Virtus Investment Partners Inc. 'BB' Ratings Affirmed; Outlook Remains Stable

  • Our assessment of Virtus incorporates its small market position, concentrated assets under management, and growth through mergers and acquisitions.
  • We anticipate leverage holding around 2.0x prospectively.
  • We are affirming our ratings on Virtus, including the 'BB' issuer credit rating.
  • Our outlook remains stable, reflecting our view that the company will undergo modest growth without debt-based acquisitions.
NEW YORK (S&P Global Ratings) Jan. 11, 2019--S&P Global Ratings said today it 
affirmed its 'BB' rating on Virtus Investment Partners Inc. The outlook on the 
long-term issuer credit rating remains stable. At the same time, we affirmed 
our 'BB' rating on the company's term loan with a recovery rating of '3', 
indicating meaningful, or 50%, recovery in the case of payment default. 

Our assessment of Virtus reflects the firm's small market position and assets 
under management (AUM) concentration. The company has limited product 
diversification, relies on a relatively small amount of key employees, and 
likely has less developed distribution capabilities versus most larger, more 
well-established managers we rate. Acquisitions have fueled growth over the 
past several years, and the company has had low success with positive net 
inflows. 

The stable outlook reflects our expectation for EBITDA to increase in 2019 as 
the company experiences the benefit of a full-year of SGA's performance, 
incurs less transaction and integration fees, and shows modest growth. It also 
reflects our expectation that the company will maintain leverage close to 2x 
in 2019, although we believe the company's ongoing leverage tolerance may be 
somewhat higher due to its acquisitive strategy.

We could lower the ratings if Virtus increases leverage to over 3x on a 
sustained basis or if we observe material business deterioration (investment 
performance or flows) such that we believe Virtus' competitive position has 
substantially worsened.

We could raise the ratings if Virtus reduces leverage to comfortably below 2x 
and the company adopts a less acquisitive strategy or a more stringent 
financial policy. An upgrade would also be contingent upon the company 
demonstrating at least stable flows and good investment performance.