Moody's upgrades debt rating, but it still remains in 'high credit risk' camp

Towergate's debt rating has been upgraded in the wake of its renegotiated banking covenants and consolidation of Paymentshield into the group.

Moody's raised Towergate's Corporate Family Rating (CFR) - ability to honour its debt obligations - from B3 to B2.

According to Moody's, B2 is 'subject to high credit risk', coming under the speculative section of the rating system.

David Masters, Moody's lead analyst for Towergate, noted, "The upgrade principally reflects the successful consolidation of Paymentshield into Towergate, subsequent to the renegotiation of the Group's banking covenants.

"Further credit strengths relative to the current B2 rating level include Towergate's strong market position within the UK insurance intermediary space, together with an excellent position within a number of niche underwriting segments".

"Conversely, Moody's notes that these strengths were tempered by Towergate's financial leverage that whilst currently remaining in excess of Moody's expectation for a single-B rated broker (4-6x coverage on a Moody's basis), is expected to reduce following the Paymentshield acquisition.

"Moody's also noted the challenges of growing the business organically within the current market environment."