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Investing.com -- Moody’s Ratings has affirmed Victory Capital Holdings (NASDAQ:VCTR), Inc.’s Ba1 corporate family rating while changing its outlook from stable to positive, citing the company’s solid operating results and expected benefits from its recent Amundi SA (EPA:AMUN) transaction.
The rating agency noted that Victory has maintained strong profitability, expanded its product portfolio through both organic and inorganic investments, and reduced debt, contributing to balance sheet deleveraging.
The positive outlook reflects the expected benefits of Victory’s acquisition of Amundi’s US asset management business, which closed on April 1. Moody’s anticipates improved credit metrics over the next 12-18 months as the new business is integrated into Victory’s operations.
For the twelve months ending March 31, Victory’s debt-to-EBITDA ratio was 2.3x. With cost synergies and estimated earnings from the Amundi US acquisition, financial leverage is expected to decrease to below 2.0x.
The partnership with Amundi is projected to yield approximately $110 million in net cost savings, higher than the $100 million initially projected. Moody’s considers the execution risks of this transaction to be modest, given Victory’s strong track record of successfully integrating new businesses.
Victory’s Ba1 rating reflects its modest financial leverage, strong profitability, and solid cash flow generation, but is constrained by ongoing asset redemptions, earnings sensitivity to financial markets, and concentrated exposure to retail distribution channels.
The rating could be upgraded if Victory achieves meaningful organic growth through net asset inflows, maintains financial leverage below 2.0x debt-to-EBITDA, or significantly improves its geographic diversification.
Conversely, the outlook could return to stable or the rating could be downgraded if Victory experiences net client redemptions exceeding 2% of managed assets, sustains financial leverage above 3.0x debt-to-EBITDA, or sees GAAP pretax income margins fall below 25%.
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