Standard Life Aberdeen shares slip on debt plans as Moody’s issues warning

Shares in Standard Life Aberdeen have slipped after the recently formed firm announced plans to issue subordinated debt.

The Edinburgh-based giant made its plans known via a regulatory announcement in which it said that the US dollar denominated debt will be used for “general corporate purposes”, including refinancing existing debt.

On the back of the disclosure, shares in the firm ended Wednesday down 2.1 per cent, however, ratings firm Moody’s said the issuance is not expected to significantly impact the firm’s financial leverage in the medium term.

It has assigned a Baa1 rating, which it says is standard for subordinated bonds issued by asset management companies.

The ratings agency, though, issued the caveat that the rating could be downgraded if the integration of Standard Life and Aberdeen resulted in serious business disruptions, it suffers sustained outflows or its debt to EBITDA ratio reaches over 2x. It currently sits at 1.4x.

Conversely, re-establishing positive net inflows, increasing AUM across strategies and gaining more assets from outside the UK, plus maintaining pre-tax income margins above 38 per cent could result in an upgrade.

It follows Moody’s upgrade of the Standard Life Aberdeen long-term issuer rating earlier this week from Baa1 to A3, following a review period due to the merger. It has upgraded its outlook to stable.

Moody’s, which noted that it has seen little business disruption as a result of the mega merger so far, said in its announcement: “We expect the group to benefit from a more diverse revenue mix, cross-selling opportunities and expense reductions, all of which better position it to respond to current industry pressures, such as passive competition and fee pressure.”

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