Moody's Ratings assigns A3 ratings to Eaton's proposed senior unsecured euro notes

Moody's Ratings assigns A3 ratings to Eaton's proposed senior unsecured euro notes

Moody’s Investors Service has affirmed Eaton Vance Corp.’s (EV) long-term issuer rating of A3 and short-term issuer rating of Prime-2, while upgrading its senior unsecured debt rating to A1 (backed) from A3, following the completion of Morgan Stanley’s (MS, A1 stable) acquisition of EV on March 1, 2021 according to Moody’s analysis. The ratings agency noted that EV’s A3 long-term issuer rating aligns with MS’s lead bank’s adjusted baseline credit assessment (BCA), reflecting Moody’s expectation that MS would likely support EV to prevent default, provided MS itself remains solvent. However, EV’s small size and non-banking operations reduce the likelihood of it being designated as a material operating entity in MS’s resolution plan, limiting further rating uplift.

The upgrade of EV’s senior unsecured debt to A1 (backed) stems from MS’s full and unconditional guarantee of EV’s $325 million 3.625% 2023 notes and $300 million 3.500% 2027 notes. This guarantee aligns EV’s senior unsecured rating with MS’s A1 long-term issuer rating. Moody’s also highlighted that MS’s strategic shift toward recurring revenue streams in wealth and investment management, including through the EV acquisition, has enhanced its credit profile relative to its institutional securities segment.

EV’s and Eaton Vance Management’s (EVM) outlooks remain stable, consistent with MS’s stable outlook. Factors that could lead to a rating upgrade include improved performance at MS’s lead bank or its support provider, Mitsubishi UFJ Financial Group, Inc. (MUFG). Conversely, downgrades could arise from weakened profitability, liquidity, or risk management at MS or MUFG.

Moody’s rationale emphasizes the interdependence of EV’s credit profile with MS’s structural support and business strategy, underscoring the importance of MS’s financial resilience in maintaining EV’s ratings.