Fitch Rates Berkshire Hathaway Finance Corporation's Senior Debt Issue 'A+'

CHICAGO--()--Fitch Ratings has assigned 'A+' ratings to the $750 million of senior unsecured notes issued by Berkshire Hathaway Finance Corp. (BHFC). The notes are guaranteed by Berkshire Hathaway Inc. (NYSE:BRK). The 'A+' ratings are equivalent to Fitch's ratings on BHFC's outstanding senior unsecured notes that are guaranteed by BRK.

The issuance of senior unsecured notes consisted of the following: $650 million, new floating rate notes maturing in 2017 and an addition of $100 million to existing 2.0% coupon notes maturing in 2018. Proceeds from the senior notes are to be used to redeem notes maturing this month.

KEY RATING DRIVERS

Fitch's ratings on BRK are supported by extremely strong capitalization and market position of its insurance subsidiaries, solid operating performance with good diversification across business lines and excellent financial flexibility and liquidity.

Also considered in the ratings are material equity market risk, insured natural catastrophe exposures, growing exposure to asbestos and environmental risk and various issues associated with the company's acquisition strategy.

BRK's consolidated financial leverage was 24% of total capital as of Sept. 30, 2013. Consolidated interest coverage for the first nine months of 2013 was 9x excluding realized investment gains. Both financial leverage and interest coverage ratios are not expected to change meaningfully given the modest size of the issuance relative to total capitalization and since proceeds will be used to pay maturing debt.

BRK's debt-to-total capital and debt-to-tangible capital ratios at the holding company level (including debt issued by the company's finance company subsidiaries and guaranteed by BRK) were 16% and 21%, respectively at Sept. 30, 2013. The agency views BRK's ability to fund finance operations at a low cost as an important competitive advantage for the finance operations and also notes that much of the finance company debt is guaranteed by BRK.

RATING SENSITIVITIES

Key rating triggers that could lead to a future downgrade include:

--Deterioration in the credit quality of key insurance subsidiaries (National Indemnity, GenRe, and GEICO) that is no longer consistent with the current 'AA+' rating. Measures of credit quality include Fitch's judgment of capitalization, a total financing and commitments ratio greater than 1.5x, net leverage (excluding affiliated investments) over 3.5x or a sharp and persistent reduction in underwriting profits.

--A consolidated run-rate debt-to-total capital ratio that exceeds 30% or a run-rate debt-to-total capital ratio from the holding company, insurance and finance operations (including debt issued or guaranteed by the holding company) that exceeds 25%.

--Material increases in leveraged equity market exposure such as its equity index put derivative portfolio.

--Acquisitions or other actions that reduce outstanding cash below $10 billion or approximately 5x consolidated interest expense.

Key rating triggers that could lead to an upgrade include:

--A commitment to lower debt-to-tangible capital ratios attributed to the holding company, insurance and finance operations. Fitch believes that this would likely require the scaling back of the finance operations.

Fitch assigned the following ratings:

Berkshire Hathaway Finance Corporation (BHFC)

--$650 million floating rate senior notes due Jan. 2017 'A+';

Fitch took no action on the following ratings:

Berkshire Hathaway, Inc.

--Issuer Default Rating (IDR) 'AA-'.

--$750 million floating rate senior notes due Aug. 2014 'A+';

--$1.7 billion 3.20% senior notes Feb. 2015 'A+';

--$300 million 0.8% senior notes due May 2016 'A+';

--$750 million 2.20% senior notes due Aug. 2016 'A+';

--$1.1 billion 1.9% senior notes due Jan. 2017 'A+';

--$800 million 1.55% senior notes due May 2018 'A+';

--$500 million 3.75% senior notes due Aug. 2021 'A+';

--$600 million 3.40% senior notes due Jan. 2022 'A+'

--$500 million 3.0% senior notes due May 2023 'A+';

--$1 billion 4.5% senior notes due May 2043 'A+'.

Berkshire Hathaway Finance Corporation (BHFC)

--IDR 'AA-';

--$400 million 5.1% notes due July 2014 'A+';

--$1 billion 4.85% notes due Jan. 2015 'A+';

--$500 million 2.45% senior notes due Dec. 2015 'A+';

--$600 million 0.95% senior notes due May 2016 'A+';

--$400 million 0.95% senior notes due Oct. 2016 'A+';

--$1,350 million 1.6% senior notes due May 2017 'A+';

--$1.25 billion 5.4% notes due May 2018 'A+';

--$500 million 2.0% senior notes due May 2018 'A+'

--$500 million 1.3% senior notes due May 2018 'A+';

--$550 million 2.9% senior notes due Oct. 2020 'A+';

--$750 million 4.25% senior notes due Jan. 2021 'A+';

--$775 million 3.0% senior notes due May 2022 'A+';

--$750 million 5.750% senior notes due Jan. 2040 'A+';

--$725 million 4.4% senior notes due May 2042 'A+';

--$500 million 4.3% senior notes due May 2043 'A+'.

GEICO Corporation

--IDR 'AA-';

--$150 million 7.35% senior notes due July 15, 2023 'A+'.

General Re Corporation

--IDR 'AA-'.

--$500 million commercial paper program 'F1+';

--Short-term IDR 'F1+'.

Fitch did not take a rating action on the following insurance subsidiaries that currently carry an 'AA+' Insurer Financial Strength:

--Government Employers Insurance Company;

--General Reinsurance Corporation;

--General Star Indemnity Company;

--General Star National Insurance Company;

--Genesis Insurance Company;

--National Indemnity Company;

--Columbia Insurance Company;

--National Fire and Marine Insurance Company;

--National Liability and Fire Insurance Company;

--National Indemnity Company of the South;

--National Indemnity Company of Mid-America;

--Wesco Financial Insurance Company.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Insurance Rating Methodology' (Nov. 13, 2013).

Although BRK's General Reinsurance Corp. subsidiary participated directly in the rating process, BRK did not participate other than through the medium of its public disclosure.

Applicable Criteria and Related Research:

Insurance Rating Methodology - Effective Sept. 19, 2012 to Oct. 18, 2012

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688011

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814851

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Contacts

Fitch Ratings
Primary Analyst
Douglas M. Pawlowski, CFA, +1 312-368-2054
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Christopher A. Grimes, CFA, +1 312-368-3263
Associate Director
or
Committee Chairperson
Douglas L. Meyer, CFA, +1 312-368-2061
Managing Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Douglas M. Pawlowski, CFA, +1 312-368-2054
Senior Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Christopher A. Grimes, CFA, +1 312-368-3263
Associate Director
or
Committee Chairperson
Douglas L. Meyer, CFA, +1 312-368-2061
Managing Director
or
Media Relations:
Brian Bertsch, +1 212-908-0549
brian.bertsch@fitchratings.com