Citadel Limited Partnership

S&P Global Ratings' outlook on Citadel is stable, indicating our view that the company will generate strong adjusted EBITDA margins above 80% (net of expense reimbursements), debt leverage below 2.0x adjusted EBITDA, and interest coverage of about 9x-13x in the next 18-24 months. The stable outlook also demonstrates our expectation that Citadel will maintain or modestly build up its AUM and keep up its 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 seriously deteriorate, or Citadel experiences large net outflows beyond distributions

...We anticipate the enhanced fee structure to provide some stability in earnings, but dependence on performance fees may still lead to volatility. As of Jan. 1, 2021, approximately 85% of Citadel Limited Partnership's investment capital has transitioned to the enhanced management fee structure: a 1% management fee credited against any performance fees for the year, in addition to expense reimbursements 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. Sizable internal capital aligns the interest of Citadel principals and employees and external investors. As of Jan. 1, 2021, internal capital from Citadel principals and employees constituted more than $7 billion (over 20%) of the investment capital. As such, the interests of internal and external stakeholders are strongly aligned. Internal and external investors are subject to the same fee structure....

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