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S&P: Osaic’s Lincoln Acquisition Won’t Damage Debt Ratio

S&P estimates Osaic will pay $1.04 billion, including transaction costs and retention loans to Lincoln advisors.

Osaic’s plan to acquire $108 billion Lincoln Wealth won’t materially change the firm’s leverage or debt servicing capacity, according to a bulletin from S&P Global Ratings.

Lincoln National Corp. signed an agreement in December to sell its wealth management unit, with some 1,450 financial advisors, to Osaic, for $700 million. S&P estimates it will cost Osaic $1.04 billion, factoring in transaction costs and retention loans to Lincoln advisors.

The firm will fund half the acquisition using cash on its balance sheet and a new equity injection. As a result, S&P expects Osaic’s adjusted debt-to-EBITDA ratio to remain at 5.0x to 5.5x, with adjusted EBITDA-to-interest expense above 2.0x. The cash equity signals Osaic’s private equity owner Reverence Capital Partners’ commitment to its investment in the firm. (Bloomberg reported in December that Reverence seeks to sell up to 20% of Osaic.)

“We view the acquisition of Lincoln’s wealth management arm—if successfully executed—and Osaic’s ongoing ‘Journey to One’ integration project as potentially positive to its business profile and operating performance,” S&P Global Ratings said. “However, we do not expect them to materially improve Osaic’s business risk or change its business position compared to those of peers (notably, Kestra, LPL and Aretec).”

A spokesman for Osaic did not respond to a request for comment prior to publication.

In December, Moody’s Investors Service placed Osaic’s ratings on review for downgrade, including its B2 corporate family rating, B1 senior secured first lien bank credit facility ratings, B1 senior secured first lien notes ratings and Caa1 senior unsecured rating. The agency said it was concerned about the acquisition’s possible negative effect on Osaic’s financial profile and new debt issuance. 

The deal with Lincoln is expected to close in the first half of this year. Osaic has said Lincoln Wealth’s businesses will join as stand-alone entities, with the leadership team, led by David Berkowitz, and employees remaining intact. However, the businesses will be integrated into Osaic over time, as the firm has been doing with its existing broker/dealers. Advisors will not have to do any repapering, nor will there be a change to account numbers.

In September, Advisor Group, one of the largest networks of independent broker/dealers with over 10,500 affiliated advisors, announced it would merge its multibrand network into a single entity with a new name, Osaic. It has been slowly transitioning its b/ds to the Osaic brand, with all of them expected by the second quarter of 2025.

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