Grosvenor Capital Management Holdings, LLLP -- Moody's assigns Ba3 CFR to GCM Grosvenor Inc.; outlook positive

Rating Action: Moody's assigns Ba3 CFR to GCM Grosvenor Inc.; outlook positiveGlobal Credit Research - 16 Feb 2021New York, February 16, 2021 -- Moody's Investors Service, ("Moody's") assigned a Ba3 corporate family rating ("CFR") and a Ba3-PD probability of default ("PD") rating to GCM Grosvenor Inc. (Grosvenor; NASDAQ: GCMG). Moody's also assigned a Ba3 rating to senior secured credit facilities at Grosvenor Capital Management Holdings, LLLP. The outlook is positive for GCM Grosvenor Inc. and Grosvenor Capital Management Holdings, LLLP.Assignments:..Issuer: GCM Grosvenor Inc..Corporate Family Rating, Assigned at Ba3.Probability of Default Rating, Assigned at Ba3-PD..Issuer: Grosvenor Capital Management Holdings, LLLP.$290 million senior secured first lien term loan due 2028, Assigned at Ba3 .$50 million senior secured first lien revolving credit facility due 2026, Assigned at Ba3 Outlooks Actions: ..Issuer: GCM Grosvenor, Inc. .Outlook, Assigned Positive ..Issuer: Grosvenor Capital Management Holdings, LLLP.Outlook, Assigned PositiveRATINGS RATIONALEThe Ba3 CFR reflects the firm's strong and established position as an alternative investment solutions provider, moderate financial leverage and uneven organic AUM growth. The rating is also supported by the company's high AUM retention rates and the scale and breadth of its alternative asset management platform. Grosvenor's rating is constrained by the erosion of pricing power in the alternative intermediary business which weighs on the company's revenue and margin growth.The positive outlook reflects improvement in the investment performance of Grosvenor's absolute return strategies and steady growth in private market strategies fee-paying AUM, as well as its recent transition into a public company through a SPAC conversion which was a deleveraging event for the company. We expect higher operating earnings in 2021 on the back of strong fundraising in private market strategies in 2020. Furthermore, the recent closing of the business combination with CF Finance Acquisition Corp which resulted in Grosvenor becoming a public company also serves to strengthen the company's profile by reducing balance sheet leverage and improving corporate transparency and governance. Grosvenor has made significant progress in reducing notional debt through the Mosaic transaction and its transition to a public company in 2020. During the outlook period, we will be watching to see if the improved performance of the firm's public markets strategies translates into stronger client inflows and whether the positive momentum in private market fundraising is sustained.The company's amend and extend transaction will build on improvements in the company's balance sheet strength by extending the maturities on the term loan and revolver each by three years, lowering its cost of borrowing and reducing the outstanding term loan amount by $50 million to $290 million. The company's pro-forma Debt/EBITDA ratio (as defined by Moody's) is expected to be 3.2x at the close of the transaction.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSUpward pressure on the ratings of Grosvenor could arise following; (1) annualized organic AUM growth of 2% or above, (2) success of the firm's extension of its AUM mix into new asset classes and ESG strategies, (3) improvement in pre-tax income margins to above 30%, or (4) leverage sustained below 3.5x (as measured by Moody's).Downward pressure on the ratings could arise following: (1) annualized organic AUM decay of 2% or higher; (2) leverage (Debt/EBITDA) sustained above 5.0x; 3) sustained deterioration in pre-tax income margins, or 4) an event that materially impacts the firm's brand name/reputation.Grosvenor is an alternative asset management company with close to $58.6 billion of AUM as of 30 September 2020.The principal methodology used in these ratings was Asset Managers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186105. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor 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. 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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 ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are 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_1243406.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.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK 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. Stephen Tu Vice President - Senior Analyst Financial Institutions Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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