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Janus Capital sees credit ratings drop

Bloomberg News

Published February 23, 2009 at 10:27 a.m.

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Janus Capital Group's credit ratings were lowered to "junk" by Standard & Poor's because a decline in client assets is hurting cash flow.

The fund manager's stock fell 12 percent Monday.

Janus was downgraded to BB+, the first level below investment grade, from BBB-, S&P said in a statement Monday. The stock dropped to its lowest level since the Denver-based company was publicly listed in 2000.

"Janus has been harder hit than most other rated asset managers during the global plunge in stock prices, because it is primarily an equity shop," S&P said. "Profitability and cash-flow generation had been on a recovery path through the first half of 2008, but have since suffered along with the global equity markets."

Stock funds accounted for 91 percent of Janus's $123.5 billion in assets as of Dec. 31.

Janus' profit fell 60 percent in the fourth quarter compared with a year earlier. A plunge in world stock values contributed to a 40 percent drop last year in the amount of money Janus manages.

The company has cut about 115 jobs, or 9 percent of its staff, and said it will reduce annual expenses by as much as $45 million.

Janus declined 55 cents to $3.99 on Monday. It dropped as much as 18 percent in earlier trading. The stock has fallen 83 percent in the past year, compared with the 46 percent drop by the S&P 500 Index.

"The announcement wasn't unexpected given the market's deterioration of the last several months," said James Aber, a Janus spokesman. "However, we continue to believe that the company's financials are sound and that long-term business fundamentals remain intact."

The lower ratings will push coupon payments 0.25 percentage points higher on Janus' $1.1 billion in debt. Aber said that would cost Janus about $2.8 million in annualized 2009 interest expenses.

The downgrade wouldn't have any other material effect, he said.

The additional costs would trim 1.8 cents from earnings a share annually. Fifteen analysts surveyed by Bloomberg before today's downgrade had estimated Janus would earn 38 cents a share this year.

"They should be able to manage through it," Matt Snowling, an analyst with Friedman, Billings Ramsey Group Inc. in Arlington, Va., said in an interview.

"But if the markets continue to fall apart and their earnings base continues to come down, it could become a bigger problem as their ability to refinance could come into question."

Comments

  • February 24, 2009

    7:38 a.m.

    Suggest removal

    goodheart writes:

    Janus Karma is working against them as well. On my second day of work there I went to a company party where I saw my boss sign a bill for $60,000. One night, one dinner in 2007.

  • February 24, 2009

    8:48 a.m.

    Suggest removal

    Gowla writes:

    Two Face JNS = All for 1 and NONE for ALL!