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KBRA affirms AA- issuer and senior unsecured debt ratings for TPG Operating Group II, L.P. with a subordinated debt rating of A+. The Outlook is Stable. The ratings reflect TPG's advantageous market position, strong performance track record, extensive fundraising capabilities, and growth prospects. With substantial dry powder, client overlap, and strategic acquisitions, TPG is well-positioned for organic growth and EBITDA growth in 2024. TPG benefits from high base management fees, stable AUM, and robust ability to generate performance fees. The issuance of senior and subordinated notes, along with a flexible cost base, support the rating assignment. TPG is viewed as a fundamentally stronger asset class with favorable industry outlook.
KBRA conferma il rating AA- all'emittente e al debito senior non garantito per TPG Operating Group II, L.P., con un rating per il debito subordinato di A+. La prospettiva è stabile. I rating riflettono la posizione di mercato vantaggiosa di TPG, un solido track record di performance, notevoli capacità di raccolta fondi e prospettive di crescita. Grazie a una notevole liquidità immediatamente disponibile, sovrapposizione di clienti e acquisizioni strategiche, TPG è ben posizionata per una crescita organica e per l'incremento dell'EBITDA nel 2024. TPG beneficia di elevate commissioni di gestione fisse, una gestione degli asset stabile e una robusta capacità di generare commissioni di performance. L'emissione di titoli senior e subordinati, insieme a una base di costi flessibile, supportano l'assegnazione del rating. TPG è considerata una classe di asset fondamentalmente più forte con una prospettiva di settore favorevole.
KBRA confirma las calificaciones de emisor y deuda senior no asegurada en AA- para TPG Operating Group II, L.P., con una calificación de deuda subordinada de A+. La perspectiva es estable. Las calificaciones reflejan la posición ventajosa en el mercado de TPG, un historial de desempeño sólido, capacidades de recaudación de fondos extensas y perspectivas de crecimiento. Con una importante cantidad de recursos líquidos, solapamiento de clientes y adquisiciones estratégicas, TPG está bien posicionada para el crecimiento orgánico y el aumento del EBITDA en 2024. TPG se beneficia de altas tarifas de gestión base, un AUM estable y una robusta capacidad para generar tarifas por rendimiento. La emisión de notas senior y subordinadas, junto con una base de costos flexible, respaldan la asignación de calificación. TPG es vista como una clase de activo fundamentalmente más fuerte con una perspectiva de industria favorable.
KBRA는 TPG Operating Group II, L.P.의 발행자 및 상위 무담보 채무 등급을 AA-로, 하위 채무 등급을 A+로 유지합니다. 전망은 안정적입니다. 등급은 TPG의 유리한 시장 위치, 강력한 성과 이력, 광범위한 자금 조달 능력 및 성장 전망을 반영합니다. 풍부한 유휴 자금, 고객 중복 및 전략적 인수로 TPG는 2024년 유기적 성장과 EBITDA 성장에 유리한 위치에 있습니다. TPG는 높은 기본 관리 수수료, 안정적인 AUM 및 성과 수수료를 생성할 강력한 능력에서 혜택을 받습니다. 상위 및 하위 노트의 발행과 유연한 비용 기반은 등급 부여를 지원합니다. TPG는 업계 전망이 유리한 근본적으로 더 강한 자산 클래스로 간주됩니다.
KBRA confirme la note AA- pour l'émetteur et la dette senior non garantie de TPG Operating Group II, L.P., avec une note de dette subordonnée de A+. Les perspectives sont stables. Les notations reflètent la position avantageuse sur le marché de TPG, un bilan de performances solide, de grandes capacités de collecte de fonds et des perspectives de croissance. Avec une importante poudre sèche, un chevauchement des clients et des acquisitions stratégiques, TPG est bien positionnée pour une croissance organique et une croissance de l'EBITDA en 2024. TPG bénéficie de frais de gestion de base élevés, d'un AUM stable et d'une capacité robuste à générer des frais de performance. L'émission de notes senior et subordonnées, ainsi qu'une base de coûts flexible, soutiennent l'attribution de la note. TPG est considérée comme une classe d'actifs fondamentalement plus forte avec une perspective de secteur favorable.
KBRA bestätigt das AA- Rating für Emittenten und nicht besicherte Senior-Schulden für TPG Operating Group II, L.P., mit einem Rating für nachrangige Schulden von A+. Die Aussicht ist stabil. Die Ratings spiegeln TPGs vorteilhafte Marktposition, starke Performancehistorie, umfangreiche Fundraising-Fähigkeiten und Wachstumsaussichten wider. Mit erheblichem ungenutztem Kapital, Kundenüberschneidungen und strategischen Akquisitionen ist TPG gut positioniert für organisches Wachstum und EBITDA-Wachstum im Jahr 2024. TPG profitiert von hohen Basismanagementgebühren, stabilem AUM und einer robusten Fähigkeit, Performancegebühren zu generieren. Die Ausgabe von Senior- und nachrangigen Anleihen zusammen mit einer flexiblen Kostenbasis unterstützen die Ratingzuweisung. TPG wird als grundsätzlich stärkere Vermögensklasse mit günstiger Branchenaussicht angesehen.
Positive
TPG has advantageous market position and strong performance track record.
Substantial dry powder of $51 billion at YE23 supports organic growth prospects.
High base management fees and stable AUM contribute to revenue and EBITDA growth.
