KBRA Affirms Ratings for BGC Partners, Inc.
5 Jul 2023 | New York
KBRA affirms the issuer and senior unsecured debt ratings of BBB for New York, NY-based BGC Partners, Inc. (“BGC” or “the company”). The Outlook for the ratings is Stable.
The ratings are underpinned by management’s long record of producing mostly consistent operating results, adapting to market evolution, and ongoing emphasis on risk and liquidity management. The agency brokerage business model that obviates the need for significant inventory/investments risk positions also reinforces the ratings.
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 weighted on bottom-line earnings; however, 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 (excluding unsecured debt maturities) remains solid. Contingent funding vis-à-vis a committed line of credit has increased commensurately with the growth in the overall business.
KBRA believes the unrelenting growth in global debt – public and private – will create ongoing brokerage revenue opportunities from a volume and volatility perspective especially as it relates to rates and FX, key product segments for BGC. The potential for further commoditization of securities trading and brokerage could pose a competitive threat, longer term; however, BGC’s leadership in the electronification of trading and associated services, some of which are customized, demonstrates its capacity to adapt to market and technological changes and differentiate itself to clients.
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