Warren Buffett’s Berkshire Has AAA Credit Rating Cut by Fitch
By Erik Holm
March 12 (Bloomberg) -- Billionaire Warren Buffett’s Berkshire Hathaway Inc. had its top-level AAA credit rating cut by Fitch Ratings, which cited concern about the potential for losses in the insurer’s equity and derivatives holdings.
Buffett’s role as chief investment officer also puts the company at risk if he becomes unable to do the job, Fitch said in a statement. The service cut the so-called issuer default rating on Berkshire to AA+, and senior unsecured debt to AA. The insurance and reinsurance units kept their AAA status, with Fitch warning that all the ratings are being reviewed for another possible downgrade.
“Fitch views this risk as unrelated to Mr. Buffett’s age, but rather Fitch’s belief that Berkshire’s record of outstanding long-term investment results and the company’s ability to identify and purchase attractive operating companies is intimately tied to Mr. Buffett,” Fitch said. Buffett is 78 years old.
The action follows a 35 percent drop in Berkshire’s stock in 12 months tied to Buffett’s bets on derivatives -- which he has called “financial weapons of mass destruction” -- will crush profit at the Omaha, Nebraska-based insurer. Berkshire is backing derivatives pegged to corporate junk bonds, municipal debt and the performance of stock indexes on three continents, with liability of more than $14 billion as of Dec. 31.
He said in a Bloomberg Television interview he plans to sell more derivative contracts, a tactic some investors have said may cause the insurer to suffer billions of dollars in losses.
“Oh, we’ll continue,” he said. “We do anything that I think I understand and where I think that the odds strongly favor making money, which doesn’t mean you make money every time.”
To contact the reporter on this story: Erik Holm in New York at eholm2@bloomberg.net.
Last Updated: March 12, 2009 19:09 EDT
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