Rating Action: Moody's affirms Mariner Wealth Advisor's Corporate Family Rating; upgrades senior secured debt on new subordinated issueGlobal Credit Research - 17 Dec 2021New York, December 17, 2021 -- Moody's Investors Service ("Moody's") affirmed Mariner Wealth Advisors, LLC's (Mariner) B1 Corporate Family Rating (CFR) following the company's closing of a new $150 million second lien term loan facility. The new second lien facility (unrated) includes a $100 million funded term loan and a $50 million delayed draw term loan, bringing total debt, including the $50 million delayed draw loan, to $550 million. Outlook remains stable.The rating affirmation follows from our expectation that once proceeds from the new facility are used to complete signed acquisitions, Mariner's leverage will remain stable, at approximately 5 times run-rate EBITDA.In addition to affirming the CFR, Moody's has upgraded the company's existing first lien loan facility and revolving credit facility by one notch to Ba3. First lien creditors' position is improved versus the CFR. They will have a claim on a larger company, with the second lien facility acting as a loss-absorbing cushion in the capital structure, behind them.The following ratings actions were taken:Issuer: Mariner Wealth Advisors, LLC..Affirmation:Long-term Corporate Family Rating, affirmed B1Probability of Default Ratings, affirmed B1-PD..Upgrades:Senior Secured Term Loan B, upgraded to Ba3 from B1Senior Secured Delayed Draw Term Loan, upgraded to Ba3 from B1Senior Secured Revolving Credit Facility, upgraded to Ba3 from B1 Outlook Action: ..Outlook remains Stable RATINGS RATIONALE Mariner's B1 CFR reflects its leading position as a consolidator of wealth advisors, its strong AUM resilience and organic growth rate, and its relatively high financial leverage, a product of its acquisition-driven strategy. The company has relied on a balanced use of debt and internally-generated cash to support its acquisition strategy and grow its business since its founding in 2006.The company's strong organic growth, which has exceeded 10 percent given the company's excellent client retention and sales record, could reduce leverage over time, as revenues grow, and the company invests in efficiencies that accelerate gains in operating leverage.However, ongoing acquisitions of advisors, as Mariner actively participates in the consolidation of the wealth advisory industry, should lead to increased demand for external capital resources. We therefore anticipate that Mariner's leverage will remain elevated as it presses ahead with new acquisitions. Multiples for RIA acquisitions have averaged 9x acquired EBITDA, and so internal resources, including cash flow and synergies, as well as equity, will be required to manage leverage lower. We do not expect significant deleveraging for the next 12 to 18 months.While the growing company is able to carry more debt, risks of rapid growth are a concern. Mariner has a solid advisor retention record of 98% and good experience with acquired RIAs that have increased their practices post acquisition. Nonetheless it may be exposed to challenges encountered by serial acquirers such as integrating new businesses, merging personalities, and maintaining incentives.Marty Bicknell, a founder of Mariner and its CEO and president, has been instrumental in fashioning the firm's strategic objectives, and he maintains oversight of the firm's critical M&A program. Thus, Mariner is exposed to the "key person" risk that he might be unable to continue in his duties for any reason.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe factors that could lead to an upgrade of Mariner's rating include: 1) scale (net revenue) exceeding $400 million; 2) steady-state leverage multiple below 3.5x; and 3) pre-tax margins in excess of 15%. Conversely, factors that could lead to a downgrade included: 1) scale declining below $150 million; 2) leverage rising on decline in earnings, to exceed 6.0x; 3) breakdown of advisor and client retention metrics; and 4) sustained decline in wealth management fee rates or loss of pricing power.The last rating action on Mariner Wealth Advisors was 28 July 2021 when Moody's assigned new ratings to Mariner.Mariner Wealth Advisors is a national wealth advisory firm founded in 2006 with $47.5 billion of assets under management and advisement as of 30 September 2021.The principal methodology used in these ratings was Asset Managers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1186105. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Neal M. Epstein, CFA VP - Senior Credit Officer Funds & Asset Management Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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