Resolute Investment Managers Inc. 'B+' Rating Affirmed; Outlook Remains Stable

  • Our assessment of Resolute incorporates its small market position, AUM (assets under management) equity concentration, and growth through mergers and acquisitions.
  • We anticipate leverage averaging 4.0x–4.5x.
  • We are affirming our 'B+' issuer credit rating on Resolute as well as our 'B+' rating on its first-lien term loan and our 'B-' rating on its second-lien term loan.
  • Our outlook remains stable, reflecting our view that the company will undergo modest growth without debt-based acquisitions.
NEW YORK (S&P Global Ratings) Feb. 4, 2019--, S&P Global Ratings today 
affirmed its 'B+' issuer credit rating on Resolute Investment Managers Inc. 
The outlook on the issuer credit rating remains stable. At the same time, we 
affirmed our 'B+' rating on the company's first-lien term loan and our 'B-' 
rating on its second-lien term loan. Our recovery rating on the first-lien 
loan is '3', indicating our expectation for meaningful recovery in the event 
of default, and our recovery rating on the second-lien loan is '0', indicating 
our expectation for negligible recovery. 

Our assessment of Resolute reflects the company's small market position and 
concentration in equity strategies. Although it has been making an effort to 
diversify its assets under management (AUM), mainly through mergers and 
acquisitions, the bulk of its AUM remains concentrated in the American Beacon 
Funds. Moreover, as of Sept. 30, 2018, 35% of AUM remains in American Beacon 
Advisors - Institutional, which has very low fees and contributes 7% to 
revenue. Affiliates are smaller and have less brand recognition than some of 
the larger companies we rate. 

Our view of the asset management industry is negative, and we see several 
sectorwide macroeconomic headwinds. The combination of Resolute's small market 
position and other aforementioned characteristics with a more challenging 
landscape weighs on our assessment of Resolute's business risk profile. 
The stable outlook reflects our expectation that Resolute will operate with 
leverage between 4.0x and 4.5x during the next 12 months while AUM flows 
remain modest and EBITDA margins stay strong.

We could lower the ratings if the company's leverage rises above 5x as a 
result of further debt issuances or lower cash flow generation. We could also 
lower the ratings if Resolute's investment performance significantly 
deteriorates, or if the company experiences meaningful outflows.

An upgrade is unlikely over the next 12 months.
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