S&P gives BB- to Knight loan, B to notes

Standard & Poor's said it assigned its preliminary BB- issuer credit rating to Knight Holdco Inc. At the same time, S&P assigned a preliminary BB- issue-level rating to the company's proposed $555 million senior secured credit facility, which will consist of a $535 million first-lien term loan and a $20 million revolver; and a preliminary B issue-level rating to the proposed $305 million senior secured second-lien notes.

The outlook is stable.

S&P said its preliminary ratings on Knight Holdco Inc. (KCG), which subsequently changed its name to KCG Holdings Inc., reflect the highly competitive and transactional nature of the firm's market-making and electronic brokerage businesses, the influence of market volatility and volumes on its revenues, the firm's exposure to operational and model risk, and its evolving risk-management framework.

S&P said it also believes the substantial integration risk, which will consume a substantial amount of senior management's time, the considerable debt leverage, and weak operating performance of each business in 2012 and the first quarter of 2013 are negatives for the ratings.

"The combined company's relatively diversified business profile and adequate capitalization only partially offset these weaknesses," said S&P credit analyst Sebnem Caglayan in a news release.

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