Moody’s cuts ICAP, Tullett Prebon

Moody's Investors Service said it downgraded the long-term corporate family rating of ICAP plc to Baa3 from Baa2 and Tullett Prebon plc to Ba1 from Baa3.

The outlook remains negative for both firms, reflecting the risk of further deterioration of credit metrics due to continuing revenue and margin pressures, as well as the potential risk of conduct charges that each may face separately.

Moody’s said the action responds to continued pressure facing the interdealer broking industry, a result of both structural and cyclical pressures which have caused top-line revenues to erode at both issuers. Pressures on the industry are evident in the reduced commitment of interdealer broker firms’ sell-side dealer client base toward market making.

Operating margins at both issuers have faced pressure from increasing compliance costs related to the evolving regulation of market infrastructure as well as restructuring costs undertaken by both firms to better align their cost bases with the industry's lower activity levels; the agency views these restructuring costs as recurring as the businesses respond to pressures in the industry environment and attempt to protect their margin.

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