Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Buffett's Berkshire loses top S&P credit rating

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Berkshire Hathaway has been stripped of its top-tier credit rating by Standard & Poor's as the conglomerate run by Warren Buffett moves to complete its purchase of railroad operator Burlington Northern Santa Fe Corp.

Berkshire's rating was cut to "AA+," down one notch from "AAA," S&P said Thursday. The downgrade came on the same day Berkshire filed to sell $8 billion worth of bonds to help finance its $26 billion acquisition of Burlington.

"We believe that the railroad acquisition will reduce what historically has been extremely strong capital adequacy and liquidity, and that investment risk with sizable concentrations remains very high," S&P said in a statement.

Berkshire (BRKA, Fortune 500) was placed on credit watch in November, shortly after the company announced plans to buy Burlington. (BNI, Fortune 500) The deal is scheduled to close early this year.

S&P said the outlook for Berkshire was stable.

"Albeit weakened, we view the company's liquidity position and balance sheet as still very strong," S&P said. "However, we see meaningful exposure to adverse development of reserves held for long-term insurance liabilities, and uncertainty remains regarding management succession."

Berkshire had already lost its "AAA" rating at Fitch and Moody's, the two other main credit rating agencies, last year. In March, Fitch said Berkshire's diversified business model wasn't enough to offset its exposure to risky derivatives contracts.

The Omaha-based holding company has a variety of subsidiaries including auto insurer Geico, See's Candy and Fruit of the Loom. It also has investments in an array of companies ranging from Goldman Sachs (GS, Fortune 500) to Johnson & Johnson. (JNJ, Fortune 500)

With Berkshire's rating cut, there are now only four publicly traded U.S. companies that have a "AAA" credit rating, according to S&P.

Exxon Mobil (XOM, Fortune 500), Johnson & Johnson (JNJ, Fortune 500), Microsoft Corp. (MSFT, Fortune 500) and Automatic Data Proccesing Inc. (ADP, Fortune 500) still maintain the highest possible credit rating. Assured Guaranty, LTD., a privately held bond insurer, also has a "AAA" rating at S&P.

Among the other major corporations to have lost their pristine credit ratings from S&P recently are Pfizer (PFE, Fortune 500) and General Electric (GE, Fortune 500).

Pfizer was downgraded in October due to its acquisition of rival drugmaker Wyeth. S&P cut General Electric's rating in March amid concerns about the company's struggling finance unit GE Capital.  To top of page

Index Last Change % Change
Dow 17,689.86 -56.12 -0.32%
Nasdaq 5,128.28 -0.50 -0.01%
S&P 500 2,103.84 -4.79 -0.23%
Treasuries 2.20 -0.06 -2.78%
Data as of 12:16pm ET
Company Price Change % Change
Bank of America Corp... 17.88 -0.25 -1.38%
Micron Technology In... 18.51 -1.39 -6.98%
Facebook Inc 94.01 -1.20 -1.26%
Apple Inc 121.30 -1.07 -0.87%
Frontier Communicati... 4.72 0.09 1.94%
Data as of Jul 31
Sponsors

Sections

Some families are outraged at the sums they've been offered by Lufthansa as compensation for the Germanwings plane crash in March which killed 150 people. More

Fast-food chains that operate in more than 30 locations nationwide are the sole target of a new rule in New York to hike their minimum wage to $15. But consumers and small business owners, as well as some employees, may be the ones to pay the price. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More