Berkshire Hathaway Finance Corp. 'AAA' Senior Debt Rating Affirmed
NEW YORK (Standard & Poor's) April 13, 2005--Standard & Poor's Ratings
Services said today that it affirmed its 'AAA' senior debt rating on Berkshire
Hathaway Finance Corp. (BHFC).
The affirmation takes into account BHFC's $3.75 billion debt-exchange
offering. The offering is to exchange BHFC's 4.125% senior notes due in 2010,
4.85% senior notes due in 2015, and floating-rate senior notes due in 2008
(collectively referred to as exchange notes), which have been registered under
the Securities Act of 1933, for BHFC's currently outstanding obligations
(outstanding notes). The exchange notes and the outstanding notes are both
unconditionally guaranteed by Berkshire Hathaway Inc. (NYSE:BRK;
'AAA/Stable/A-1+'), and the exchange notes are identical to the outstanding
notes.
The reason for the exchange is to register under the federal securities
laws, and these exchange notes will not bear any legend restricting their
transfer. The exchange notes will represent the same debt as the outstanding
notes and will be issued under the same indenture.
"The rating is based on the parent's extremely strong competitive
position, capitalization, and financial flexibility as well as its very strong
operating performance," said Standard & Poor's credit analyst Damien
Magarelli. Debt leverage (including the noninsurance operations but excluding
accumulated other comprehensive income) was 12% at year-end 2004, and as this
is an exchange offer only, no incremental debt is expected. Partially
offsetting these strengths are BRK's willingness to provide coverage for the
most volatile risks within the insurance and reinsurance sectors, limited
number of common stocks holdings, and exposure to retroactive risks.
BRK fully guarantees BHFC's exchange offer. BHFC originally issued these
notes to Goldman Sachs Group Inc. on Jan. 11, 2005, with the net proceeds used
to fund the finance operations of Vanderbilt Mortgage and Finance Inc., a
wholly owned subsidiary of Clayton Homes Inc. (BBB/Stable/--). Clayton is a
vertically integrated manufacturing housing company.
Standard & Poor's believes BRK will maintain its extremely strong
financial leverage and insurance operations' consolidated capital adequacy,
supported by a strong, diversified earnings stream. Although BRK is exposed to
the potential negative earnings effect of large loss events and investment
risk, its financial leverage is expected to remain within the range for the
rating category.
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings
Search.
| Primary Credit Analyst: | Damien Magarelli, New York (1) 212-438-6975; damien_magarelli@standardandpoors.com |
| Secondary Credit Analyst: | Thomas Upton, New York (1) 212-438-7249; thomas_upton@standardandpoors.com |
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