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Rating Action:

MOODY'S ASSIGNS A3 RATING FOR MAN GROUP PLCFOR SENIOR LONG TERM DEBT

07 Nov 2002
MOODY'S ASSIGNS A3 RATING FOR MAN GROUP PLCFOR SENIOR LONG TERM DEBT

Approximately GBP 325 Million of Debt Securities Affected.

London, 07 November 2002 -- Moody's Investors Service assigned A3 rating to Man Group Plc (Man) in connection with a proposed GBP325 million senior debt offering. The issue is a guaranteed exchangeable bond due in 2009 exchangeable for ordinary shares of and unconditionally guaranteed by Man. The A3 rating is a reflection of Man's strong cash flow, profitability and moderate debt levels. We do not expect to see the debt burden increase for Man after the bond issue since it will trigger a smaller use of credit facilities.

The Man Group is divided in two divisions; Man Investment Products (MIP), the asset management business and Man Financial (MF) the brokerage business.

MIP is one of the leading players in the alternative asset management industry with a long track record and an experienced management team. They have built an attractive product mix ranging from hedge funds, structured guaranteed products and managed futures funds.

Its diversification in terms of customers and business segments and its ability to generate returns in down and up markets contributes to more stable income levels compared to traditional asset managers. 2002 Year-end results have been confirmed by the interim results announced this morning. Net management fee income is up more than 60% compared to last year translating a strong growth in funds under management with a total of 22.1B$.

One of Man's primary goals has been to increase its European presence in the institutional market. The acquisition of RMF in May, a Swiss based provider of alternative investment products focusing on the institutional market, has provided Man with 9.4B$ of assets and a broadened range of asset classes and clients. It creates at the same time less volatile fee income due to the pricing structure of institutional products. RMF complements Man-Glenwood's strong position in the US and Japanese markets. Since the acquisition, RMF's funds under management have been up 8%.

MIP is made up of a number of fund managers, the major two in addition to RMF being AHL, a managed futures manager and Glenwood, a fund of hedge funds provider with a risk averse, multi-strategy and multi-advisor approach. Much of the projected growth in Man is driven by guaranteed products, the core of their private client business so far. These products are mainly composed of AHL and Glenwood funds with a guarantee at maturity. The latest global product launch of this kind, MAN IP 220 Series 4 Ltd, closed in October raising a record $686 million of client money.

MIP has launched over 200 investment vehicles since 1983. MIP has one of the largest distribution networks in the industry and sees opportunity for future growth within the US retail market where agreements have been made with a number of intermediaries. In 2002, the majority of sales were raised from Europe, Asia and the Middle East. In Europe, Man has started to use RMF's distributors to access the institutional market.

Man Financial (MF), the second division of Man, is amongst the world's leading providers of brokerage services in futures and options for both institutional and private clients. Although the brokerage business typically provides lower margins than fund management, it diversifies Man's profile and provides Man with multiple contacts with hedge fund managers. The recent acquisition of GNI, a leading broker of futures and options, creates the world's largest independent futures broker.

Revenues & Profitability

MIP has grown consistently over the years and has demonstrated a strong history of cash flows and profitability. Earnings are derived from both management and performance fees. Management fees represented more than 60% of the pre-tax profit in 2002. They are at 65% as of September 2002. Pre-tax margins ( Pre-tax earnings/Total revenues) are very strong - 48% over the past 2 years - a reflection of a strong performance year for 2001 and strong asset growth in 2002 (net sales of GBP3.6 billion as of March 2002). The trend is confirmed in the six months to September 2002 with a pre-tax margin at 50%.

Funding sources and credit facilities

As of September 2002, the Group had gross debt of GBP528 million offset by cash balances of GBP350 million (net debt GBP178m). The net debt has increased by GBP138m since March bringing the gearing from 8% to 19%. This is on line with Man's estimates. The RMF acquisition was partially funded using existing cash and a new share issuance. The cash financing of GNI will also trigger a higher gearing. Man debt level will stay moderate even after the issuance of the exchangeable bond. Man has a $1.5 billion syndicated revolving credit facility. The Group has another $500 million of bank facilities available. Cash usage from credit facilities generally does not exceed 40-50%.

London
David A. Vriesenga
Representative Director
Managed Funds
Moody's Investors Service Ltd.
44 20 7772 5454

London
Vania Schleef
AVP-Analyst
Managed Funds
Moody's Investors Service Ltd.
44 20 7772 5454

No Related Data.
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