Buffett loses last AAA rating as S&P cuts Berkshire

Berkshire, which is taking on debt to fund the US$26 billion takeover, was cut one level to AA+ from S&P's highest grade, the ratings firm said Thursday in a statement. The downgrade came the same day Berkshire filed to sell US$8 billion of bonds to fund the Burlington Northern purchase. The sale of the senior unsecured notes was completed after the ratings company announced its decision, said a person with knowledge of the transaction.

“We think that Berkshire is becoming increasingly complex,” Damien Magarelli, an S&P credit analyst, said Thursday in an interview.

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.

The ratings firms “are hedging their bets in the event of another economic downturn,” said Michael Yoshikami, chief investment strategist at Berkshire shareholder YCMNet Advisors. Buffett's firm is “expanding in economically sensitive businesses, like the railroads,” he said.

Berkshire's Class A shares fell US$2,800, or 2.5 percent, to US$108,900 in New York Stock Exchange composite trading Thursday. Buffett didn't respond to a request for comment left with an assistant. The ratings cut concludes a review that S&P announced on Nov. 4, the day after Berkshire disclosed the Burlington Northern deal.

General Electric Co. and drug-maker Pfizer Inc. are among companies that lost their top credit grades from S&P in the past year. Berkshire, which Buffett built into a US$170 billion company over four decades, was raised to AAA at S&P in 1989.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email