Moody’s cuts Berkshire Hathaway’s credit rating

Moody’s cuts Berkshire Hathaway’s credit rating
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First Published: Thu, Apr 09 2009. 04 37 PM IST
Updated: Sun, Apr 12 2009. 12 44 PM IST
New York: Global credit rating agency Moody’s has lowered the credit rating of legendary investor Warren Buffett-led Berkshire Hathaway from ‘Aaa´, reflecting adverse impact of economic recession on its business.
However, the rating agency has maintained a stable outlook.
The move by Moody’s Investor Service comes a few weeks after the premium rating of Berkshire Hathaway was slashed by another global rating entity Fitch.
Moody’s has cut the rating on the entity from ‘Aaa´ - the highest investment grade - to ‘Aa2´, mirroring the deterioration in the financial profile of the company, due to economic downturn and decline in its investment portfolio as stock prices fell.
Further, the rating on National Indemnity, Berkshire’s flagship reinsurer has been slashed to ‘Aa1´ from ‘Aaa´.
Interestingly, Buffett reportedly has some investments in Moody’s.
“Today’s rating actions reflect the impact on Berkshire’s key businesses of the severe decline in equity markets over the past year as well as the protracted economic recession,” said Bruce Ballentine, Moody’s lead analyst for Berkshire said in a statement on Thursday.
Moody’s noted that Berkshire’s rating is well supported at the revised level. “The company has several businesses that are relatively uncorrelated to the general economy and that continue to perform well,” it added.
Moody’s said many factors including further deterioration in the company’s “stand-alone credit profile” could lead to further downgrade.
On the other hand, it added that “improvement in the stand- alone credit profiles of various operating units across the major segments” and other factors could result in a rating upgrade.
Fitch had downgraded Berkshire Hathaway’s rating from ‘AAA´ (highest investment grade) to a notch lower to ‘AA+´. The rating agency had said its ratings on Berkshire reflect the “long standing concerns with respect to key man risk in the form of the company’s chairman Buffett,” but noted that the risk is unrelated to the legendary investor’s age.
Now, there are just five American corporates - ExxonMobil, Johnson & Johnson, Automated Data Processing (ADP), Microsoft and Pfizer - with the top credit rating of ‘AAA´, down from more than 60 in early 1980s.
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First Published: Thu, Apr 09 2009. 04 37 PM IST