Font ResizeNew York » Standard & Poor's warned Wednesday that Warren Buffett's bid for Burlington Northern Santa Fe Corp. could sap the liquidity and capital position of the legendary investor's insurance operations at Berkshire Hathaway Inc., jeopardizing the company's AAA rating.
The ratings agency placed its ratings on Berkshire Hathaway on CreditWatch with negative implications following Berkshire's announcement Tuesday that it will buy Burlington Northern for $26.3 billion.
Standard & Poor's said it expects a significant part of the cash portion will come from Berkshire Hathaway's core insurance operations and the transaction will reduce the liquidity and "capital adequacy" of the company's insurance operations.
Standard & Poor's Ratings Services also placed its 'BBB' corporate credit rating and other long-term ratings on railroad Burlington Northern on CreditWatch with positive implications.
Berkshire Hathaway and Burlington Northern did not immediately return calls seeking comment.
The acquisition of Burlington Northern Santa Fe, the nation's second-largest railroad, would be the biggest ever for Warren Buffett's Berkshire Hathaway investment company. Berkshire Hathaway owns a 22 percent stake in Burlington Northern and would buy up the rest under the deal.
It requires approval from Burlington shareholders and antitrust regulators.
Standard & Poor's credit analyst John Iten said
In addition, in the past 12 months the insurance operations acquired Berkshire Hathaway's investments in Goldman Sachs, General Electric Co., WM. Wrigley Jr. Co. and Swiss Re, Iten said. These large investments are boosting investment income but also have increased the insurance companies' exposure to equities and speculative-grade bonds, he said.
Shares of Berkshire Hathaway's Class A shares added $1,080, to $101,530 while its Class B shares rose $55.65, to $3,381. Burlington Northern rose 1 cent, to $97.01.
