New York, Mar 25, 2009 (Asia Pulse Data Source via COMTEX) -- BRK/A | Quote | Chart | News | PowerRating -- Credit rating agency Standard & Poor's has revised the outlook on legendary investor Warren Buffett-led Berkshire Hathaway and its subsidiaries to 'negative' from 'stable'.
The outlook has been lowered from 'stable' to 'negative' while the 'AAA/A-1+' credit rating on Berkshire has been affirmed.
S&P Ratings Services in a statement on Tuesday said the outlook has been revised mainly on account of a decline in insurance operations' capital due to a fall in equity values this year.
The rating agency added it has revised the outlook on "Berkshire Hathaway Inc, Berkshire Hathaway Finance Corp and Berkshire' core insurance companies including Berkshire Hathaway Assurance Corp..." It noted that Berkshire Hathaway's coveted 'AAA' -- highest investment grade rating -- could be downgraded if the continued deterioration of stock markets affects the company's capital further.
Less than two weeks ago, another rating agency Fitch had lowered the firm's 'AAA' rating by one notch to 'AA+'.
Shares of Berkshire Hathaway has seen significant value erosion last year in the wake of the economic turmoil.
S&P noted that at the end of 2008, the capital adequacy of Berkshire's insurance operations was significantly lower than what it was one year ago, but was appropriate for the rating. It said the time period for the outlook is 12 months.
The outlook could be revised back to stable if the value of the group's substantial equity investment holdings were to stabilise or improve, among other factors.
However, the rating agency pointed out, "if continued substantial deterioration in the equity markets hurt capital further, or if it appears that the insurance group will not be able to restore capital back to the 'AAA' level, then the rating might be lowered".
On Monday, another rating agency Moody's had cut the long term debt ratings of General Electric and its subsidiaries, implying a slightly higher degree of investment risk.
Currently, there are just five American corporates -- ExxonMobil, Johnson & Johnson, Automated Data Processing (ADP), Microsoft and Pfizer -- with the top credit rating of 'AAA', down from more than 60 in early 1980s.
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