March 13, 2009 / 4:25 PM / 10 years ago

Berkshire credit costs trade like Turkey's

NEW YORK, March 13 (Reuters) - Credit protection costs for Warren Buffett’s Berkshire Hathaway (BRKa.N) are trading on par with those of emerging market nations Turkey, Colombia and Peru.

In a sign that investor perception of risk for Berkshire has fallen to levels matching developing countries, five-year credit default swaps of Berkshire Hathaway fell on Friday to 417 basis points, or $417,000 a year to protect $10 million of debt, from 438 basis points at Thursday’s close, according to data from CMA DataVision.

Credit protection costs for emerging markets such as the Republic of Turkey and Colombia are trading at about 438 basis points and 452 basis points, respectively, while Peru’s five-year CDS trades at about 421 basis points.

Berkshire Hathaway lost its top “AAA” credit rating from Fitch Ratings barely hours after Standard & Poor’s cut General Electric Co’s (GE.N) top-tier rating on Thursday, marking the latest American corporate titans hurt by the global financial crisis.

Berkshire still retains top ratings from the other two main rating companies. The lower cost to insure Berkshire’s debt on Friday reflected market optimism that the rating cut did not go beyond one notch, even though current levels suggest the risk of default has grown over the past year.

Citing concerns about Berkshire’s equity and derivatives investments, Fitch cut the insurance and investment company’s issuer default rating by one notch to “AA-plus,” the second-highest grade.

The downgrade is another setback to Buffett, 78, coming a day after the billionaire lost his position as the world’s richest man to Microsoft Inc (MSFT.O) founder Bill Gates, according to Forbes’ annual list. Buffett’s net worth plunged to $37 billion from $62 billion last year, according to Forbes. (Reporting by Walden Siew; Editing by Dan Grebler)

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