Warren Buffett's Berkshire Hathaway Inc. has $40 billion in cash and the world's most celebrated stock-picker in the top job. But it might not have its ultra-strong AAA bond rating much longer.
Fitch Ratings revised its outlook on Berkshire's triple-A long term debt rating to "negative" from "neutral," saying the advancing age of Buffett, the company's chairman, exposes the company to a high level of "key person" risk.
"Although the 74-year-old Mr. Buffett is reportedly in good health and has expressed no intention of retiring," Fitch said, it's far from certain that the famous investor's talents can be easily replaced.
Berkshire Hathaway, based in Omaha, Neb., is Buffett's publicly traded investment vehicle. His 40 percent stake is valued at about $42 billion.
Over the years, Buffett's investing acumen has made many of his investors millionaires. As a result, he is revered by most of them. The problem, Fitch said in a report yesterday, is that the company's "outstanding long-term success record" is largely attributable to Buffett's skills.
The agency said Buffett's reputation is so strong that it "allows the company to adopt strategies and accumulate capital in ways that would generally not be accepted at other public companies."
As an example, Fitch noted that Berkshire has about $43 billion in cash. Buffett told investors he hasn't found anything he wants to buy recently. Stockholders might get restless with that much money sitting idle if the man known as the "Oracle of Omaha" wasn't the one calling the investment shots.
"It is unlikely," Fitch said, "that Berkshire would be able to operate with the attributes that have historically allowed it to achieve AAA ratings after the inevitable departure of Mr. Buffett."
The Chicago-based rating company's shift to "negative" means that a downgrade might occur in the next six months.
The Chicago Tribune is a Tribune Publishing newspaper.