S&P Global Ratings downgrades ASX
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The news: S&P Global Ratings has downgraded its credit rating on ASX Group and its subsidiaries, ASX Clear (Futures) and ASX Clear, due to what the ratings agency says are significant deficiencies in governance and risk management.
The context: The ratings agency lowered its credit rating top A+/A-1 from AA-/A-1+.
S&P Global Ratings said the corporate regulator’s final inquiry report highlighted significant investment needed to address shortcomings in the group’s governance and risk management after persistent operational failures.
“As a result, we have removed the positive comparable adjustment on our ratings on ASX,” it said.
However, it noted the ASX would continue to have strong revenue growth to support its required investment given most of its businesses benefitted from market movements.
The ratings agency expects the ASX to retain its dominant market position over the next two years.
What they said: “We could downgrade ASX if our view of the group’s risk controls and practices — especially in the critical discipline of clearinghouse risk management and associated financial safeguards — deteriorates in the next two years,” S&P Global Ratings said.
“We could also lower the ratings if we perceive a material diminution of the group’s franchise with key stakeholders, leading to the emergence of significant competition in its core markets, materially weaker profitability, or both.
“Finally, we would lower the long-term rating if ASX sharply increases its leverage with its adjusted debt-to-EBITDA ratio staying above 1.75x.”
The source: S&P Global Ratings
