Citadel Limited Partnership

S&P Global Ratings' outlook on Citadel is stable, reflecting our view that the company will generate strong adjusted EBITDA margins above 50% (net of expense reimbursements), debt leverage below 2.0x adjusted EBITDA, and interest coverage of about 9x-12x in the next 18-24 months. The stable outlook also reflects our expectation that Citadel will maintain or modestly grow its AUM and maintain solid investment performance. Any further debt issuance that is not supported by additional stable earnings sources could result in a downgrade. We could also lower the rating if earnings decline so that leverage increases to 2.0x or more on a sustained basis, investment performance or profitability deteriorates substantially, or Citadel experiences significant net outflows beyond distributions in the ordinary

...We anticipate the enhanced fee structure to provide some stability in earnings, but dependence on performance fees may lead to volatility. As of Jan. 1, 2020, more than 80% of Citadel's investment capital has transitioned to the enhanced management fee structure: a 1% management fee credited against performance fees for the year, if any, in addition to expense reimbursement applicable to all funds. This brings more stability and transparency to future earnings. But a majority of the company's revenues are still derived from performance fees, which can be volatile. Significant internal capital aligns the interest of Citadel principals and employees and external investors. As of Jan. 1, 2020, internal capital from Citadel principals and employees constituted more than $6 billion (over 20%) of the investment capital. As such, there is a significant alignment of interests between the internal stakeholders and the external investors. The company continues to generate solid investment returns....

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