Fitch Affirms Welsh Road Funding LLC at 'F1+sf'
--$1,500,000,000 commercial paper (CP) notes at 'F1+sf'.
Welsh Road was established to issue CP, the proceeds of which are used to purchase variable funding note (VFN) advances issued by Berkadia Commercial Mortgage LLC (Berkadia or the VFN Issuer). The proceeds from the issuance of the VFNs are used by Berkadia for general business purposes. Payments under the VFNs are covered by a $2.5 billion surety from Columbia Insurance Company (Columbia, Insurer Financial Strength rating 'AA+'/Stable Outlook), which is backed by a corporate guarantee from Berkshire Hathaway Inc. (BHI, or the guarantor, Issuer Default Rating 'AA-'/Stable Outlook).
KEY RATING DRIVERS
The rating of the CP notes is directly linked to that of BHI, as guarantor of the unconditional and irrevocable surety issued by its subsidiary, Columbia. BHI's Long-Term 'AA-' rating correlates to a Short-Term 'F1+' rating. Additional information on long - and short-term ratings correlations can be found at 'www. fitchratings. com'.
On March 31, 2016, a Fourth Amended and Restated Series 2010-1 Supplement was executed, which reduced the CP issuance cap to $1.5 billion from $2.5 billion beginning March 31, 2016, less fees and expenses. The surety limit will remain at $2.5 billion through March 31, 2017, after which time it will be reduced to $1.5 billion through the transaction termination. Finally a "no change in control" clause was added as a condition precedent to the issuance of CP.
The rating remains sensitive to the rating migration of BHI. A Long-term 'AA-' rating correlates to an 'F1+' Short-Term rating, but lower long-term ratings have a correlation that may overlap multiple short-term ratings. Specifically, a one-notch downgrade of BHI's Long-Term IDR to 'A+' from 'AA-' would likely have no impact on the current rating; however, a downgrade to 'A-' would result in an 'F1sf' or 'F2sf' rating. Such a determination would be decided by a ratings committee, taking into consideration input provided by Fitch's Corporates Group regarding the short-term financial position of BHI. Additional information on long - and short-term ratings correlation can be found at 'www. fitchratings. com'.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
No third-party due diligence was provided or reviewed in relation to this rating action.