S&P May Downgrade Berkshire, Upgrade Burlington Northern
November 04, 2009 4:06 PM
Standard & Poor's may downgraded the credit rating of Berkshire Hathaway (NYSE: BRK.A, BRK.B) after the company announced it will buy railroad giant Burlington Northern (NYSE: BNI) for $34 billion, jeopardizing Berkshire's "AAA" credit rating.
The ratings agency placed its ratings on Berkshire Hathaway on CreditWatch with negative implications, but S&P also said it may upgraded Burlington Northern to "BBB+" from "BBB."
S&P said Berkshire will fund a good portion of the acquisition from cash dervied from its insurance businesses and the reduced liquidity could constrain captial adequacy at the insurance units.
S&P said Berkshire Hathaway's insurance operations' capital adequacy has declined over the past year, reflecting the drop in the market value of the company's portfolio of equity holdings of the insurance subsidiaries.
