Fitch Affirms Intermediate Capital Group at 'BBB-'; Outlook Stable

Wed Jul 16, 2014 11:59am EDT

Related Topics

(The following statement was released by the rating agency) LONDON, July 16 (Fitch) Fitch Ratings has today affirmed Intermediate Capital Group plc's Long-term Issuer Default Rating (IDR) at 'BBB-'. The Outlook is Stable. KEY RATING DRIVERS ICG's IDR is driven by its strong leveraged finance franchise and developing investment and asset management franchise. The investment-grade IDR is supported by healthy, albeit potentially volatile, profitability and by Fitch's expectation that leverage will be contained at a low level. The rating also considers ICG's increased focus on third-party fund management and the higher quality stable revenues derived from this business. The rating also reflects the asset portfolio's inherent risk profile, ICG's reliance on wholesale funding and dependence on wider market performance. Despite exposure to a portfolio of leveraged assets, Fitch expects that provisions will remain close to the historical average of 2.5% of total portfolio size, helped by adequate provisioning on pre-crisis investments and by the fact that post-crisis investments have generally displayed stronger performance. In the longer-term, Fitch believes that tighter underwriting and ICG's revised strategy of focusing on smaller and less balance-sheet-intensive investment should support a lower sustainable level of impairment charges. RATING SENSITIVITIES The ratings may be downgraded if ICG's leverage, defined as net debt adjusted for CLOs/ tangible equity, exceeds 1x (end-March 2014: 0.3x) on a sustained basis, if it reports a material fall in fund management fees or suffers from weak performance in its asset portfolio, as reflected, for example, in portfolio companies' heightened provisions and refinancing challenges. Upside rating potential is currently limited but the rating would benefit from a further rebalancing of the earnings profile towards stable fund management company fee income and evidence of a related reduction in balance sheet risk. Fitch would also view positively continued evidence of its ability to raise funding across an increasingly diversified product suite, together with a prudent approach towards co-investments and strong performance of its asset portfolio. The latter would be reflected by prudent leverage, limited impairments and successful refinancing of the entities in which ICG has invested. Contact: Primary Analyst Denzil De Bie, CFA Director +44 20 3530 1592 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Erwin Van Lumich, CFA Managing Director +34 93 323 8403 Committee Chairperson Gordon Scott Managing Director +44 20 3530 1075 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria, dated 31 January 2014 and Investment Manager and Alternative Funds Criteria, dated 12 December 2013 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Investment Manager and Alternative Funds Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

FILED UNDER: