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Rating Action:

Moody's downgrades Man Group LT ratings (senior to Baa2); Confirms P-2 ST rating

11 Aug 2010

London, 11 August 2010 -- Moody's Investors Service announced today that it has downgraded the long term credit ratings of Man Group plc ("Man" or the "Company") by one notch (issuer rating to Baa2, from Baa1). Man's P-2 short term rating was confirmed. These rating actions conclude reviews for possible downgrade initiated on 19 May, following Man's announced acquisition of GLG Partners LP ("GLG"). Following these actions, Man's rating outlook is stable. A complete list of ratings affected by these rating actions is available at the end of this press release.

Moody's stated that the downgrade reflects the view that while the GLG acquisition may enhance Man's business position over time by broadening its products and distribution, the potential benefits are outweighed in the near-to-medium term by 1) reduced financial flexibility, 2) a reduction in Man's liquidity cushion, and 3) integration risk associated with the transaction. Moody's also noted that these elevated risks come at a challenging time for Man Group, following weakened results in 2009 and 2010 and a decline in funds under management of just under 50% since early 2008. Moody's believes that the GLG acquisition is substantial for Man Group and puts pressure on its financial and operational profile.

ELEVATED RISK IN NEAR TERM

Commenting further on the key factors driving the rating action, Moody's noted that Man Group's funding for the transaction from internal cash sources, combined with a debt issue earlier this year, will result in a significant reduction in the Company's financial flexibility. Moody's also noted that the Company's gross debt more than doubled from year-end (March) 2009 levels to $1,489m from $643m. The results of the acquisition would also reduce tangible equity by $1.1b as a result of the net effect of $1.7b in goodwill offset by $600m of new equity. Man expects to maintain a regulatory capital surplus of over $300m.

Moody's also cited a weakening of Man's previously very strong liquidity profile as surplus cash is directed toward acquisition funding. Man Group has worked to reduce the potential liquidity needs of its fund products, which have historically been addressed in part via advances from the manager, but the Company does remain exposed to some contingent liquidity risk. Moreover, with excess liquidity reduced at the Company level, its fund products are likely to remain more constrained by the need to maintain liquidity of their own. This reduced flexibility could reduce the overall products' competitiveness in the medium term.

Finally, Moody's noted that integration risks remain meaningful, with a key risk being the retention of key investment professionals at GLG, as well as the potential for management distraction and operational challenges at a challenging time for the business. The Company and GLG have prepared integration plans that aim to address these risks. However, as with any merger of this size, integration challenges represent a key uncertainty. This is partially mitigated by the "lock-in" contractual engagement of the three principals and other senior employees for a period of three years.

The inclusion of GLG would likely weaken the Company's margin levels, particularly given the addition of GLG's retail long-only fund business, which has considerably lower margins than the alternative products.

IMPROVED BUSINESS PROFILE

While the balance of considerations associated with the acquisition led Moody's to lower Man's ratings, the rating agency did highlight some positive factors that may emerge over time. Should the acquisition and subsequent integration be successful, Moody's believes that addition of GLG would strengthen Man's business profile, by diversifying its product base away from its current AHL-centric platform and by diversifying its investor base to include retail long-only investors, ultra high net worth individuals and institutional investors of a different nature. The addition of GLG would also complement Man's distribution platform, although the Company would remain under-represented in North America.

SHORT-TERM RATING CONFIRMED

Moody's confirmed the Company's short-term rating at P-2, noting that Man still has strong ability to repay its short-term debt obligations, consistent with P-2, based on its $2.4b available committed syndicated loan facility.

The last rating action on Man Group plc took place on 19 May 2010, when Moody's placed the ratings on review for possible downgrade.

Man Group plc is an asset management company domiciled in the UK, specialised in the alternative investment management business. The company had total funds under management of USD39.4 billion and reported shareholders' equity of approximately USD4 billion at 31 March 2010.

The following rating actions have been taken by Moody's in relation to this issuer:

- Man Group plc - Issuer Rating -- Downgraded to Baa2 from Baa1;

- Man Group plc - Subordinated Debt -- Downgraded to Baa3 from Baa2;

- Man Group plc - Perpetual Subordinated Capital Securities -- Downgraded to Ba1 from Baa3;

- Man Group plc USD3 billion EMTN programme - Senior Notes -- Downgraded to Baa2 from Baa1;

- Man Group plc USD3 billion EMTN programme - Dated Subordinated Notes -- Downgraded to Baa3 from Baa2;

- Man Group plc USD3 billion EMTN programme - Undated Subordinated Notes- Downgraded to Baa3 from Baa2

- Man Group plc USD3 billion EMTN programme - Junior Subordinated Notes -- Downgraded to Ba1 from Baa3

- Man Group plc USD3 billion EMTN programme - Short-Term Notes -- Rating confirmed at P-2.

The principal methodology used in rating Man Group was "Moody's Global Rating Methodology for Asset Management Firms", dated October 2007, which can be found at www.moodys.com in the Research & Ratings directory, in the Rating Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies subdirectory.

London
Odi Lahav
VP - Senior Credit Officer
Global Managed Investments Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Yaron Ernst
MD - Managed Investments
Global Managed Investments Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom

Moody's downgrades Man Group LT ratings (senior to Baa2); Confirms P-2 ST rating
No Related Data.
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