S&P: Berkshire Hathaway Still No AAA-Rating (BRK-A)

Standard & Poor’s Ratings Services has downgraded many sovereign AAA ratings lately.  Many large stable corporations have also lost their prized “AAA” ratings in the last decade.  In fact, there is now just a handful of Triple-A ratings when it comes to the underlying credit quality of some of the world’s top corporations.  While Berkshire Hathaway Inc. (NYSE: BRK-A) used to be a “AAA” rating, those days are gone.

S&P has just assigned a AA+ rating to Berkshire Hathaway’s senior debt ratings.  The current rating structure is technically listed as being  AA+/Negative/A-1+.  Today’s note relates to  $1.7 billion senior unsecured notes being issued in two tranches: $1.1 billion as 1.9% senior unsecured notes due January 31, 2017; and $600 million as 3.4% senior unsecured notes due January 31, 2022.

Mr. Buffett and friends are using the proceeds for general corporate purposes, but ultimately it looks to repay $1.7 billion in notes maturing on February 10, 2012.  S&P has noted that Berkshire Hathaway’s adjusted debt leverage was roughly 12.3% as of the end of the third quarter of 2011 and this new debt effectively just offsets the prior debt which is maturing in February.

Today’s action should not be considered as a news event, but it does resonate that not even Warren Buffett’s great historical track record is worthy of a prized Triple-A rating from the ratings agencies.

JON C. OGG