OREANDA-NEWS. Fitch Ratings has affirmed Invesco Ltd.'s (IVZ) and Invesco Finance PLC's Long-Term Issuer Default Ratings (IDRs) and senior unsecured debt ratings at 'A-', and has maintained the Positive Rating Outlook. A full list of rating actions follows at the end of this release.

These rating actions were undertaken as part of Fitch's global peer review of traditional investment managers. For more information on the peer review, please refer to the press release "Fitch Completes Traditional Investment Manager Global Peer Review" dated June 9, 2016.

KEY RATING DRIVERS

IDRS AND SENIOR UNSECURED DEBT

The affirmations reflect IVZ's strong investment management franchise, scale and diversification, historical asset under management (AUM) growth, levelling out of seed capital investments and generally good investment performance. These strengths are balanced against the sensitivity of the business model to broader financial markets, leverage, interest coverage, and margin levels which although strong, are weaker relative to more highly rated peers. IVZ's business model is also sensitive to lagging short-term investment performance and moderate exposure to the money market fund business, which introduces regulatory and contingent liability risks.

The maintenance of the Positive Rating Outlook reflects the potential for upward rating momentum over the next 12 - 24 months provided the company is able to reduce leverage towards or below 1.0x on a debt/EBITDA basis, manage moderate operating environment and performance headwinds, continue to focus on organic growth and maintain elevated cash on its balance sheet following the $500 million debt issuance in October 2015.

Ratings continue to be supported by the firm's scale and diversification. IVZ remains among the largest traditional investment managers globally, with $771.5 billion in AUM at 1Q16, a slight reduction from its peak in 1Q15 of $812 billion, mainly due to declines in stock markets and Pound Sterling (GBP) depreciation against the U. S. Dollar. Net AUM flows also moderated in 2015 and were approximately flat in 1Q16.

AUM and product offerings are fairly diversified, which should allow the firm to better address the underlying shifts in customer preferences. At the same time, the relative equities focus (48% of AUM at 1Q16) makes the firm sensitive to weak equity markets, which could translate into weaker investment performance, outflows, and revenue volatility. However, Fitch recognizes that the level of exposure to equity products is in-line with peers. IVZ's three - and five-year equity fund performance remained largely above those of peers and stated benchmarks, although one-year performance was slightly lagging for the second year in a row. Another year of slower investment performance may translate in weaker thee-year fund metrics, undermining firm's ability to attract further investments.

IVZ generates strong operating margins, which are above the peer averages and in line the company's target of 40%. The adjusted operating margin was 40.3% and the adjusted EBITDA margin was 31.5% for the trailing-12-months (TTM) ending 1Q16, consistent with Fitch's quantitative benchmark for the 'A' category of greater than 30%. Margins came under some pressure in 1Q16, driven by slower markets and reduced flows, and consequently, weaker fee generation. If such a slowdown continues, it may have a negative impact on IVZ's profitability and leverage metrics.

IVZ's leverage is fairly modest on an absolute basis, although higher than more highly rated peers. At TTM 1Q16, leverage as measured by gross debt/EBITDA was 1.3x, which is consistent with Fitch's quantitative benchmark for 'A' category of 1.5x or less. Leverage has increased over the last year, driven by reduced EBITDA as well as increased debt following the $500 million debt issuance in October 2015. Positively, most of the proceeds from the debt issuance have thus far been retained on balance sheet, resulting in a less significant leverage impact on a net debt/EBITDA basis. Interest coverage has been consistently strong and measured 23.6x at TTM 1Q16. From a liquidity perspective, IVZ maintained $1.4 billion in cash and $1.3 billion in undrawn revolver capacity at 1Q16. The company is also subject to European regulatory requirements with respect to minimum liquidity amounts ($610 million at end-1Q16), against which the company seeks to maintain a buffer of greater than $1 billion.

Invesco Finance PLC's IDR and senior unsecured debt rating have also been affirmed at 'A-', reflecting the fact that it is a wholly-owned subsidiary of IVZ whose ratings are equalized with IVZ's because of shared branding and IVZ's 100% ownership.

RATING SENSITIVITIES

IDRs AND SENIOR UNSECURED DEBT

Ratings could be positively influenced by leverage approaching or below 1.0x on a sustained basis, continued retention elevated levels of cash or cash equivalents, maintenance of EBITDA margins consistently over 30%, positive AUM flows and strong investment performance. Continued organic AUM expansion and diversification and stabilization of seed capital investments would also be viewed positively.

Conversely, the Positive Outlook and/or ratings could come under pressure if deleveraging does not occur over time or if debt issuance proceeds are deployed into acquisitions. A severe and prolonged decline in equity markets, deterioration in investment performance, and a consistent decline of EBITDA margins below 30%, and operational losses or significant net redemptions may also have negative rating implications.

Invesco Finance PLC's ratings are equalized with those of IVZ, and therefore, would be affected by the sensitivities outlined above.

Fitch affirms the following:

Invesco Ltd.

--Long-Term IDR at 'A-'; Outlook Positive

--Senior unsecured debt at 'A-'.

Invesco Finance PLC

--Long-Term IDR at 'A-'; Outlook Positive

--Senior unsecured debt at 'A-'.