Investing.com -- S&P Global Ratings has revised its outlook for Allspring Buyer LLC to stable from negative due to a decrease in leverage. The ’BB-’ long-term issuer credit and issue ratings on the company and its debt have been affirmed.
Allspring, an asset management company, lowered its leverage to 4.4x at the end of 2024. This was a significant decrease from the 6.3x leverage at the end of 2023. The reduction was attributed to improvements in revenue and margins, with revenue growing by 7% in 2024 due to strong fixed-income inflows and market appreciation.
The company’s EBITDA margins also expanded to 23% from 18% in 2023. This was achieved through cost savings realized as Allspring completed its separation from Wells Fargo (NYSE:WFC). S&P Global Ratings anticipates that Allspring will maintain leverage between 4.0x-5.0x in 2025 and 2026, supported by continued improvements in revenue and margins.
The stable outlook is based on the expectation that Allspring will operate with leverage of 4.0x-5.0x over the next 12 months. During this period, the company is also expected to maintain its assets under advisement (AUA) and investment performance.
Allspring ended 2024 with an AUA of $605 billion, diversified across fixed income (31%), equity (23%), liquidity (36%), and stable value (10%). The company benefited from $12 billion in fixed-income inflows in 2024, supported by strong investment performance in those strategies.
The company is expected to maintain adequate liquidity over the next 12 months. As of Dec. 31, 2024, Allspring’s liquidity sources included a cash balance of $179 million and an undrawn $170 million revolving credit facility due in 2029. These sources are expected to cover liquidity uses, which include debt amortization, capital expenditures, and working capital needs.
S&P Global Ratings could lower the ratings if Allspring’s leverage rises above 5.0x or if the business deteriorates, as indicated by a significant decline in earnings, AUA, or investment performance. An upgrade is considered unlikely over the next 12 months.
Allspring, previously known as Zebra Buyer LLC, operated as WFAM under the Wells Fargo brand before being acquired in 2021 by private equity firms GTCR LLC and Reverence Capital Partners (WA:CPAP). These firms hold the majority ownership, while Allspring’s management and Wells Fargo own minority stakes.
The company’s recovery analysis includes a $170 million revolving credit facility due in 2029 and a $1.3 billion senior secured term loan due in 2030. A 5.0x multiple was applied for all asset managers, representing an average multiple for industry players emerging from a default. In a simulated default scenario, the net recovery value for the waterfall after 5% administrative expenses was estimated at $569 million, with a recovery range of 35%.
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