Osaic’s plan to accumulate $108 billion Lincoln Wealth may have minimal affect on the agency’s debt leverage and curiosity protection, in keeping with experiences from Moody’s Traders Service and Fitch Scores. The 2 scores companies stated their outlook on the wealth administration agency’s credit score was secure.
This follows a related report from S&P World Scores final week, estimating the acquisition will price Osaic $1.04 billion, factoring in transaction prices and retention loans to Lincoln advisors.
Lincoln Nationwide Corp. signed an settlement in December to promote its wealth administration unit, with about 1,450 monetary advisors, to Osaic for $700 million.
In December, Moody’s positioned Osaic’s scores on evaluate for downgrade, together with its B2 company household ranking, B1 senior secured first lien financial institution credit score facility scores, B1 senior secured first lien notes scores and Caa1 senior unsecured ranking. The company stated it was involved in regards to the acquisition’s attainable damaging impact on Osaic’s monetary profile and new debt issuance.
Moody’s has confirmed these scores, citing Osaic’s improved profitability, money movement and debt leverage all through 2023. Its monetary place permits it to raised soak up the debt it plans to difficulty, Moody’s stated.
“The secure outlook displays Moody’s expectations that the Lincoln wealth acquisition won’t pose an outsized operational burden throughout integration, the focused synergies will largely be achieved inside a 12 months of the acquisition shut, and that Osaic’s monetary insurance policies will stay largely unchanged,” Moody’s stated within the report. “The secure outlook additionally displays Moody’s expectations that Osaic’s monetary profile will proceed to be supported by excessive rates of interest in 2024.”
Moody’s expects the financing will barely enhance Osaic’s adjusted debt to EBITDA leverage to five.5x or underneath on a professional forma foundation on the finish of 2024, in comparison with 5.3x for the trailing 12 months ending Sept. 30, 2023. The agency’s EBITDA to curiosity expense ratio will decline to 2.1x on a pro-forma Moody’s adjusted foundation on the finish of 2024, in comparison with 2.2x for a similar trailing 12-month interval.
Fitch Scores affirmed Osaic’s long-term issuer default ranking at B, senior secured debt ranking at B+/RR3, and senior unsecured debt ranking at CCC+/RR6. The company stated it expects the agency’s professional forma leverage to remain at 5.5x and professional forma curiosity protection of two.1x on a trailing 12-month foundation by means of Sept. 30, 2023.
“The ranking affirmation displays Fitch’s view that, primarily based on data offered to the company, the transaction won’t have a significant affect on leverage or curiosity protection metrics, and the extra income and potential synergies related to the transaction will lead to additional de-leveraging and improved curiosity protection over time,” the Fitch report stated.
Fitch additionally cited Osaic’s potential to efficiently combine acquisitions, similar to American Portfolios, Infinex and Ladenburg Thalmann.
“The ranking affirmation additionally continues to replicate Osaic’s bettering scale and market place as one of many largest unbiased monetary advisors within the U.S.; cash-generative enterprise mannequin; a comparatively versatile price base, which ought to assist cushion income declines in downward market environments; and excessive advisor retention charges,” Fitch stated.
Fitch additionally pointed to elements that might constrain Osaic’s scores, together with excessive leverage ranges, weak curiosity protection, low margins and a extremely aggressive IBD and RIA market.
“Further ranking constraints embody Osaic’s personal fairness possession, which introduces a level of uncertainty over the corporate’s future monetary insurance policies and a possible for extra opportunistic development methods,” Fitch stated.
Osaic is majority-owned by Reverence Capital Companions, which is looking for a purchaser for as much as 20% of the wealth administration agency, in keeping with a Bloomberg report.
A spokesman for Osaic didn’t reply to a request for remark previous to publication.
