Moody’s Downgrades Berkshire Hathaway

So much for the conspiracy theories! Moody’s, which is 20% owned by Berkshire Hathaway, today downgraded the long term issuer rating of Berkshire two notches fromAaa to Aa2, and the Issuer Financial Strength (IFS) rating of most of the insurance subsidiaries one notch from Aaa to Aa1. After taking this action, Moody’s declared Berkshire Hathaway’s ratings outlook to be “stable”. For those who have signed up for a free account with Moody’s, the text of the action can be found here. Read this post for more details.

Berkshire Faces Higher Financing Costs

Earlier this month, Fitch Ratings downgraded Berkshire Hathaway’s credit rating on unsecured debt from AAA to AA+. Earlier this week, Standard and Poor’s lowered its outlook on Berkshire Hathaway from stable to negative. The result appears to be at least partially responsible for a slight increase in Berkshire’s funding costs. While today’s notes were priced to yield 282 basis points over Treasuries, the yield spread was only 220 points in January when Berkshire sold $250 million of 5.4 percent notes due in 2018. Read this post for more details.

S&P Issues Negative Outlook on Berkshire

In a widely anticipated move, Standard & Poor’s today revised its outlook on Berkshire Hathaway from stable to negative. Standard & Poor’s reaffirmed Berkshire’s AAA rating for now. This action follows the March 13 downgrade of Berkshire by Fitch Ratings which I wrote about earlier this month. Ever since the Fitch action, there has been intense speculation regarding whether Moody’s and Standard & Poor’s would make a similar move. This post examines the reasoning used by Standard & Poor’s today and compares it to the reasoning used by Fitch earlier this month.


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