Berkeshire Hathaway Loses AAA Rating
Hat-tip to the guy I overheard at the next table at the internet cafe I’m hanging out in.
Buffett’s Berkshire Has AAA Debt Rating Cut by Fitch
By Erik Holm | March 12 (Bloomberg)
Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses on the insurer’s equity and derivatives holdings.
Buffett’s role as chief investment officer also puts the company at risk if he becomes unable to do the job, Fitch said in a statement. Fitch cut the so-called issuer default rating on Berkshire to AA+, and senior unsecured debt to AA. The insurance and reinsurance units kept their AAA status, with a negative outlook for all entities, Fitch said.
“Fitch views this risk as unrelated to Mr. Buffett’s age, but rather Fitch’s belief that Berkshire’s record of outstanding long-term investment results and the company’s ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett,” Fitch said. Buffett is 78.
Berkshire joins General Electric Co., which was downgraded by Standard & Poor’s today and lost its status as one of the remaining AAA companies in the U.S. Berkshire stock fell 35 percent in 12 months on concern that Buffett’s bets on derivatives—instruments he has called “financial weapons of mass destruction”—will crush profit at the firm.
Read the rest of the article.
If I’d been keeping up with Yves Smith at Naked Capitalism, I’d have found out sooner. Here’s what she had to say:
Ah, the mighty are fallen, or more accurately, falling.Fitch is generally the first to whack ratings (unless you count the feisty but not given sufficient credit newcomer, Egan Jones).
Note this does not (yet) appear to affect Berkshire’s new muni bond guarantee business, since the insurance and reinsurance units kept their top ratings, albeit with a negative outlook.
