NEW YORK--(BUSINESS WIRE)--Fitch Ratings expects to rate Stifel Financial Corp.'s $250 million senior unsecured debt issuance 'BBB' due in 2020. Proceeds of the issuance are for general corporate purposes.
KEY RATING DRIVERS - SENIOR UNSECURED DEBT
The expected senior unsecured debt rating of 'BBB' reflects that the debt will rank pari passu with all of Stifel's other senior unsecured debt. The $250 million debt issuance does not materially affect the firm's leverage and as noted in the last rating action commentary on July 14, 2015 when Stifel was upgraded, Fitch noted that there was room for modestly higher leverage at the current rating level. Stifel's rating strengths include the company's conservative business profile, well-established wealth management platform, improved risk controls and increased deposit funding and solid capital levels.
RATING SENSITIVITIES - SENIOR UNSECURED DEBT
The expected rating assigned to the unsecured debt is equalized with Stifel's Issuer Default Rating (IDR), and therefore, would be expected to change as a result of a change in Stifel's IDR. Existing notes are senior unsecured obligations of the company that rank equally in payment priority with all existing and future unsubordinated unsecured indebtedness of Stifel.
Stifel's IDRs and senior unsecured debt ratings are sensitive to future acquisitions in terms of the associated size, pace, financing, balance sheet risk and integration risk associated. Stifel's IDR could be downgraded if the firm shows an increased appetite for more balance sheet intensive acquisitions, either in terms of risker acquisition targets or more aggressive funding (i.e. issuance of new debt).
Rating upside is viewed as limited in the near term, although longer term, upward rating momentum could be influenced by moderated growth and/or acquisitions, acquisitions that are limited in their balance sheet intensity, continued profitability with successful acquisition integration, and loan performance that is superior or at least consistent with peers through the cycle.
Material, rapid deterioration in capitalization, either for the overall firm or at the subsidiary level, particularly if such reduction is not accompanied by a commensurate reduction in Stifel's growth profile, significant integration issues with any recent or future acquisitions, and large-scale management departures, could also lead to a downgrade. Failure to successfully navigate the increased regulatory requirements associated with assets exceeding $10 billion would also be viewed negatively.
Stifel is a full-service middle market regional brokerage and investment bank based in St. Louis, MO. Stifel is the holding company for Stifel, Nicolaus & Company, Inc. (its primary broker-dealer subsidiary) and other subsidiaries. Stifel provides retail brokerage, securities trading, equity and fixed income capital markets, investment banking and advisory, and retail and commercial banking services to its clients. Much of Stifel's growth has been fueled by acquisitions that have increased the company's size and scope of operations.
Fitch expects to assign the following rating:
Stifel Financial Corp.
--$250 million senior unsecured debt due 2020 'BBB'(EXP).
Date of Relevant Committee: July 13, 2015.
Additional information is available on www.fitchratings.com.
Global Bank Rating Criteria (pub. 20 Mar 2015)
Global Non-Bank Financial Institutions Rating Criteria (pub. 28 Apr 2015)