S&P Positive on BNSF-Berkshire Hathaway

A purchase of U.S. freight rail giant BNSF Railway by Warren Buffett’s Berkshire Hathaway could lead Standard & Poor's Ratings Services to upgrade its assessment of BNSF debt.

S&P said it was placing its “BBB” corporate credit rating and other long-term ratings for the rail company on its CreditWatch list “with positive implications” as it waits for the deal to go through. Its “A-2” rating for short-term debt is not on CreditWatch.

Berkshire, which already owned nearly 23 percent of BNSF shares, said it will pay more than $26 billion in cash and stock for the rest, and assume $10 billion in debt. That values the company at $44 billion, or $100 per share of stock.

The transaction is subject to review by the Department of Justice, but because it involves no rail mergers it is not subject to approval by the Surface Transportation Board, the rail regulatory agency that rules on railroad combinations. It is expected to close in next year’s first quarter.

“At close of the transaction,” S&P said, “we will assess the new capital structure and any potential parental support from Berkshire Hathaway.”

Credit analyst Anita Ogbara also said, “we would most likely limit a ratings upgrade, if any, to one notch (to 'BBB+').”

Contact John D. Boyd at jboyd@joc.com.