last March, S&P kept its AAA rating on Berkshire, but lowered its outlook to "negative" from "stable" because lower equity prices were hurting the capital holdings of Berkshire's insurance operations.
Today S&P says it may lower Berkshire's rating by one or two notches within 90 days, after it takes a closer look at the company's agreement to buy BNSF.
It expects a "significant part" of the deal's cash portion will come from Berkshire's "core insurance operations, as has historically been the case in other transactions."
As a result, says S&P credit analyst John Iten, "We believe that this transaction will decrease the liquidity and capital adequacy of the insurance operations. For the consolidated organization, financial leverage will increase and fixed-charge coverage may decline."
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