Moody's lowers Russell Investments

Moody's Investors Service said it downgraded Russell Investments Cayman Midco, Ltd.'s corporate family rating to B1 from Ba3 and its probability of default rating to B1-PD from Ba3-PD. Moody's also lowered the senior secured first-lien term loan and senior secured revolving credit facility issued by co-borrowers, Russell Investments US Institutional Holdco, Inc. and Russell Investments US Retail Holdco, Inc., to B1 from Ba3.

The downgrade reflects higher leverage amid operating earnings below expectations in recent quarters and the challenges that Russell faces to improve its revenue and earnings trajectory. Russell's EBITDA plummeted 34% year-over-year on a last 12-month basis as of June 30, reflecting the lagged impact of weak financial market performance in 2022 on assets under management and investment management and customized portfolio solutions revenue and continued net outflows, the agency said.

“These factors have driven the company's leverage up to 7.5x as of June 30, 2023 from 5.9x at year-end 2022. The company is taking a number of steps to improve its earnings trajectory in H2 2023 and 2024, including additional cost savings and revenue enhancements, but Moody's still expects Russell's leverage to end 2023 above 7x, Moody’s said in a press release.

The outlook remains negative.

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