TEXT-Fitch affirms Intermediate Capital, revises outlook to stable

July 27 - Fitch Ratings has affirmed Intermediate Capital Group PLC's
(ICG) Long-term Issuer Default Rating (IDR) at 'BBB-' and revised the
Outlook to Stable from Negative.

RATING ACTION RATIONALE
The affirmation and Outlook revision reflect a moderation in its near-term
refinancing risks, a positive trend in fund management company (FMC) fee income,
which Fitch views as good quality earnings, as well as Fitch's expectation that
ICG will continue to manage leverage at lower levels. ICG's Long-term IDR
incorporates the continued strong European franchise and profitability but also
the more challenging sector outlook and ICG's reliance on wholesale funding
sources.

Near-term refinancing risks have moderated following the extension of ICG's bank
facilities to 2016 from 2013. In addition, progress has been made in
diversifying from bank sources of finance through private placements and UK
retail bonds. However, ICG remains reliant on wholesale sources of funds and its
pool of potential sources of bank finance is lower than pre-crisis. Headroom was
just in excess of GBP500m following the refinancing of the bank facilities after
FYE12. Net debt/tangible equity was 0.6x at FYE12, down from a peak of 2.6x at
FYE09. Fitch expects leverage to continue to be managed to such lower levels.

ICG's profitability has held up well. Management targets a mid-teen return on
equity over the cycle (FY12: 13.9%). Cash core income, which is a more
meaningful measure of cash earnings, also improved during FY12 driven by
increasing fee income and improved realisation of payment-in-kind (PIK)
interest. FMC fee income improved overall, although funds under management (FuM)
fell in FY12 as credit funds entered their realisation phase, which was partly
offset by growth in higher fee mezzanine funds. ICG plans to launch several new
funds in the near term, in addition to further segregated mandates. ICG's target
of an equal split between Investment Company (IC) and FMC over the medium term
is dependent on the successful launches and investment performance of these of
new funds. There is some dependence on PIK interest.

Impairments remain the main driver of earnings and ICG expects provisions to
remain around the historical 2.4% average. Although the European leveraged
credit sector faces significant senior debt maturities between 2014 and 2016,
there is potential for further cycles of amend and extend negotiations with
creditors. Creditors are unwilling to take control or crystallise losses. In
addition, while CLOs have flexibility to commit cash beyond the reinvestment
period, the reinvestment is subject to constraints that may be difficult to
satisfy. Fitch believes there are downside risks of a greater than expected
increase in defaults or a reversal of the performance of many portfolio
companies due to the eurozone crisis and a generally weaker economic
environment. However, provisioning should remain manageable relative to ICG's
good profitability.

The balance sheet investment portfolio is relatively granular with limited
participation in large syndicated deals, which should reduce the complexity of
any restructuring negotiations. Overall, Fitch expects relatively flat
performance in the near term and believes fund management growth will offset
lower net interest income as balance sheet investments are realised.

RATING DRIVERS AND SENSITIVITIES
ICG's Long-term IDR is sensitive to a change in Fitch's outlook for the
leveraged credit sector, a material worsening in asset quality, leverage or
refinancing risks and to a reversal of the positive trend in FMC fee income.
ICG's Long-term IDR is unlikely to be upgraded in the near term, but if there
was further progress with the rebalancing towards the FMC and a commensurate
reduction in balance sheet risks, the rating could be upgraded over the medium
term.

ICG is a leading provider of European mezzanine and leveraged loan finance and
asset management. ICG had GBP7.2bn of third-party FuM at FYE12.

Additional information is available on www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 16
August 2011, 'Investment Manager and Alternative Funds Criteria', dated 23
December 2011, 'Evaluating Corporate Governance', dated 13 December 2011, are
available on www.fitchratings.com.

Applicable Criteria and Related Research:
Evaluating Corporate Governance
Global Financial Institutions Rating Criteria
Investment Manager and Alternative Funds Criteria