Moody’s: BlackRock rating unaffected by Barclays share sale

The agency affirmed BlackRock’s A1 senior unsecured and P-1 ratings with a stable outlook, after it announced it would repurchase up to $1 billion in shares, through available cash and debt raising of $500m.

Rory Callagy, vice president at Moody’s, says: “Although leverage increases modestly as a result of this transaction, it is manageable within BlackRock’s current A1 rating level.

“We expect that BlackRock will continue to generate sufficient levels of operating cash flow to meet short-term maturities, strengthen its liquidity position and reduce the incremental leverage from this transaction within several quarters.”

He adds “The size of this share repurchase transaction does not place undue stress on BlackRock’s debt protection metrics and liquidity.” (article continues below)

Barclays had announced it would be selling its entire holding in the asset manager at the start of the week.

After the sale by Barclays, BlackRock will have one large equity investor in PNC Financial Services Group, which held a 20.9% stake in the asset manager at the end of March.

However, Moody’s believes the group may trim its holding or divest it completely over Basel III regulations. The agency warns BlackRock would face negative rating pressure if weere to issue more debt for a “significant repurchase” of PNC’s stake.

The ratings could also come under negative pressure if it were to increase balance sheet risk through further direct investments or increasing exposure to capital markets.