A Standard Life Aberdeen announcement regarding plans to to issue subordinated debt resulted in its shares slipping on Wednesday.
The recently merged business said in a regulatory announcement that the US dollar denominated debt will be used for “general corporate purposes”, including refinancing existing debt.
Its shares ended the day down 2.1 per cent.
Moody’s says the issuance is not expected to significantly impact Standard Life Aberdeen’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.
It warned 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.
However, 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.
“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,” Moody’s said in the announcement.
It noted it had seen little business disruption from the merger so far.