News Column

Fitch Rates Berkshire Hathaway Senior Debt Issue 'A+'

August 12, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'A+' rating to the $750 million 2.1% senior unsecured notes issued by Berkshire Hathaway Inc. (NYSE:BRK). In addition, Fitch has assigned an 'A+' rating to the $400 million of floating-rate senior unsecured notes issued by Berkshire Hathaway Finance Corp. (BHFC), which are guaranteed by BRK. The 'A+' ratings are equivalent to Fitch's ratings on both BRK and BHFC's outstanding senior unsecured notes.

KEY RATING DRIVERS

Fitch's ratings on BRK are supported by the extremely strong capitalization and market position of its insurance subsidiaries, solid operating performance with good diversification across business lines and excellent financial flexibility and liquidity.

Also considered in the ratings are material equity market risk, insured natural catastrophe exposures, growing exposure to asbestos and environmental risk and various issues associated with the company's acquisition strategy.

BRK's consolidated financial leverage ratio was 24% as of June 30, 2014. Consolidated interest coverage for the first half of 2014 was 8.2x excluding realized investment gains. Both financial leverage and interest coverage ratios are not expected to change meaningfully given the issuances replaced debt that matured in July and August 2014.

BRK's financial leverage ratio at the holding company level (including debt issued by the company's finance company subsidiaries and guaranteed by BRK) was 14% at June 30, 2014. The agency views BRK's ability to fund finance operations at a low cost as an important competitive advantage and also notes that much of the finance company debt is guaranteed by BRK.

RATING SENSITIVITIES

Key rating triggers that could lead to a future downgrade include:

--Deterioration in the credit quality of key insurance subsidiaries (National Indemnity, GenRe, and GEICO) that is no longer consistent with the current 'AA+' rating. Measures of credit quality include Fitch's judgment of capitalization, a total financing and commitments ratio greater than 1.5x, net leverage (excluding affiliated investments) over 3.5x, or a sharp and persistent reduction in underwriting profits;

--A consolidated run-rate financial leverage ratio that exceeds 30% or a run-rate financial leverage ratio from the holding company, insurance and finance operations (including debt issued or guaranteed by the holding company) that exceeds 25%;

--Material increases in leveraged equity market exposure such as its equity index put derivative portfolio;

--Acquisitions or other actions that reduce outstanding cash below $10 billion or approximately 5x consolidated interest expense.

Key rating triggers that could lead to an upgrade include:

--A commitment to lower debt-to-tangible capital ratios attributed to the holding company, insurance and finance operations. Fitch believes that this would likely require the scaling back of the finance operations.

Fitch has assigned the following ratings:

Berkshire Hathaway Finance Corporation

--$400 million floating-rate senior notes due August 2017 'A+'.

Berkshire Hathaway, Inc.

--$750 million 2.1% senior notes due August 2019 'A+'.

Fitch currently has the following ratings:

Berkshire Hathaway, Inc.

--Issuer Default Rating (IDR) 'AA-';

--$750 million floating-rate senior notes due August 2014 'A+';

--$1.7 billion 3.20% senior notes February 2015 'A+';

--$300 million 0.8% senior notes due May 2016 'A+';

--$750 million 2.20% senior notes due August 2016 'A+';

--$1.1 billion 1.9% senior notes due January 2017 'A+';

--$800 million 1.55% senior notes due May 2018 'A+';

--$500 million 3.75% senior notes due August 2021 'A+';

--$600 million 3.40% senior notes due January 2022 'A+';

--$500 million 3.0% senior notes due May 2023 'A+';

--$1 billion 4.5% senior notes due May 2043 'A+'.

Berkshire Hathaway Finance Corporation (BHFC)

--IDR 'AA-';

--$1 billion 4.85% notes due January 2015 'A+';

--$500 million 2.45% senior notes due December 2015 'A+';

--$600 million 0.95% senior notes due May 2016 'A+';

--$400 million 0.95% senior notes due October 2016 'A+';

--$650 million floating-rate senior notes due January 2017 'A+';

--$1,350 million 1.6% senior notes due May 2017 'A+';

--$1.25 billion 5.4% notes due May 2018 'A+';

--$500 million 2.0% senior notes due May 2018 'A+';

--$500 million 1.3% senior notes due May 2018 'A+';

--$550 million 2.9% senior notes due October 2020 'A+';

--$750 million 4.25% senior notes due January 2021 'A+';

--$775 million 3.0% senior notes due May 2022 'A+';

--$750 million 5.750% senior notes due January 2040 'A+';

--$725 million 4.4% senior notes due May 2042 at 'A+';

--$500 million 4.3% senior notes due May 2043 'A+'.

GEICO Corporation

--IDR 'AA-';

--$150 million 7.35% senior notes due July 15, 2023 'A+'.

General Re Corporation

--IDR 'AA-';

--$500 million commercial paper program 'F1+';

--Short-term IDR 'F1+'.

Fitch currently rates the following insurance subsidiaries:

Government Employers Insurance Company;

General Reinsurance Corporation;

General Star Indemnity Company;

General Star National Insurance Company;

Genesis Insurance Company;

National Indemnity Company;

Columbia Insurance Company;

National Fire and Marine Insurance Company;

National Liability and Fire Insurance Company;

National Indemnity Company of the South;

National Indemnity Company of Mid-America;

Wesco Financial Insurance Company:

--Insurer Financial Strength 'AA+'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Although BRK's General Reinsurance Corp. subsidiary participated directly in the rating process, BRK did not participate other than through the medium of its public disclosure.

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=849674

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Douglas M. Pawlowski, CFA, +1 312-368-2054

Senior Director

Fitch Ratings, Inc.

70 W. Madison Street

Chicago, IL 60602

or

Secondary Analyst

Christopher A. Grimes, CFA, +1 312-368-3263

Associate Director

or

Committee Chairperson

Douglas L. Meyer, CFA, +1 312-368-2061

Managing Director

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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