Fitch Ratings has assigned 'AAA' ratings to two new issues of debt from Berkshire Hathaway Finance Corporation (BHFC), a wholly owned subsidiary of Berkshire Hathaway Inc. (Berkshire). The newly rated debt totals $1.5bn. BHFC issued $700m of 4.75% senior notes due 15 May 2012 and $800m of floating-rate notes due 16 May 2008. The notes are guaranteed by Berkshire. The Rating Outlook is Negative.
Berkshire's ratings are based primarily on Berkshire's exceptionally strong capitalisation, as well as its diversified sources of earnings, substantial financial flexibility, and the strong operating performance of its primary insurance and non-insurance subsidiaries. These positives are offset by the very high level of 'key person risk' at Berkshire and, to a lesser extent, Berkshire's increased use of debt to fund finance subsidiaries. While current levels of financial leverage are high relative to Fitch's 'AAA' standard, Fitch believes the current debt level represents the 'high water mark' for the near future and expects that debt levels will gradually decline over time as debt retirements exceed future issuances.
