Pilot Travel Centers, now 100% owned by Berkshire Hathaway, has an upgraded debt rating from Moody’s, though it is significantly lower than what S&P Global Ratings has bestowed on the chain.
Moody’s on Tuesday gave Pilot a long-term issuer rating of Baa3. It replaces the Ba1 corporate family rating, which is one notch below the new rating.
Moody’s also withdrew its Probability of Default rating for Pilot of Ba2, which is two notches less than Pilot’s new long-term issuer rating.
Moody’s (NYSE: MCO) and S&P (as well as Fitch) often disagree on debt ratings. The agencies also have different terms for their ratings; for example, the Baa3 rating given by Moody’s is considered equivalent to a BBB- rating at S&P Global (NYSE: SPGI).
But S&P’s rating of Pilot is well above even the latest Moody’s rating. Last year, soon after Berkshire Hathaway (NYSE: BRK.B) took a controlling interest in Pilot – it has owned 100% of the travel service provider since January – S&P increased its rating on Pilot to BBB+. That is two notches above Moody’s on an equivalency table. And while one-notch differences are not rare, differences of two or more notches are far less frequent.
The move by Moody’s is also notable because it puts Pilot’s debt rating at a level that is considered investment-grade. The Ba1 rating it had previously was not investment-grade. The S&P rating of BBB+ is three notches more than the cutoff for investment- versus non-investment-grade.
The new rating of Pilot is listed as “stable,” meaning conditions that could lead to an upgrade or downgrade in the near-to-medium-term future are not present.
As would be expected in an upgrade, especially one that took Pilot from a non-investment-grade debt rating to investment-grade, the Moody’s report was mostly positive.
“The Baa3 rating reflects Pilot’s significant scale, broad geographic reach and good credit metrics with very good liquidity and balanced financial policy,” the report said. Moody’s also said the rating was tied in part to “Pilot’s in-direct ownership and strategic importance to Berkshire Hathaway Inc.” At Moody’s, Berkshire Hathaway carries an Aa2 rating, the third-highest on Moody’s scale. The ownership by Berkshire Hathaway is “credit positive,” Moody’s said.
The latest quarterly earnings from Berkshire Hathaway has additional insight into Pilot’s operations. It said revenue at Pilot for the six months ended June 30 was $24.93 billion, down from $25.95 billion a year earlier when Berkshire Hathaway did not have full ownership.
However, that 2024 figure would have been impacted by lower diesel prices. The Department of Energy/Energy Information Administration weekly retail diesel price averaged $4.17 per gallon in the first six months of 2023. In 2024, that number was $3.91 per gallon.
Net earnings attributable to Berkshire Hathaway shareholders in the first six months of 2024 were $238 million. Berkshire Hathaway’s 10-Q report for the first half only reported five months of earnings data for Pilot for 2023. That figure was $197 million last year. The per-month average for Pilot in 2024 and 2023 are almost identical.
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