NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today affirmed and withdrawn Affiliated Managers Group, Inc.'s (AMG) long-term Issuer Default Rating (IDR), senior unsecured note rating and senior bank credit facility rating at 'BBB+'. Fitch has also affirmed and withdrawn AMG Capital Trust II's trust preferred security rating at 'BB+'. The ratings have been withdrawn for commercial reasons.
KEY RATING DRIVERS
IDR, SENIOR UNSECURED DEBT, SENIOR BANK CREDIT FACILITY
The affirmations reflect AMG's continued strong financial performance, cash flow generation, AUM inflows and execution, driven by a consistent operating strategy and affiliate and assets under management (AUM) diversity. AMG maintains a favorable competitive position in the affiliated manager space, generally with revenue sharing agreements which reduce downside risk to the company. These attributes have led to improved interest coverage (adjusted EBITDA/interest expense) and a demonstrated ability to manage leverage (adjusted debt-to-adjusted EBITDA) below 2x, consistent with the lowered targets articulated by AMG in 2013 and 2014.
Primary rating constraints include AMG's acquisitive business model, which results in periodic increases in leverage, AUM concentration in equities, which is a relatively more volatile asset class and can lead to variability in management fee streams, and leverage and interest coverage that although improved, remain weaker relative to more highly rated peers.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The affirmation of the trust preferred securities issued by AMG Capital Trust II maintains the three-notch differential from AMG's IDR. The three-notch differential reflects Fitch's view of the subordinated nature and interest deferral feature of this hybrid security in accordance with Fitch's criteria 'Treatment and Notching of Hybrids in Nonfinancial Corporates and REIT Credit Analysis'.
Fitch has affirmed and withdrawn the following ratings:
Affiliated Managers Group, Inc.
--Long-term Issuer Default Rating (IDR) at 'BBB+', Outlook Stable;
--Senior unsecured notes at 'BBB+';
--Senior bank credit facility at 'BBB+'.
AMG Capital Trust II
--Trust preferred securities at 'BB+'.
Additional information is available on www.fitchratings.com
Global Non-Bank Financial Institutions Rating Criteria (pub. 28 Apr 2015)
Treatment and Notching of Hybrids in Non-Financial Corporate and REIT Credit Analysis (pub. 25 Nov 2014)
Dodd-Frank Rating Information Disclosure Form