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Rating Action: Moody's assigns A3 ratings to Cboe's $500 million senior notes due 2030
Global Credit Research - 08 Dec 2020
New York, December 08, 2020 -- Moody's Investors Service (Moody's) today assigned an A3 rating to Cboe Global Markets, Inc.'s (Cboe) senior unsecured notes due 2030. Moody's said the outlook on Cboe's ratings is stable.
Issuer: Cboe Global Markets, Inc.
Senior unsecured notes, assigned A3
The rating assigned to the new senior notes is in line with the existing A3 ratings already assigned to Cboe's outstanding senior unsecured debt.
Moody's said the ratings reflect the firm's strong financial profile and product suite, which includes its highly profitable proprietary options and futures products (notably the Cboe Volatility Index and options on S&P indices). Cboe's credit profile also benefits from its offerings in multiply-listed options, US and European cash equities exchanges and a foreign exchange trading platform. Moody's said that Cboe's ratings are constrained by the firm's elevated concentration in key proprietary products (such as SPX options and VIX options and futures) which represent around 37% of its trailing-twelve months' net revenue through September 2020.
Cboe plans to utilize the net proceeds of the offering to finance its acquisition of Bids Trading, repay a portion of the amount outstanding under the term loan facility and all outstanding indebtedness under the revolving credit facility, with the remaining balance for general corporate purposes (which may include the financing of future acquisitions or the repayment of other outstanding indebtedness). In October 2020, Cboe announced that it will acquire Bids Trading, an operator of a dark pool. The acquisition, which Cboe expects to close in late December 2020 or early 2021, is credit positive because it will reinforce Cboe's market share in US equities trading, particularly in the anonymous block trading segment. Although the transaction will be fully funded with debt, Moody's said Cboe's leverage should only increase to 1.4x-1.5x upon the transaction's completion from 1.2x as of September 2020.
Cboe's stable outlook reflects Moody's expectation that its debt leverage will be maintained around its existing level in the ordinary course of business, and that in pursuing growth opportunities it will remain committed to maintaining a well-balanced approach towards the consideration of creditor and shareholder interests, while diversifying away from its concentration in key proprietary products.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
The ratings could be upgraded should Cboe commit to and sustainably achieve a debt leverage of around 1.5x; the ratings could also be upgraded if Cboe achieves an increased share of net revenue from recurring sources that are not dependent on transaction volume.
The ratings could be downgraded if Cboe sustainably increases debt leverage above 2x, through a debt-funded acquisition or via a sustained reduction in operating cash flows; the ratings could also be downgraded if regulatory, market structure changes or operational failures result in significantly adverse repercussions for Cboe's key business activities.
The principal methodology used in this rating was Securities Industry Service Providers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187116. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Fadi Abdel Massih Asst Vice President - Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Ana Arsov MD - Financial Institutions Financial Institutions Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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