Moody's rates Kestra Advisor loan B3

Moody's Investors Service said it assigned a B3 corporate family rating and B3 senior secured bank credit facility rating to Kestra Advisor Services Holdings A, Inc.

The action follows Kestra's proposed financing following a recapitalization led by private equity firm Warbug Pincus LLC.

The outlook is stable.

The ratings reflect the company's planned high level of debt leverage and its modest profitability, Moody's said.

The company's planned increase in debt following its acquisition by Warburg Pincus will pressure its financial flexibility and limit its room for additional debt at the existing rating level, the agency said.

In February, Kestra announced that Warburg Pincus agreed to acquire a majority interest in Kestra from funds managed by Stone Point Capital, LLC, Moody's explained.

Stone Point will retain a minority interest in Kestra, the gency said.

As part of the transaction, Kestra is proposing the issuance of a $410 million senior secured first-lien term loan and $75 million revolving credit facility.

Moody's said the transaction will result in an adjusted leverage of about 6x.

This elevated level of leverage will weaken the company's credit profile for the next 12- to 18-months, the agency said.

The company has achieved strong revenue growth driven by mergers and acquisitions and successful advisor recruiting, S&P said.

However, its focus on the fast growing financial advisor base will require Kestra to devote increasing resources towards oversight and regulatory compliance processes, the agency noted.

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