KBRA Assigns Rating to BGC Group, Inc.'s Senior Unsecured Notes Issue

NEW YORK--(BUSINESS WIRE)--KBRA assigns a rating of BBB to the senior unsecured notes issued by BGC Group, Inc. (NASDAQ: “BGC”), a diversified holding company and market leader specializing in global wholesale brokerage, complemented with a growing financial technology platform that offers an array of products and services to various types of clients, including governments, corporations, and financial institutions, including banks, broker-dealers, and investment advisors and funds. The rating Outlook is Stable.

On September 6, 2023, BGC announced plans to exchange senior notes (“old notes”) of BGC Partners, Inc. (“BGCP”) for notes (“new notes”) to be issued by BGC. KBRA believes the terms and conditions of the new notes reflect substantially similar terms to the old notes. Previously, on July 1, 2023, BGCP completed a corporate conversion to reorganize and simplify its organizational structure such that all owners (shareholders and partners) of its existing entities would participate in the economics of the consolidated enterprise through a new publicly traded entity, BGC Group, Inc. At the that time, KBRA noted that the reorganization and conversion will not have a material financial impact on the consolidated enterprise and there will be no changes to the organization’s business strategy, or its capital and liquidity management practices, and that the senior unsecured indebtedness of BGCP would likely be exchanged into obligations of BGC on substantially similar terms and conditions.

Key Credit Considerations

The ratings remain underpinned by management’s long record of producing mostly consistent operating results, adapting to market evolution, and ongoing emphasis on risk and liquidity management. Profitability, while modest at times, is on an improving trend due to the overall increase in capital markets volatility, which KBRA expects to persist for the foreseeable future. High compensation expenses (cash and non-cash) have historically weighed on bottomline earnings; adjusted for equity-based compensation profitability is commensurate with the ratings. Leverage in the 2.5x range (Debt/Adj. EBITDA) has been managed consistently. BGC remains adequately funded; unsecured debt is well laddered and has been issued at a reasonable cost. Cash coverage of short-term obligations remains solid.

Rating Sensitivities

The issuer ratings for BGC are well positioned at the current rating. Although not anticipated, an erosion in business fundamentals that precipitated a declining trend in revenues would cause the ratings to be re-evaluated. In addition, a change in capital management such that leverage were to be managed above 5x or a decline in profitability that pressured the interest coverage to deteriorate to below 4x on a regular basis would also trigger reconsideration of the current ratings.

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Methodologies

Financial Institutions: Securities Firm Global Rating Methodology
ESG Global Rating Methodology

September 29, 2023

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.