S&P Lowers Berkshire Hathaway's Outlook

It looks as though Fitch’s lowering of Berkshire Hathaway’s credit rating won’t be a one-off. S&P is doing its standard dance, pre-announcing that it’s likely to lower the company’s rating, as well. It always does this in steps — like it did with GE (GE) — first lowering the outlook for the company, but holding the rating steady.

WSJ: The rating agency said the capital adequacy of Berkshire’s insurance operations was significantly lower at the end of 2008 than a year earlier, but it was still appropriate for the rating.

If the value of the company’s equity holdings stabilizes or improves in the next 12 months or Berkshire is able to rebuild its capital position in the next one to two years, S&P will change the outlook back to stable. But if capital falls further, Berkshire’s ratings could be cut one notch, the ratings agency said.

Note that the reasoning here is a bit different from Fitch’s, which cited the company’s derivatives book for the downgrade.

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