Banking, finance, and taxes

S&P Puts Eagle Eye On Buffett & Berkshire (BRK-A, GE)

buffett-image3Standard & Poor’s Ratings Services is putting Mr. Buffett on Watch.  Berkshire Hathaway Inc. (NYSE: BRK-A) has had its ratings outlook revised to “Negative” from “Stable” along with Berkshire Hathaway Finance Corp., Berkshire Hathaway Assurance Corp., and other subsidiaries.  The good news is that the “AAA/A-1+” ratings and the counterparty credit ratings were maintained.  At least for now.

This will sound a lot like when S&P fired a shot across the bow of General Electric Co. (NYSE: GE) when it put it on negative watch.  It took S&P only about three months to downgrade GE. Keep in mind that Fitch already cut its ratings on Berkshire.

This notes that S&P said Berkshire could get a negative review back in December if current circumstances did not change.  What is interesting is that in this cut S&P is citing the decline in equity values as having reduced Berkshire’s insurance statutory capital.  A preliminary analysis indicates that the group’s capital is “no longer redundant at the ‘AAA’ level.”

S&P’s time horizon is 12-months for the review and it states that an increase in holdings values or a likely rebuilding of capital could allow this to go back to “Stable.”  The flip-side is that it notes continued equity drops and an inability to restore capital back to that of a ‘AAA’ via earnings growth or capital contributions then S&P “might lower the ratings.”  The only real good news there is that the note says the belief is that it does not currently anticipate any downgrades of more than one notch in ratings.

Buffett is out supposedly looking for a deal to do in the $5 to $20 billion range.  It is possible he would raise capital, but even Mr. Buffett has no inclination to believe he can just wish-up the market.

Jon C. Ogg
March 24, 2009

It’s Your Money, Your Future—Own It (sponsor)

Retirement can be daunting, but it doesn’t need to be.

Imagine having an expert in your corner to help you with your financial goals. Someone to help you determine if you’re ahead, behind, or right on track. With SmartAsset, that’s not just a dream—it’s reality. This free tool connects you with pre-screened financial advisors who work in your best interests. It’s quick, it’s easy, so take the leap today and start planning smarter!

Don’t waste another minute; get started right here and help your retirement dreams become a retirement reality.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.

AI Portfolio

Discover Our Top AI Stocks

Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.

You can follow him investing $500,000 of his own money on our top AI stocks for free.