(The following statement was released by the rating agency)
LONDON, June 18 (Fitch) Fitch Ratings has affirmed Aberdeen
Plc's (AAM) Long-term Issuer Default Rating (IDR) at 'A' and
Short-term IDR at
'F1'. The Outlook on the Long-term IDR is Stable.
The operating environment for traditional investment managers
favourable, driven by improved global equity markets that have
under management (AUM) and attracted investor flows. This has
healthy fee revenue generation, improved investment performance
operating margins, supported by continued cost discipline.
Leverage has generally declined, and in some cases been reduced
to zero, driven
by improved cash flow generation and debt repayment. Many
traditional IMs have
taken advantage of favourable capital markets and low interest
refinance debt at attractive spreads, which should improve
Liquidity remains strong, with most traditional IMs operating at
negative net debt position.
These positive trends are tempered by the cyclical nature of
appreciation, potential performance and reputational risks in a
rate environment and regulatory uncertainty surrounding IMs
and/or their funds.
KEY RATING DRIVERS - IDRs
The affirmations of AAM's IDRs reflect its strong profitability,
and its profile and track record as a traditional asset manager.
benefit from the high cash generation typical of AAM's industry
but are also
exposed to the risks common to the business model, notably the
AUM, and consequently earnings, to market dynamics, and
Fitch upgraded AAM's IDR to 'A' from 'A-' on 8 April 2014, due
to the improved
product and geographical diversification that the Scottish
Partnership Group Limited (SWIP) acquisition brought to AAM (see
Aberdeen Asset Management to 'A'; Outlook Stable' at
AAM has grown into its present global position via successfully
acquisitions, which have contributed to higher earnings and
and product diversification. AAM's ratings consider the
diversification arising from the SWIP acquisition, particularly
addition of quantitative equities and fixed income portfolio.
SWIP's strong UK and developed market focus mitigates AAM's
concentrations to emerging markets and Asia Pacific.
The ratings also consider the integration challenges, margin
potential reduction of existing AUM in light of the
comparatively large SWIP
acquisition. Fitch considers that cost savings from the
duplicated activities will contribute to improving financial
although this will be offset by integration costs during FY14
Operating and fee margins are tighter in the acquired business,
weaken the combined group's margin and efficiency metrics in the
short to medium
RATING SENSITIVITIES - IDRs
Upward rating momentum could be driven by successful execution
of the SWIP
integration process, continued increases in AUM, further
improvements in client,
product and geographical concentrations, improved net cash
earnings, and consistently low leverage.
The ratings could be downgraded if there is a substantial and
in leverage, material reputational damage, a sustained
deterioration of fund
performance or significant AUM net outflows.
KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT AND
AAM's USD500m perpetual cumulative subordinated instruments
receive 50% equity
credit and are rated three notches below AAM's IDR in accordance
criteria for the "Treatment and Notching of Hybrids in
and REIT Credit Analysis" dated 23 December 2013. A hybrid
easily activated going-concern loss absorption would normally be
rated at least
three notches lower than the issuer's Long-term IDR.
The rating actions are as follows:
Long-Term IDR affirmed at 'A'; Outlook Stable
Short-Term IDR affirmed at 'F1''
Subordinated perpetual cumulative notes affirmed at 'BBB'
Denzil De Bie
+44 20 3530 1592
Fitch Ratings Limited
30 North Colonnade
London, E14 5GN
+44 20 3530 1491
+1 212 908 0827
Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153,
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
Investment Manager and Alternative Funds Criteria
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