KBRA Comments on Rithm Capital's Proposed Acquisition of Sculptor Capital Management

Rithm Capital Corp.’s (NYSE: RITM; “Rithm” or “the company”) proposed acquisition of alternative asset manager Sculptor Capital Management, Inc. (NYSE: SCU; “Sculptor”) is consistent with the company’s strategic desire to build a scale third-party asset manager; supplementing Rithm’s current operating profile that reflects one of the industry’s leading residential mortgage servicing and origination business, as well as business purpose lender (Genesis Capital), and a Single Family Rental (SFR) portfolio, among other primarily real estate related businesses. Rithm’s BB+ Issuer rating was affirmed on July 7, 2023.

With approximately $34 billion of AUM, NYC-headquartered Sculptor was founded in 1994 and reflects some diversification across most major asset classes, with a focus broadly on credit-related products and real estate.

Rithm’s 100% cash consideration offer for Sculptor’s Class A shareholders aggregates to a transaction announcement value of ~$640 million; while not immaterial to Rithm’s current financial profile - $5.7 billion of common equity at 1Q23 and $1.8 billion of on-balance sheet cash and liquidity preliminarily reported for recently ended 2Q23 – is considered very manageable.

Following the closing of the proposed transaction, which is currently targeted for 4Q23, KBRA would anticipate refining any potential ratings ramifications associated with the acquisition. With that said, the proposed combination with an alternative asset manager that has reflected generally favorable multi-year performance across its principal investment products / strategies, at a reasonable acquisition cost, could benefit Rithm’s credit profile.