Buffett Loses Last AAA Rating as S&P Cuts Berkshire


Andrew Frye
Bloomberg
February 4, 2010

Warren Buffett’s Berkshire Hathaway Inc. was stripped of its last AAA credit rating by Standard & Poor’s after the billionaire investor agreed to buy railroad Burlington Northern Santa Fe Corp.

[efoods]Berkshire, which is taking on debt to fund the $26 billion takeover, was cut one level to AA+ from S&P’s highest grade, the ratings firm said today in a statement. The downgrade comes the same day Berkshire filed to sell $8 billion of notes to fund the Burlington Northern purchase, and concludes a review that S&P announced on Nov. 4, the day after Berkshire disclosed the deal.

“The railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity,” S&P said. “Risk tolerances appear to have increased.”

Buffett, 79, has called the railroad takeover an “all-in wager” on the U.S. economy. Berkshire lost its top credit grades at Fitch Ratings in March and at Moody’s Investors Service in April amid a slump in the firm’s manufacturing, retail and travel units. The earlier downgrades were on concern about Buffett’s successor and the firm’s derivative bets.

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