Moody’s Investors Service announced that it has downgraded the corporate family rating of Cooper Gay Swett & Crawford Ltd. (CGSC) to B3 from B2 “based on challenges in certain international operations, leading to a decline in projected revenues and EBITDA.”
The rating agency also downgraded CGSC’s probability of default and credit facility ratings by one notch. Moody’s outlook for the ratings remains stable.
Bruce Ballentine, Moody’s lead analyst for CGSC, explained: “The rating downgrade reflects challenges CGSC has faced in its international division, particularly in Latin American and the UK. CGSC is taking steps to reduce costs in the affected areas and expand in other areas, but we regard the projected credit metrics as more consistent with a B3 corporate family rating.”
Toby Esser, CGSC Group CEO, offered an immediate response. “Our business in North America is showing very strong momentum and growth not seen for a number of years,” he said. “It is disappointing to see that some volatility we have experienced in our international units in 2013 has resulted in a downgrade, as we are confident these are short term in nature.
“Nevertheless, we enter the latter part of the year and into 2014 in great shape. We have just completed the NMB transaction which complements and strengthens our UK business enormously. We also have a number of further potential value-added investments underway.
“Despite the downgrade, our financing costs and investment firepower remains unaffected and we retain strong and supportive equity partners. CGSC remains very hungry for further growth opportunities.”
Moody’s announcement also indicated that “CGSC’s ratings reflect its good market presence as a global wholesale and reinsurance broker, its diversification across geographic regions and business lines, and its healthy cash position.”
However, the report also noted that these strengths are “tempered by the group’s significant financial leverage and its below-average EBITDA margins. CGSC also faces execution risk in any cross-border mergers and acquisitions along with potential liabilities from errors and omissions, a risk inherent in professional services.”
Sources: Moody’s Investors Service and Cooper Gay Swett & Crawford
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