Global asset manager Standard Life Aberdeen's (LON:SLA) subordinated debt rating backed by unit Standard Life Assurance Ltd. (SLAL) has been downgraded by Moody’s to Baa1(hyb) from A3(hyb) and junior subordinate debt rating backed by SLAL to Baa2(hyb) from Baa1(hyb), following the completion of the sale of SLAL to Phoenix Group ('Phoenix') for £3bn.
However, Moody's affirmed SLA's issuer rating at A3, subordinated debt rating at Baa1(hyb) and changed the outlook of SLA to stable.
As part of the transaction, SLA transferred to Phoenix, a British closed book consolidator, its UK Mature Retail and Spread/Risk books as well as the Europe, UK Retail and Workplace businesses.
The long-term strategic partnership with Phoenix also ensures that SLA can: (i) retain investment management access to the assets under administration it is selling, (ii) continue to manage £48bn of assets on behalf of Phoenix Group and (iii) potentially obtain additional investment management mandates.
Moody’s said that while the debt instruments issued by SLA and backed by SLAL will retain their guarantee, it considers the guarantee to be weaker as it is now provided by an entity outside of the SLA group.
“As a result, we have removed the one notch uplift above the correspondent subordinated ratings that these instruments have benefited from. We note that SLA intends to redeem these notes with the proceeds of the sale, subject to regulatory and bondholders' approval at a later stage this year,” the agency said.
The outlook on SLA was changed to stable from stable (m) outlook as the stable outlook applies to all debt issued by SLA, included the subordinated debt instruments backed by SLAL.
SLA's rating affirmation is supported by the company's solid market position in the asset management industry, its broad product offering, global distribution and client reach. It is further supported by moderate leverage (1.6x Debt/EBITDA as of H1 2018), solid liquidity (GBP1 billion of liquid resources as of H1 2018) and a strong balance sheet.
“The sale of SLAL is expected to result in a material capital release for SLA, allowing the company to invest in future growth. This sale also completes SLA's transformation to a fee-based, capital light investment company, with a significantly de-risked balance sheet,” Moody’s concluded.
SLA is keeping its fast growing adviser platforms and financial planning arm.
