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25 Oct 2019
New York, October 25, 2019 -- Moody's Investors Service ("Moody's") upgraded
Walker & Dunlop, Inc.'s (Walker & Dunlop) senior
secured bank credit facility and corporate family ratings to Ba1 from
Ba2. Following the ratings upgrade, the outlook is stable.
Moody's also withdrew the outlook on Walker & Dunlop's senior
secured bank credit facility rating for its own business reasons.
Please refer to the Moody's Investors Service's Policy for Withdrawal
of Credit Ratings, available on its website, www.moodys.com.
Upgrades:
..Issuer: Walker & Dunlop, Inc.
.... Corporate Family Rating, Upgraded
to Ba1 from Ba2
.... Gtd Senior Secured Term Loan B,
Upgraded to Ba1 from Ba2
Outlook Actions:
..Issuer: Walker & Dunlop, Inc.
....Outlook, Changed To Stable From
Positive
RATINGS RATIONALE
The upgrade reflects the company's strengthened franchises,
strong profitability and solid capital levels, and relatively conservative
capital distribution policies. Nevertheless, the company
relies highly on confidence-sensitive wholesale funding and has
a somewhat narrow business focus in the agency multifamily finance market.
The stable outlook reflects Moody's expectation that Walker &
Dunlop will maintain strong profitability and solid capital levels in
the next 12-18 months.
Walker & Dunlop is a commercial real estate finance company that specializes
in originating and servicing multifamily residential loans backed by Fannie
Mae and Freddie Mac. Walker & Dunlop has benefitted from the
rapid growth of the agency multifamily market, as total agency multifamily
outstanding balances grew an average of 16% per year between 2015
and 2018. In that time span, Walker & Dunlop's
ratio of net income to average managed assets has improved from 3.45%
in 2015 to 6.11% in 2018, and 5.98%
so far through the first six months of 2019.
While the company remains highly dependent on its GSE mortgage banking
activity, Walker & Dunlop has expanded its commercial mortgage
brokerage and investment sales businesses over the last several years,
which provide some modest protection against a potential decline in overall
agency volumes. Earnings growth has also coincided with more conservative
balance sheet risk management as the company's ratio of tangible
common equity to tangible managed assets has improved to 27.6%
at 30 June 2019 from 11.5% at year-end 2015.
While capital levels are not expected to be sustained at current levels,
these metrics are supported by a fairly modest capital distribution plan
which will include a projected $90 million of dividends and share
repurchases in total for 2019, in comparison to nearly $170
million in net income in the last twelve months.
The firm's business model faces some uncertainty surrounding the
future of Fannie Mae and Freddie Mac in the multifamily finance market.
The Federal Housing Finance Agency (FHFA) recently revised limits on agency
multifamily origination, which are expected to limit the potential
for further growth in agency multifamily volumes in 2020 and beyond.
The firm's growing brokerage and investment sales team, along
with its large servicing book, provide some modest protection for
earnings against lower agency volumes.
Moody's does not have any particular concerns regarding Walker &
Dunlop's governance.
WHAT COULD CHANGE THE RATING UP
The ratings could be upgraded if the company improves its overall funding
profile while maintaining strong profitability and solid capital levels,
such as a ratio of above 4% of net income to average managed assets
and above 20% tangible common equity to tangible managed assets.
WHAT COULD CHANGE THE RATING DOWN
The ratings could be downgraded if profitability is expected to remain
below 4% and if tangible common equity to tangible managed assets
is expected to remain below 20%. The ratings could also
be downgraded if the firm experiences higher asset risk or if its liquidity
and funding profile deteriorate.
The principal methodology used in these ratings was Finance Companies
published in December 2018. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of
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support provider and in relation to each particular credit rating action
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credit rating. For provisional ratings, this announcement
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rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
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For any affected securities or rated entities receiving direct credit
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Regulatory disclosures contained in this press release apply to the credit
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Please see www.moodys.com for any updates on changes to
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the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Bruno Baretta
Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
No Related Data.
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