Moody's rates Virtu loan Ba2, notes B1

Moody's Investors Service said it assigned a Ba2 rating to VFH Parent LLC's $825 million first-lien term loan and B1 rating to its $825 million second-lien notes.

Moody's also said it affirmed Virtu's Ba3 issuer and senior secured bank credit facility ratings.

The outlook is stable.

Virtu is the debt-issuing entity of Virtu Financial, Inc., the agency said.

The proceeds will be used to finance, in part, the acquisition of KCG Holdings, Inc., redeem its existing senior secured bank credit facility, repay certain indebtedness of KCG and for related expenses, Moody's said.

The acquisition is expected to close during the third quarter of 2017 after receipt of all required regulatory approvals and KCG shareholder approval, the agency said.

The agency said the Ba2 rating on Virtu's first-lien term loan is one notch higher than Virtu's Ba3 issuer rating, reflecting the loan's structural superiority in Virtu's capital structure.

The Ba3 rating on the second-lien notes is one notch lower than Virtu's Ba3 issuer rating, reflecting the notes' structural subordination to the first-lien loan, Moody's explained.

The acquisition will diversify the revenues by integrating KCG's order flow business servicing retail brokerages and combines two market makers with similar business models, offering large cost synergies, the agency said.

The acquisition does carry execution risks, including an initial spike in leverage, potential revenue losses and challenges of merging trading platforms, Moody's said.

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