KBRA Affirms Rating for Millennium Consolidated Holdings, LLC
3 May 2024 | New York
KBRA affirms the issuer rating of BBB- for Charlotte, North Carolina-based Millennium Consolidated Holdings, LLC (“MCH”). Additionally, KBRA affirms the issuer rating of BBB for the wholly owned U.S. lead operating subsidiary, Millennium Advisors, LLC (“the firm”), an SEC-registered broker-dealer. The Outlook for all ratings is Stable.
Key Credit Considerations
The ratings are supported by KBRA’s favorable view of MCH’s management team and highly focused and optimized business model. Management has a proven track record in electronic fixed income trading historically, including through various operating environments.
Risk management continues to be hallmark of the franchise. Policies, monitoring, and testing are all key elements; of note, risk officials generally have realized trading experience, which heightens the overall quality of the risk apparatus, in KBRA’s view. Operational risk management remains at the forefront of the firm’s business model given the focus on electronic delivery and execution, though certainly appears to be well managed, with an established track record of nominal related issues.
The lower risk, flow-oriented securities trading operation that contributes to a higher quality balance sheet and comparatively stable revenue performance also supports the ratings. KBRA notes that Millennium’s improved financial performance has generally been robust – notwithstanding earnings weakness in 2021. Notably, operating results were strong in 2022-2023, a period of very high interest rate volatility. The earnings outlook is favorable, given the prospect for further interest rate and economic uncertainty, which should keep trading volumes elevated and margins substantial.
Financial leverage is modest, having improved with the debt reduction in 2023. Short-term corporate debt is not used.
The ratings are constrained primarily by the somewhat narrow operating model, although both geographic and product diversification continues, which could portend positive rating in the intermediate term.
Rating Sensitivities
Over the intermediate term, positive rating momentum would most likely develop from continued revenue diversification, both geographically and by product, which would also lessen correlated trading risk. Conversely, a significant erosion in the firm’s competitive position could have adverse rating implications if counterbalancing measures were not taken. A deterioration in the firm’s capital and leverage profile, violation of any other applicable contractual covenants, or the emergence of unexpected operational or technology issues could put downward pressure on the ratings.
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