Nov. 5 (Bloomberg) -- Warren Buffett’s Berkshire Hathaway Inc., which may lose its top rating from Standard & Poor’s, is as much of a credit risk as Burlington Northern Santa Fe Corp., the railroad ranked eight steps lower that it’s buying.

The CHART OF THE DAY shows that Burlington Northern’s 5.75 percent notes due in March 2018 pay about the same yield relative to Treasuries as similar debt sold by Berkshire’s financing arm. Burlington’s securities pay a spread of 109 basis points, the least since they were sold in March 2008, compared with 107 basis points on Berkshire’s 5.4 percent notes due in May 2018, according to data compiled by Bloomberg.

Spreads on the two securities have been converging since they were sold in 2008. Bonds of Omaha, Nebraska-based Berkshire trade where they do because of the company’s exposure to financial services, a risk that should diminish with the takeover of industrial companies with strong cash flows like Burlington, said B. Craig Hutson, senior bond analyst at Gimme Credit LLC in Chicago.

“Most people are still wary of companies that are tied to finance,” he said in a telephone interview. The takeover will “provide them with a more stable source of cash. When the economy recovers it’s going to be a huge cash-flow generator for them.” Berkshire Hathaway reported $35.2 billion of revenue from insurance and other financial services out of total 2008 revenue of $107.8 billion.

S&P said it may lower Berkshire’s AAA credit rating as much as two steps to AA a day after Buffett’s firm agreed to pay $26 billion to acquire the Fort Worth, Texas-based railroad, the largest in the U.S. At the same time, S&P put Burlington’s BBB ranking on review for an upgrade. Average bond spreads show both companies deserve to be rated about AA+, the second-highest ranking, according to Merrill Lynch & Co. index data.

“Burlington Northern bondholders are going to feel a lot better being part of an AA+ credit than a BBB credit,” Hutson said. “Burlington’s cost of capital will end up being Berkshire’s cost of capital.”

To contact the reporter on this story: Bryan Keogh in New York at bkeogh4@bloomberg.net

Last Updated: November 5, 2009 11:11 EST