Cetera's credit outlook gets boost from Moody's

Cetera's credit outlook gets boost from Moody's
The rating agency cites the positive impact of the firm's deal to acquire the wealth management business of Securian Financial Group.
MAR 14, 2023

Moody’s Investors Service this month gave a boost to the parent company of Cetera Financial Group when it raised the credit outlook of Aretec Group Inc. to positive from stable, pointing to the recent deal to acquire the wealth management business of Securian Financial Group as widely beneficial to the giant brokerage network.

The ratings change was based on Aretec's intention to issue a $750 million loan add-on to its existing senior secured bank credit facility to help fund its planned acquisition of the retail wealth business of Securian Financial Group Inc., which was announced in January.

"The rating upgrade reflects Aretec's improving profitability, increasing scale and the strategic benefits of the acquisition, which together more than offset the initial increase in debt leverage that will be associated with the acquisition," Moody's said in the update issued on March 3. "The business being acquired has more than 1,000 financial professionals and approximately $47 billion in client assets of which $25 billion are assets under management, or AUM."

The terms of the Securian transaction were not disclosed. Cetera has more than 8,000 financial advisors and brokers at its various broker-dealers and works with $320 billion in client assets.

Cetera, along with competitor Advisor Group, relied on debt to fuel acquisitions, leading some to question how it would weather the turbulent markets. But rising interest rates are a tonic for the balance sheets of all broker-dealers, which generate income from interest generated from client cash and borrowing.

Moody's has been steadily improving its rating on the debt of Cetera Financial Group's parent. Two years ago, the rating agency had bumped Aretec's credit outlook up to stable from negative.

"Aretec has a strong track record of successfully integrating similar acquisitions, and with effective realization of synergies," according to Moody's, which noted that Aretec could expect additional cash sweep program revenue and strategic partner contract alignments.

“Securian has a really strong culture, and there’s tremendous value delivered by its ownership structure, which consists of more than 30 managing partner businesses,” Cetera CEO Adam Antoniades said last month in an interview. “This is a group that’s going to be primed for growth.”

A Cetera spokesperson did not return calls Tuesday morning to comment.

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