S&P to Warren Buffett: We're watching you

Ratings agency Standard & Poor’s is watching Warren Buffett’s Berkshire Hathaway.

In a statement on Tuesday, S&P said that it is placing Berkshire on CreditWatch Negative following its acquisition of Precision Castparts.

In its release, S&P said this 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 added 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 paid $US235 per share for Precision in a deal worth $US37.2 billion. Berkshire also assumed Precision’s net debt of around $US5 billion.

Last week, Berkshire reported earnings that missed expectations after the company saw underwriting losses in its insurance unit during the second quarter.

Read S&P’s full release here »

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