NEW YORK: Berkshire Hathaway Inc. is at risk of losing its “AAA” credit rating from Standard & Poor’s after the ratings agency revised its outlook on billionaire Warren Buffett’s company to “negative” from “stable.”

Citing worsening market conditions that have hurt Berkshire’s financial condition and investment portfolio, S&P said late Tuesday that it assigned the “negative” outlook to the Omaha, Nebraska-based parent company.

The “negative” outlook also applies to Berkshire Hathaway Finance Corp., and Berkshire’s core insurance companies, including Berkshire Hathaway Assurance Corp. Berkshire Hathaway’s Class A shares fell $1,650, or nearly 1.9 percent, to close at $86,850 apiece on Wednesday.

Those shares are still the most expensive U.S. stock, but have lost nearly 43 percent of their value since setting a high of $151,650 in December 2007.

S&P credit analyst John Iten said a decline in stock values this year “has reduced the statutory capital of the insurance operations.”

The negative outlook signals that downgrades could be possible if business conditions worsen.

S&P meanwhile affirmed all of its ratings on the Berkshire companies, including its “AAA/A-1+” counterparty credit rating on Berkshire.

S&P said its negative outlook applies to the next 12 months. S&P said Berkshire could regain a stable outlook if its stock holdings “were to stabilize or improve during this period, or if it appears that the group will be able to rebuild its capital position back to a level commensurate with the current ratings.”

A lower rating could be triggered if stock markets continue to deteriorate and further erode Berkshire’s capital position, S&P said.

A lower rating also could be triggered if Berkshire’s insurance group is unable to restore capital back to the “AAA” level through capital contributions from non-insurance operations or other outside sources.

“We do not currently anticipate that any possible downgrade of the insurance company ratings would be by more than one notch,” S&P said.

Meanwhile Moody’s Investors Service on Wednesday cut the debt ratings of Bank of America Corp., and sent its rating of the bank’s preferred stock into junk territory, citing an increasing risk that government intervention may be needed to bolster the bank’s capital position.

Also, Bank of America’s chief executive said in an interview published Wednesday in the Los Angeles Times that the bank wants to begin repaying $45 billion in federal bailout funds next month.

Unlike Moody’s junk-level downgrade of its rating on the bank’s preferred stock, the cuts involving Bank of America’s debt kept those ratings within investment-grade range.

Moody’s lowered its senior debt rating on the Charlotte, North Carolina-based bank down a notch to “A2″ from “A1.”

Bank of America’s senior subordinated debt rating was also cut one notch, to “A3″ from “A2,” and the junior subordinated debt rating fell four notches to “Baa3″ from “A2.”

The preferred stock rating fell to “B3″ from “Baa1″ – a drop of eight notches, to a level six steps below investment grade, and considered indicative of high credit risk.

Moody’s also lowered the financial strength rating of Bank of America N.A., the parent company’s primary bank subsidiary, to “D” from “B-”.

The deposit and senior debt ratings of the parent company’s U.S. banking subsidiaries were lowered to “Aa3″ from “Aa2,” and its subordinated debt rating to “A1″ from “Aa3″ – all within investment grade.

Moody’s assigned a “negative” outlook for the preferred stock and junior subordinated debt, as well as the bank’s financial strength rating, signaling the possibility of further downgrades should business conditions worsen.

Moody’s said the negative outlooks reflect its belief that Bank of America “remains vulnerable to further declines in its tangible common equity due to rising credit losses.”

Such declines “could lead the bank to seek additional capital support from the government,” Moody’s said.

Also Wednesday, a report in The Wall Street Journal said the bank was folding its Premier Banking unit into Merrill Lynch’s Global Wealth Management unit, laying off several hundred workers.

According to the report, client managers were among those notified of layoffs last week.

Shares of Bank of America rose 48 cents, or nearly 6.7 percent, to close at $7.70 on Wednesday.