OREANDA-NEWS. Fitch Ratings has assigned 'A+' ratings to four new senior notes issued by Berkshire Hathaway Inc. (NYSE:BRK) and its wholly owned finance subsidiary Berkshire Hathaway Finance Corporation (BHFC) totalling USD2.5 billion. The offerings include Euro1.1 billion of senior unsecured notes issued by BRK and USD1.3 billion of senior notes issued by (BHFC) which are fully and unconditionally guaranteed by the parent.

The proceeds of the note issuances from BRK will be used to refinance USD1.1 billion of 1.9% senior notes maturing this month. The proceeds from the BHFC notes will be used to refinance USD1.05 billion of floating rate senior notes that also mature this month.

KEY RATING DRIVERS

BRK's consolidated financial leverage ratio was 27% as of Sept. 30, 2016 and this ratio is not expected to change, since the issuance is essentially refinancing maturing debt. Further, this level of financial leverage would not trigger any rating sensitivities; however, BRK is approaching Fitch's limits on financial leverage and interest coverage. Consequently, a material acquisition funded with significant amounts of debt would place downward pressure on BRK's ratings.

Consolidated interest coverage in the first nine months of 2016 was 7.5x excluding realized investment gains and losses on derivatives, which is below Fitch's expectations of 12x for companies at BRK's rating level. An alternate calculation of interest coverage, excluding railroad, utilities and energy, was 13.6x in the first nine months of 2016 and is consistent with the current rating category.

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/total capital ratio that exceeds 30% or a run-rate debt/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 in its equity index put derivative portfolio.

--Acquisitions or other actions that reduce outstanding cash below USD10 billion or approximately 5x consolidated interest expense.

Key rating triggers that could lead to an upgrade include:

--A commitment to lower debt/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.

FULL LIST OF RATING ACTIONS

Fitch has assigned the following ratings:

Berkshire Hathaway, Inc.

--Euro550 million 0.250% senior notes due January 2021 at 'A+';

--Euro550 million 0.625% senior notes due January 2023 at 'A+.

Berkshire Hathaway Finance Corporation (BHFC)

--USD950 million floating rate senior notes due January 2019 at 'A+';

--USD350 million floating rate senior notes due January 2020 at 'A+'.