(The following story by John D. Boyd appeared on The Journal of Commerce website on February 5, 2010.)
WASHINGTON, D.C. Credit evaluator Standard & Poor's Ratings Services raised its long-term ratings on debt issued by BNSF Railway, and said after acquisition by Berkshire Hathaway the railroad should keep generating cash flow well beyond its needs.
S&P raised its rating to BBB+ from BBB and said BNSFs outlook is stable. It said the Berkshire acquisition of BNSF should close no later than Feb. 15, after BNSF shareholders complete their voting on the deal by Feb. 11.
S&P had already cut its rating for Berkshire to AA+ from the top AAA rating, as Berkshires $26 billion purchase of the BNSF shares it did not already own would reduce its overall available capital and liquidity.
But the agency said BNSF's internally generated cash flow is well in excess of capital expenditures and working capital needs, and we expect this to remain so following the acquisition. So its rating does not include an explicit debt guarantee from Berkshire, and we expect BNSF to continue to access debt capital markets to refinance upcoming maturities, S&P said.
As to how the railroad performs going forward, S&P said BNSF should continue to benefit from stabilizing volumes, cost savings, and stable pricing trends over the next few years.
