Approximately $10 billion of debt securities affected
New York, November 03, 2009 -- Moody's Investors Service placed its ratings for Burlington Northern Santa
Fe Corporation's ("BNSF"), senior unsecured at Baa1 under
review for possible upgrade. At the same time, Moody's affirmed
the company's short term P-2 rating. This review was prompted
by today's announcement of Berkshire Hathaway, Inc.'s
('Berkshire') plan to acquire the remaining 77.4%
of the shares of BNSF that it does not already own in a transaction valued
at about $44 billion, including existing BNSF debt.
Because the transaction will be funded with a combination of cash and
Berkshire stock, with no explicit upstream support provided by BNSF,
it is not expected to have any material adverse implications for the financial
profile of BNSF. At the same time, Moody's does not
anticipate that Berkshire will guarantee or provide any other explicit
support for the obligations of BNSF.
In its review, Moody's will assess the future financial policies
and liquidity profile of BNSF under its new ownership structure,
and the degree to which BNSF would have greater potential to direct its
free cash flow toward investing in its business as a wholly owned subsidiary
of Berkshire. If Berkshire's stated goals and financial policies
for BNSF permit greater re-investment in the business and exclude
any greater levels of distributions or return of capital to shareholders,
Moody's believes the ratings could be raised, but that the
increase would be unlikely to exceed one rating notch.
The Baa1 rating of BNSF, and the A3 senior unsecured rating of its
principal operating subsidiary, the BNSF Railway Company have historically
reflected a strong operating profile, with good cash flow and debt
coverage metrics through both strong and weak periods in the economic
cycle. However, the ratings for BNSF have been constrained
by its propensity to return a substantial portion of free cash flow to
shareholders by means of aggressive share repurchases. With the
acquisition by Berkshire Hathaway, Moody's believes that this
concern could be substantially reduced for BNSF. The potential
for BNSF to increase investments in its business while maintaining its
debt capacity could result in a considerable competitive advantage for
the company over other North American railroads.
The last rating action was on September 21, 2009, when a Baa1
rating was assigned to a senior unsecured notes offering.
The principal methodology used in rating BNSF was Moody's Global Freight
Railroad Methodology, published in March 2009 and available on www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
On Review for Possible Upgrade:
..Issuer: Atchison, Topeka and Santa Fe Railway
Company
....Senior Secured Equipment Trust,
currently Aa2
..Issuer: BNSF Funding Trust I
....Preferred Stock Preferred Stock,
currently Baa3
..Issuer: BNSF Railway Company
....Senior Secured Equipment Trust,
currently a range of A1 to Aa2
....Senior Secured Pass-Through,
currently Aa2
....Senior Secured Regular Bond/Debenture,
currently A2
..Issuer: Burlington Northern Santa Fe Corporation
....Issuer Rating, currently Baa1
....Senior Unsecured Regular Bond/Debenture,
currently Baa1
....Senior Unsecured Shelf, currently
(P)Baa1
..Issuer: Burlington Northern, Inc.
....Senior Unsecured Regular Bond/Debenture,
currently A3
..Issuer: Northern Pacific Railway Company
....Senior Secured Regular Bond/Debenture,
currently A2
Outlook Actions:
..Issuer: Atchison, Topeka and Santa Fe Railway
Company
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BNSF Funding Trust I
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: BNSF Railway Company
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Burlington Northern Santa Fe Corporation
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Burlington Northern, Inc.
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: Northern Pacific Railway Company
....Outlook, Changed To Rating Under
Review From Stable
Burlington Northern Santa Fe Corporation ("BNSF") owns the BNSF Railway
Company, the 2nd largest Class I railroad. BNSF Railway operates
over 32,000 route miles of track in the western U.S.
New York
Michael J. Mulvaney
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
David Berge
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's reviews ratings of BNSF for possible upgrade