Fitch cuts Fortress Investment to BB

Fitch Ratings said it downgraded the long-term issuer default rating of Fortress Investment Group LLC and its related entities to BB from BB+ and affirmed its short-term issuer default ratings at B.

The outlook is stable.

Fitch said the downgrade was driven by higher than previously assumed leverage both at 1Q18 and on a projected basis over the rating outlook horizon.

On May 16, 2017, Fortress' ratings were downgraded to BB+ from BBB- following its acquisition by SoftBank Group Corp., and the resultant increase in leverage associated with the issuance of $1.4 billion of five-year secured debt to fund the transaction.

At that time, Fitch said it believed leverage would decline to below 6 times over the rating outlook horizon, driven by FEBITDA margin expansion and debt principal reductions from a mandatory cash flow sweep.

However, based on the agency’s updated assumptions with respect to Fortress' FEBITDA generation and margin rate, leverage was estimated to be 8.1 times on a TTM basis through March 31, 2018 and may be challenged to get below 6 times by the end of 2018.

Fitch said it currently assumes a 35% FEBITDA margin for Fortress, consistent with the company's historical margins excluding the traditional investment management business, Logan Circle, which was sold in September 2017.

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