TPG's ability to generate performance fees is considered robust.
Issuance of senior and subordinated notes strengthens the capital structure.
Flexible cost base enhances cash flow resiliency.
TPG is viewed as a fundamentally stronger asset class with favorable industry outlook.
Negative
None.
NEW YORK--(BUSINESS WIRE)--
KBRA publishes and affirms the issuer and senior unsecured debt ratings of AA- for TPG Operating Group II, L.P. (TOG II), a subsidiary of TPG Inc. (NASDAQ: TPG; "the firm"). In addition, KBRA assigns a subordinated debt rating of A+. The Outlook for the ratings is Stable. On April 11, 2022, KBRA assigned issuer and senior unsecured debt ratings of AA- with a Stable Outlook to TPG Operating Group II, L.P. on an unpublished basis. On April 11, 2023, KBRA affirmed issuer and senior unsecured debt ratings of AA- with a Stable Outlook for TPG Operating Group II, L.P. on an unpublished basis.
The ratings are supported by TPG’s advantageous market position, which continues to benefit from its growing scale and diversification, further enhanced by the strategic acquisition of Angelo Gordon (AG), which added a scaled credit business and complementary RE strategies to TPG’s historically private equity focused platform. With substantial dry powder of $51 billion at YE23, limited client overlap with AG, and ample opportunities to leverage resources across the combined platform, TPG is well positioned to capitalize on organic growth prospects and secular tailwinds, notably in the private credit space. TPG’s strong performance track record and extensive fundraising capabilities, including during more challenging market dynamics, have produced considerable growth in AUM, revenue, and EBITDA since inception. Moreover, KBRA expects considerable EBITDA growth in 2024 underpinned by a significant cache of FAUM subject to step-up and AUM that has yet to collect fees ($24.4 billion at YE23) combined with a full year benefit of AG’s operations, continued fundraising tailwinds, and a more constructive realization environment to date. Revenues and EBITDA benefit from a high level of base management fees, particularly when compared with traditional asset managers, as well as a strong track record of performance fee generation from multiple funds and investments. Management fees (based on committed/invested capital) are viewed as stable/predictable. Meanwhile, AUM and fee levels are not susceptible to redemption risk as funds are predominantly closed-end with long life spans. Additionally, TPG’s future ability to generate performance fees is considered robust given the large stock of unrealized performance fees and management’s continued ability to create value and generate returns above hurdle rates. Following TPG’s 2021 IPO, TPG Operating Group is entitled to 20% of realized carry, 65%-70% goes towards partners’ performance allocations, and 10%-15% to RemainCo Partner Holdings, L.P., which owns certain excluded assets. TPG also benefits from a flexible cost base, which augments cash flow resiliency. In February 2024, TOG II issued $600 million senior notes and $400 million subordinated notes. Pro forma gross recourse debt/EBITDA was 1.4x at YE23, which is within rating category assumptions and expected to naturally delever over time. Interest coverage is anticipated to remain sufficient over the medium term. In addition, KBRA notes the modest level of senior debt at TOG II which, combined with the expectation that the capital structure will remain unchanged over the foreseeable future, supports the subordinated debt rating assignment at one level below the senior unsecured debt rating of TOG II. For TOG II's subordinated notes, KBRA also recognizes the capital-like elements of the note issuance, including the ability to defer coupon five years before default and the long life span of the instrument (40 year maturity), which speaks to durability.
KBRA considers TPG and other private equity and private credit focused asset managers as a fundamentally stronger asset class versus other types of financial institutions given comparatively stable management fees augmented by the opportunity to generate considerable carried interest and investment income. In addition, a flexible cost base adds to the resiliency of these firms. The industry outlook is favorable for continued AUM growth, particularly among alternative asset managers such as TPG which have strong performance track records and can offer compelling strategies beyond traditional equity and fixed income funds with more limited mark-to-market volatility. For asset managers focused on private equity and private credit strategies, AUM and management fee levels are not susceptible to redemption risk or net asset value risk. Funds are closed-end with long life spans and management fees are based on committed capital or invested capital (at cost). The resiliency of larger managers is enhanced by multiple funds, strategies, and fund vintages combined with portfolio company and geographic diversification.
To access rating and relevant documents, click here.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.
What are the issuer and senior unsecured debt ratings for TPG Operating Group II, L.P.?
KBRA affirms AA- issuer and senior unsecured debt ratings for TPG Operating Group II, L.P. with a Stable Outlook.
What is the subordinated debt rating for TPG Operating Group II, L.P.?
KBRA assigns a subordinated debt rating of A+ for TPG Operating Group II, L.P.
What is the outlook for the ratings of TPG Operating Group II, L.P.?
The Outlook for the ratings is Stable.
What supports the ratings for TPG Operating Group II, L.P.?
The ratings are supported by TPG's advantageous market position, strong performance track record, extensive fundraising capabilities, and growth prospects.
How much dry powder did TPG have at YE23?
TPG had a substantial dry powder of $51 billion at YE23, supporting organic growth prospects.
What benefits TPG's revenues and EBITDA?
High base management fees and stable AUM benefit TPG's revenues and EBITDA growth.
What supports the rating assignment for TPG?
The issuance of senior and subordinated notes strengthens the capital structure, along with a flexible cost base.
How is TPG viewed in terms of industry outlook?
TPG is viewed as a fundamentally stronger asset class with a favorable industry outlook.
