Buffett Watch

Buffett's Berkshire Hathaway May Lose Only Remaining AAA Credit Rating

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.

Fitch took away Berkshire's AAA rating in mid-March, and Moody's did the same in early April.

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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