OREANDA-NEWS. Fitch Ratings has affirmed Cantor Fitzgerald, L.P.'s (Cantor) long- and short-term Issuer Default Ratings (IDRs) at 'BBB-/F3' and its senior unsecured debt at 'BBB-'. The Rating Outlook is Stable.

Fitch has simultaneously affirmed the rating of BGC Partners, Inc. (BGC) at 'BBB-' and upgraded the rating of GFI Group, Inc. (GFI) to 'BBB-' from 'BB+'. BGC and GFI are consolidated subsidiaries of Cantor which act as inter-dealer brokers (IDBs) and whose ratings are currently equalized with those assigned to Cantor. For more information on these rating actions please see the rating action commentary titled 'Fitch Affirms BGC at 'BBB-', Upgrades GFI to 'BBB-', Outlook Stable' dated Feb. 29, 2016.

KEY RATING DRIVERS - IDRS AND SENIOR DEBT

The affirmations and Stable Outlook reflect Cantor's established position in the middle market brokerage space, increasing business diversification, moderate risk profile, controlled leverage, and adequate liquidity levels. Ratings are constrained by the cyclicality of Cantor's capital markets and real estate activities, structural challenges in the broker-dealer and IDB businesses, key main risk associated with Cantor's CEO and its exposure to non-core ventures which could potentially introduce financial/reputational risk.

Cantor's operating performance in its core institutional brokerage business, excluding BGC, GFI and Cantor Commercial Real Estate (CCRE), was up slightly in first nine months of 2015 (9M15) due to a small pickup in equity capital markets (ECM) business but overall market conditions remained challenging, especially in debt capital markets (DCM). Cantor's cost base also increased substantially during 9M15 primarily as a result of the expenses associated with the GFI acquisition, although Fitch views this expense as non-recurring. On a consolidated basis, Cantor was profitable in 2014 and 9M15, helped by organic growth and various acquisitions most notably including GFI. Nevertheless, pre-tax income and margins in 9M15 suffered over 9M14 due to higher expenses.

Fitch expects 2016 operating performance to continue to be challenged by market conditions affecting the institutional brokerage and commercial real estate businesses. Sustained decline in the core revenues, without offsetting cost declines, could pressure the ratings.

Cantor's controlled use of leverage has been the supporting strength of its ratings. Fitch adjusts leverage for reverse repurchase agreements as Cantor seeks to operate a matched repurchase book to provide financing for its customers as well as its assets/inventory, which is primarily (99%) backed by U.S. government Treasuries, agencies and agency MBS. Adjusted leverage (defined as tangible assets minus reverse repurchase agreements/Fitch Core Capital), has been at the lower end of the historical range of 8.0x to 12.0x, aside from a temporary increase in the third quarter of 2015 (3Q15) related to goodwill/intangible assets accumulated through the GFI acquisition. However, in December 2015, GFI's Trayport business was sold to Intercontinental Exchange (ICE) for $650 million, which reduced goodwill and improved leverage accordingly.

Liquidity at the parent level was improved at 3Q15 consisting primarily of unencumbered securities, cash, money market mutual funds, and money market demand accounts. The company also established a $150 million unsecured credit facility in August, 2015. The company has manageable debt maturities over the next two years, following its $375 million senior unsecured debt issuance in June 2015. The senior unsecured debt rating is equalized with Cantor's 'BBB-' IDR, reflecting sufficient unsecured funding and an expectation for average recoveries.

RATING SENSITIVITIES - IDRS AND SENIOR DEBT

Cantor's ratings remain sensitive to a material deterioration in institutional brokerage and/or real estate operating performance, a material increase in leverage levels, adverse changes in the reverse repurchase book composition, the departure of Cantor's CEO prior to further expansion of the management team and/or material loss or reputational damage from Cantor's noncore ventures. Ratings also remain sensitive to changes in BGC's ratings.

Positive rating momentum, although limited in the near term, could be driven by continued business diversity which contributes to materially increased earnings stability, sustained improvement in core institutional brokerage business margins, and sale or closure of non-core and non-viable ventures, while maintaining a moderate risk appetite, conservative leverage, and sufficient capital.

The senior unsecured debt rating is equalized with Cantor's IDR and therefore would be expected to move in tandem with any changes to Cantor's IDR.

Fitch affirms Cantor Fitzgerald L.P.'s ratings as follows:

--Long-term IDR at 'BBB-'; Outlook Stable.
--Short-term IDR at 'F3';
--Senior unsecured debt at 'BBB-'.