KBRA Assigns Rating to Cantor Fitzgerald, L.P.’s Senior Unsecured Notes Issue
6 Dec 2023 | New York
KBRA assigns a BBB rating with a Stable Outlook to the $750 million senior unsecured notes issued by Cantor Fitzgerald, L.P. (“Cantor” or “the firm”). The notes are scheduled to mature on December 12, 2028. Domiciled in New York, NY, Cantor is a full-service, globally diverse capital markets and investment banking firm with controlling stakes in wholesale finance brokerage and commercial real estate brokerage and services companies. Use of proceeds will be for general corporate purposes, including repayment of Cantor’s outstanding 4.875% notes that mature in May 2024.
Key Credit Considerations
The rating is underpinned by management’s long record of producing mostly stable operating results, adapting to regulatory changes and market evolution, ongoing emphasis on risk management, and consistent financial leverage and liquidity management policies. Cantor’s lower risk matched-book, securities trading operation, and agency brokerage business model that contribute to a higher quality balance sheet, also support the rating.
Profitability, while reasonably stable, is somewhat low for the rating category, primarily due to elevated compensation expense (although a sizeable percentage is variable and non-cash). While revenue performance generally follows the contours of capital markets conditions, KBRA considers it to be sufficiently diversified to absorb an environment of subdued transactions and trading.
Leverage, on a net basis, has been managed steadily over an extended period and remains commensurate for the rating category. Cash coverage of short-term obligations and aggregate liquid assets and contingency funding coverage of unsecured debt remains adequate. Reliance on short-term debt is low; long-term debt maturities are well staggered.
Rating Sensitivities
The rating is well positioned in the current category. Although not expected, a change in the firm’s stringent enterprise risk management policies and practices or liquidity management would pressure the rating. A change in the revenue profile – most likely from a secular dislocation in the wholesale brokerage or commercial real estate brokerage and financing business – would cause the rating to be reevaluated, especially if there were not compensating expense reductions.
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