KBRA Affirms Ratings for Petershill Partners Following Announced Transaction

KBRA affirms the issuer and senior unsecured debt ratings of A for Petershill Partners Inc. ("Petershill Delaware"), a wholly owned issuing entity of Petershill Partners PLC (“PHP” or the “firm”). The rating Outlook is Stable. The independent Board of PHP has announced its intention to recommend a return of capital and share cancellation for free float shareholders, and delist the firm from the London Stock Exchange, all subject to shareholder approval. In conjunction with this transaction, PHP plans to secure c.$850 million in additional financing through an up to 12-month bridge facility, which is expected to be partially refinanced through an add-on issuance of new senior unsecured notes with the remaining repaid through the deferred proceeds from recent stake divestments.

Key Credit Considerations

PHP’s credit profile benefits from a management team of highly regarded industry experts combined with support from Goldman Sachs Asset Management (“GSAM”). Management has constructed a sizeable and diverse portfolio of high performing asset managers. A focus on private equity, real assets, and private credit has resulted in compelling growth, durable fund structures, predictable management fees, and the opportunity to share in considerable carry and investment gains over time. Strong growth of aggregate AUM of partner firms has been the primary driver of overall positive management fee trends. Momentum is expected to continue owing to successful fundraising by partner firms combined with additional acquisitions by PHP in future years post deleveraging. PHP benefits from more diversification by fund, fund vintage, and strategy when compared to a typical mid-sized manager with AUM in the range of $40 billion (PHP’s economic ownership of partner firm AUM). As a result of the transaction, debt/EBITDA is expected to temporarily increase in 2025. However, management is prioritizing deleveraging, and has committed to materially reducing leverage within a 12-month time frame, aided by the expected deferred payment from the sale of Harvest Partners, payable in July 2026. In addition, there are no plans for further acquisitions until leverage is substantially reduced. Going forward, KBRA expects PHP to maintain a conservative leverage profile as the firm resumes execution of growth strategy. Balance sheet leverage is anticipated to remain low with an ample amount of shareholders’ equity. Cash is expected to be maintained at moderate levels, and balance sheet liquidity is augmented considerably by PHP’s ability to generate operating cash flows combined with the absence of any debt maturities over the medium term, aside from its bridge facility. Should escalating trade tensions or broader geopolitical risks evolve into a protracted economic slowdown, asset managers could face potential headwinds, including delays in portfolio company exits, valuation pressures at the fund level, and a more difficult fundraising landscape.

Rating Sensitivities

Given the Stable rating Outlook, an upgrade is not expected over the next one to two-year time frame. Over the longer term, there is potential for an upgrade if management achieves growth and diversification plans, maintains leverage metrics within conservative levels, and continues to generate higher levels of operating cash flow over time. Pressure on ratings could ensue in the event of an unforeseen decline in partner firm AUM or other financial issues which result in lower fee generation and cash flow over time. That said, KBRA recognizes the resiliency of the firm to a more challenging environment. Materially higher-than-expected leverage without the prospect of trending toward historical levels could negatively affect ratings.

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