Standard & Poor’s has given Warren Buffett’s Berkshire Hathaway a “CreditWatch Negative” rating following the company’s $37.2 billion acquisition of Precision Castparts. Along with the acquisition, Mr. Buffett’s company acquired $5 billion in debt.
S&P says the move “reflects uncertainty around the funding of the acquisition and how it may affect current cash resources and leverage metrics at the holding-company level. In addition, we believe that to fund the acquisition, BRK is likely to use some of the capital resources available at its insurance companies.”
S&P adds that it “will monitor developments related to this transaction and expect to update or resolve the CreditWatch listing within the next 90 days, following discussions with [Berkshire’s] management on prospective holding company cash and leverage metrics, capital adequacy at the insurance companies, and consolidated earnings and cash-flow metrics.”
Berkshire Hathaway paid $235 per share for the company.
The S&P is watching Berkshire after it reported earnings that missed expectations because of underwriting losses in its insurance unit during the second quarter.