Osaic Holdings Inc.

Even with this improvement, we continue to see the firm's private equity ownership and aggressive financial management as a rating constraint because it entails an acquisitive growth strategy, a high debt burden, and volatile debt service coverage. The stable outlook reflects our expectation that Osaic's S&P Global Ratings-adjusted debt to EBITDA should improve to about 5.5x by the end of 2023, even as the company's aggressive financial management and private equity ownership constrain our view on capitalization and the rating. Over the next 12 months, we could lower the rating if we expect Osaic's interest coverage to modestly worsen, or if we expect S&P-adjusted debt-to-EBITDA to substantially increase above 6.0x. An upgrade is unlikely in the next twelve months because

...Osaic Holdings Inc.'s (formerly Advisor Group Holdings Inc.) private equity ownership has resulted in what we consider aggressive financial management, including a lack of tangible equity, fairly high debt leverage and modest debt service coverage. That said, EBITDA has been bolstered by increased cash sweep revenue from higher short-term interest rates and, to a lesser extent, recent acquisitions, which we expect to lower debt-to-EBITDA ratio to about 5.5x in 2023, down substantially from over 8.0x at the end of 2022. Even with this improvement, we continue to see the firm's private equity ownership and aggressive financial management as a rating constraint because it entails an acquisitive growth strategy, a high debt burden, and volatile debt service coverage. Osaic has limited credit and market risk exposure and appetite. This is because the firm doesn't hold securities inventories and doesn't self-clear its client's securities positions or transactions....

Full Report