Standard & Poor’s Ratings Services has placed F&C Asset Management on CreditWatch with negative implications after the announcement that it is to combine with Resolution Asset Management.
S&P says the combination of F&C with RAM should bring benefits in terms of critical mass and cost efficiency and F&C’s strategy remains unchanged.
But it says is unclear whether the financing of the transaction, together with increased integration risk, will impact F&C’s stand-alone creditworthiness.
And the group’s commitment to asset management has been reiterated, the extent of future support for F&C from its parent still needs to be gauged, if Friends Prov were to be downgraded.
S&P’s credit analyst Nick Hill says: “The CreditWatch placement reflects the current uncertainties regarding the financing of the acquisition of RAM and the extent of likely future support for F&C from the combined group.
“S&P expects to resolve the CreditWatch placement when more details of the financing of F&C’s acquisition of RAM emerge, and when the CreditWatch placement on Friends Provident itself is resolved.
“If the extent of group support for F&C is unchanged and F&C’s standalone financial strength unaffected, then we would expect to affirm the ratings on F&C. If we judged that support for F&C were materially weakened, or its stand-alone financials were likely to be impaired by the transaction, the ratings on F&C could be lowered to ‘BBB/A-3’.”