Fitch rates Towergate's proposed bond issue

Rating agency Fitch has assigned ratings to broking group Towergate's proposed bond issue.

Fitch has givenTowergate's proposed £280m senior secured notes, due 2018, and £160m term loan an expected rating of BB(exp) and an expected recovery rating of RR1(exp). It has assigned Towergate's planned £290m senior notes, due 2019, an expected rating of'B-(exp) and an expected recovery rating of RR5(exp)'.

The final ratings on the notes and term loan are contingent upon the receipt of final documentation and structure conforming to information already received, the agency said.

Fitch has also affirmed Towergate Finance's long-term issuer default rating at B. The agency said the affirmation reflects its view that "Towergate is likely to continue benefitting from the first mover advantage of its business strategy and that management's appetite for acquisition is disciplined."

It added that the £200m of funding from Advent will not change the strategy, further supporting the affirmation.

Towergate's operating results to September 2010 are in line with Fitch's expectations. Despite the fragile economic environment, the agency considers that the group's overall performance exhibits resilience, even in the most vulnerable mortgage broking division, Paymentshield.

Fitch added that Towergate maintains sufficient flexibility in the management of its cost structure to help support profitability and maintain a high EBITDA margin (around 38% for LTM September 2010).