Moody’s eyes Osaic for downgrade

Moody's Investors Service said it placed on review for downgrade Osaic Holdings, Inc.'s B2 corporate family rating, B1 senior secured first-lien bank credit facility ratings, B1 senior secured first-lien notes ratings and Caa1 senior unsecured rating. Previously, the outlook was stable.

The decision to review follows Osaic and Lincoln Financial Group's announcements that Osaic agreed to buy Lincoln Financial Advisors Corp. (LFA) and Lincoln Financial Securities Corp. (LFS), the wealth management firms that make up Lincoln Wealth from Lincoln National Corp., the agency said.

“Moody's said the rating action reflects the planned acquisition's possible negative effect on Osaic's financial profile. Lincoln said the transaction is expected to provide it with approximately $700 million of capital benefit, implying the purchase price paid by Osaic will be at least that amount, and likely higher. Accordingly, the acquisition may require Osaic to issue a significant amount of debt to help fund the purchase price, even though it has surplus cash on hand following a debt raise earlier in the year.

“Moody's said a new debt issuance could lead to a worsening in Osaic's interest coverage and debt leverage that could adversely affect its financial profile,” the agency said in a press release.

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