On Friday, MSCI (MSCI), a prominent provider of financial data, analytics, and indexes, was given a "stable" credit score and an "outperform" rating for its 3.0% notes due in 2033 by Gimme Credit. This initiation of coverage comes on the back of MSCI's significant role in international equity indexes and benchmarking, with approximately $15 trillion in assets under management being benchmarked to its indexes.
MSCI's largest division, the Index unit, accounts for 57% of its total sales and is recognized as a leader in its field. The company's Analytics segment, which makes up 25% of sales, delivers a suite of tools and services for risk management, portfolio management, and performance attribution. Additionally, the ESG and Climate segment, contributing 11% to sales, offers data, ratings, and research to assist clients in incorporating sustainability factors into their investment strategies.
Despite a recent downturn in the equity market—where MSCI's shares dropped by 14% following a report of increased customer churn and slowing growth in its ESG segment—analysts at Gimme Credit highlighted the company's strong credit fundamentals. MSCI's high percentage of recurring revenues, which stands at 95%, and its best-in-class EBITDA margins at 60%, along with robust free cash flow representing 16% of total debt, and leverage below 3.0x, were all factors contributing to the "stable" credit score.
The bonds currently trade at T+142, marginally inside the crossover index, and about 30 basis points wider than the average triple 'B' rating. Gimme Credit suggests that an upgrade to investment grade by Moody's, where MSCI is currently on a positive outlook, could further tighten the spread. The firm's initiation with an "outperform" rating on the 3.0% notes due 2033 at T+144 reflects their positive view on MSCI's creditworthiness.