Fitch ratings have conferred a rating of 'A+' on new issue of
notes by Berkshire Hathaway Finance Corp. This is a unit of
Berkshire Hathaway Inc.
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ASSURANT INC (AIZ): Free Stock Analysis
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
REINSURANCE GRP (RGA): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
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The issue was made in two parts - $275 million, 1.6% coupon,
maturing in 2017 and $225 million, 3% coupon, maturing in 2022.
The proceeds from the issue will be used to repay the current
The ratings are of an investment grade status. The rating
acknowledges Berkshire's very strong balance sheet position
featured by sufficient liquidity and flexibility, deep market
reach, strong operating results, and significant diversification.
These strengths differentiate Berkshire's insurance companies
from the competitors -
W.R. Berkley Corp.
Reinsurance Group of America Inc.
However, the rating agency is concerned with a substantial degree
of risk in the company investment portfolio due to high
concentration of equity in its investment portfolio.
Other issues facing the company are related to the succession of
the company's Chairman Warren Buffet, and exposure to natural
catastrophes, along with acquisition related issues.
Berkshire has a moderate degree of financial leverage (25% as of
Sep 30, 2012). The company also has an adequate cushion for
paying interest witnessed by interest coverage, which stands at
8x. The rating agency is assured of any deterioration in its
leverage ratio as well as debt servicing capability of the
company by the issue of debt.
Factors which could lead to a rating upgrade include maintenance
of low level of debt to tangible capital. However a negative
rating action can spring from an increase in debt-to-tangible
capital ratio above 30%, increase in exposure to equity
derivatives, reduction in outstanding cash below $10 billion or
approximately 5x consolidated interest expense.
The stock retains a Zacks Rank #3 (Hold).