TEXT-S&P: Berkshire Hathaway Finance notes rating is unchanged
Jan 9 - Standard & Poor's Ratings Services said today that its 'AA+' senior debt rating on Berkshire Hathaway Finance Corp.'s (BHFC) $2.85 billion senior notes remains unchanged following the company's announcement that it has increased the size of the issue to $2.85 billion from $2.35 billion. This series of notes were originally issued in an amount of $1.6 billion on May 15, 2012, then increased through a $750 million add-on offering on Sept. 15, 2012. The current notes are a second expansion of this series and have identical terms: $1.350 billion (from $1.075 billion) 1.6% senior notes due 2017; $775 million ($550 million) 3.0% senior notes due 2022; and a third tranche, comprising $725 million 4.4% senior notes due 2042, that is not affected by the current issue. The company will use the proceeds of this issue to repay $500 million of 4.5% senior notes maturing on Jan. 15, 2013. We base our issue rating on the notes on our ratings on Berkshire Hathaway Inc. (BRK; AA+/Negative/A-1+), BHFC's ultimate parent, reflecting BRK's extremely strong competitive position, very strong earnings, very strong liquidity position, and conservative financial leverage and coverage metrics. These factors are offset to some extent, in our opinion, by BRK's high tolerance for equity investment, which has resulted in volatility in the company's insurance subsidiaries' statutory capital, and its capital adequacy being less than what we typically expect to see for the rating category. Management succession at BRK is also an offsetting factor. BRK fully guarantees BHFC's new note issuance. BHFC's borrowings are used to fund the finance operations of Vanderbilt Mortgage & Finance Inc., a wholly owned subsidiary of Clayton Homes Inc., a vertically integrated manufactured housing company. BRK's adjusted debt leverage and interest coverage (excluding the separately rated subsidiaries MidAmerican Energy Holdings Co. and Burlington Northern Santa Fe LLC) are conservative. Debt leverage was 12.2% as of Sept. 30, 2012. Interest coverage was 20.6x for the first nine months of 2012. This note issue will not impact these metrics since we treat the debt associated with BHFC as operating leverage. RELATED CRITERIA AND RESEARCH -- Berkshire Hathaway Finance Corp. $2.35 Billion Senior Notes 'AA+' Rating Affirmed After $750 Million Add-On, Sept. 19, 2012 -- Berkshire Hathaway Finance Corp. $1.6 Billion Senior Notes Rated 'AA+', May 10, 2012 -- Holding Company Analysis, June 11, 2009 RATINGS LIST Berkshire Hathaway Inc. Corporate Credit Rating AA+/Negative/A-1+ Ratings Unchanged Berkshire Hathaway Finance Corp. $2.85 bil sr unsec notes AA+ Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.