KBRA Assigns Rating to BGC Group, Inc.'s Senior Unsecured Notes Issue

KBRA assigns a rating of BBB to the senior unsecured notes issued by BGC Group, Inc. (NASDAQ: “BGC”), a diversified holding company and market leader specializing in global wholesale brokerage, complemented with a growing financial technology platform that offers an array of products and services to various types of clients, including governments, corporations, and financial institutions, including banks, broker-dealers, and investment advisors and funds. The rating Outlook is Stable.

On September 6, 2023, BGC announced plans to exchange senior notes (“old notes”) of BGC Partners, Inc. (“BGCP”) for notes (“new notes”) to be issued by BGC. KBRA believes the terms and conditions of the new notes reflect substantially similar terms to the old notes. Previously, on July 1, 2023, BGCP completed a corporate conversion to reorganize and simplify its organizational structure such that all owners (shareholders and partners) of its existing entities would participate in the economics of the consolidated enterprise through a new publicly traded entity, BGC Group, Inc. At the that time, KBRA noted that the reorganization and conversion will not have a material financial impact on the consolidated enterprise and there will be no changes to the organization’s business strategy, or its capital and liquidity management practices, and that the senior unsecured indebtedness of BGCP would likely be exchanged into obligations of BGC on substantially similar terms and conditions.

Key Credit Considerations

The ratings remain underpinned by management’s long record of producing mostly consistent operating results, adapting to market evolution, and ongoing emphasis on risk and liquidity management. Profitability, while modest at times, is on an improving trend due to the overall increase in capital markets volatility, which KBRA expects to persist for the foreseeable future. High compensation expenses (cash and non-cash) have historically weighed on bottom-line earnings; adjusted for equity-based compensation profitability is commensurate with the ratings. Leverage in the 2.5x range (Debt/Adj. EBITDA) has been managed consistently. BGC remains adequately funded; unsecured debt is well laddered and has been issued at a reasonable cost. Cash coverage of short-term obligations remains solid.

Rating Sensitivities

The issuer ratings for BGC are well positioned at the current rating. Although not anticipated, an erosion in business fundamentals that precipitated a declining trend in revenues would cause the ratings to be re-evaluated. In addition, a change in capital management such that leverage were to be managed above 5x or a decline in profitability that pressured the interest coverage to deteriorate to below 4x on a regular basis would also trigger reconsideration of the current ratings.

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