Standard & Poor's on Tuesday said it may downgrade Warren Buffett's Berkshire Hathaway Inc because the company plans to spend a large amount of its cash to finance its roughly $32.3 billion purchase of aerospace parts maker Precision Castparts Corp.
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Berkshire has a "AA" credit rating from S&P, the third highest grade.
S&P analyst Laline Carvalho wrote that the agency may lower the rating by one or two notches within 90 days because of "uncertainty around the funding of the acquisition," and its impact on cash resources and leverage at the parent company.
She also said the review reflects Berkshire's "likely" need to draw on capital from its insurance units to fund the purchase, despite "substantial" cash resources.
An assistant for Buffett did not immediately respond to requests for comment.
A two-notch downgrade would reduce Berkshire's rating to "A-plus," a medium investment grade. S&P could also affirm Berkshire's rating.
Any downgrade may raise the Omaha, Nebraska-based company's borrowing costs. S&P also said it may cut the "AA-plus" financial strength ratings for Berkshire's core insurance units.
Buffett told CNBC television on Monday that he plans to use about $23 billion of Berkshire's $66.6 billion cash hoard to buy Precision Castparts, and borrow the rest.
The merger values Precision Castparts at $37.2 billion including assumed debt, and is Berkshire's largest-ever purchase. It is expected to close in the first quarter of 2016.
Last Friday, Berkshire said its insurance units had $85.1 billion of "float," or the amount of premiums held before claims are paid, as of June 30. Berkshire uses float to help fund acquisitions and other investments.
Earlier on Tuesday, Moody's Investors Service affirmed Berkshire's "Aa2" rating, equal to S&P's "AA" rating, with a stable outlook.
Fitch Ratings on Monday affirmed Berkshire's "AA-minus" rating, its fourth highest grade, with a stable outlook.
In Tuesday trading, Berkshire's Class A shares closed down $800 at $214,500 and its Class B shares fell 62 cents to $142.80. S&P announced its action after U.S. markets closed.
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)