KBRA Affirms Ratings for Petershill Partners
16 May 2024 | New York
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”). PHP has guaranteed a $500 million private placement of senior unsecured notes issued by Petershill Delaware. The ratings Outlook is Stable.
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. PHP benefits from more diversification by fund, vintage, and strategy when compared to a typical mid-sized manager. PHP’s margins and revenue durability are considerably enhanced by structural protections and debt/EBITDA is expected to be managed at conservative levels. Given the resiliency of PHP’s cash flow generation, interest coverage is projected to remain quite comfortable even in a stress scenario. Balance sheet leverage is low with an ample amount of shareholders’ equity.
The Petershill Group is a long-established leader in providing growth capital to, and partnering with, independent alternative asset managers (partner firms). PHP is managed by GSAM whose Petershill team has been operating since 2007. In October 2021, PHP’s initial public offering (IPO) achieved a permanent capital base to fund development of partner firms, acquisitions, and other growth initiatives. The establishment of a separate corporation will be instrumental in further building the Petershill brand. PHP is 76% owned by funds managed by Goldman Sachs with a free float of 24%. As part of the IPO, PHP entered into a seven-year operator agreement with GSAM, which renews annually after seven years. PHP’s corporate governance is strengthened by a fully independent board with extensive asset management and financial sector experience.
Rating Sensitivities
Given the Stable ratings Outlook, an upgrade is not expected over the next one to two-year time frame. Over the medium 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 could negatively affect ratings.
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