After Russell Investments Cayman Midco Ltd. announced a dividend recapitalization transaction, Moody's Investors Service changed its outlook on the company's ratings to negative from stable. Fitch Ratings retained its negative outlook on the company's ratings.
Russell Investments intends to upsize its existing senior term loan by $300 million, and those debt proceeds will be used to pay a one-time special dividend to shareholders. The secured debt will mature on June 2023.
Moody's views the transaction as negative, adding that an upgrade is unlikely in the next 12 to 18 months. According to Dean Ungar, a senior analyst and vice president at Moody's, Russell Investments will have "weaker financial metrics" as a result of the dividend recapitalization transaction. Ungar noted that this is the company's second transaction in two years.
Concurrent with the outlook change, Moody's affirmed the company's corporate family rating and senior secured term loan and revolving credit facility ratings, all at Ba2.
Meanwhile, Fitch affirmed the BB long-term issuer default ratings assigned to Russell Investments, and co-borrowers Russell Investments U.S. Institutional Holdco Inc. and Russell Investments Retail Holdco Inc. Fitch also affirmed the BB senior secured debt ratings of the co-borrowers.
According to Fitch, the negative ratings outlook it retained reflects continued uncertainty over the company's future financial policies, including its leverage appetite.
Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates with minority stakes held by funds managed by Reverence Capital Partners LP and Russell Investments' management.
