No. of Recommendations: 1
But...no. That's not the way the debt works.
The railroad and utilities holdings are in effect "arm's length" subsidiaries, like any of public stock holdings. An existing company was purchased, with economics that worked in part because they had their own debt and leverage and credit rating and regulatory reporting already built in. By buying (say) BNSF and letting it keep its debt, it's the purchase price that matters, not the "enterprise value". This is for the critical reason that Berkshire is not on the hook for debt at BNSF, it's non-recourse. If that debt defaulted, the creditors would not get the cash pile.
By exact analogy, if I buy shares in Hershey for $187, I don't consider my portfolio to have additional debt of $37 because of the $37 per share of debt that Hershey has. Hershey's debt per share doesn't wipe out or in any way invalidate $37 of my cash pile each time I buy a share. That's because I am not on the hook for Hershey's debt. What matters to me, for both risk level and cost basis for calculating returns, is the $187 cost basis.
These are debatable statements at best and naïve at worst. If BNSF defaults on its debt, Berkshire will take a large reputational hit. I cannot prove it, but I am sure the interest rate that BNSF gets has some discount due to Berkshire ownership.
If you buy shares of Hershey, you are absolutely on the hook for its debt. If Hershey defaults, then the creditors can put it in bankruptcy and recover the money from your equity. Not the $187 that you paid but the book value of Hershey, which will affect the stock price.
