Moody's assigned a first-time B1 corporate family rating to The Advisor Group Inc., with a stable outlook.
The rating agency said the rating was assigned in connection with the company's issuance of a seven-year $600 million senior secured term loan, the proceeds of which will be used to fund Advisor Group's acquisition of independent broker/dealer Signator Investors Inc., to retire existing debt and to pay a dividend to shareholders, among other uses.
Moody's said the ratings take into account the characteristics of the independent wealth adviser/registered investment adviser sector, Advisor Group's relatively small scale in terms of net revenues, high leverage, low profitability and the company's limited operating history as an independent company.
The ratings also incorporate several positive operating factors, including the company's successful recruitment of new advisers and its high retention rate of existing advisers, its diversified revenue stream and the fact that it is comparatively less sensitive to market fluctuations.
Moody's also wrote that Advisor Group's plan to use to the majority of the debt proceeds for a shareholder dividend instead of business investment is not an optimal capital allocation for creditors.