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S&P Global Ratings has dropped the credit rating of CI Financial Corp. to junk following CI’s request that the agency withdraw its rating, the New York-based rating firm said Monday.

S&P lowered its issuer credit and senior unsecured debt ratings on CI Financial to BB+ from BBB- and revised the rating outlook of CI Financial to stable from negative. Following the downgrade, S&P withdrew its ratings of CI Financial.

The ratings cut reflected S&P’s expectation that CI Financial would operate with debt to EBITDA of four to five times over the next 12 months, the rating agency indicated.

At the end of 2022, CI Financial reported net debt of $4.1 billion.

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During an acquisition spree between late 2019 and 2022, CI Financial made more than 30 deals, either directly or indirectly, for U.S. registered investment advisor (RIA) firms as part of its strategy to grow its business in the U.S. In Canada, CI acquired a majority stake in full-service advisory firm Aligned Capital in 2020.

In April 2022, CI Financial announced that it intended to sell 20% of its U.S. wealth management business through an initial public offering, and later said it would consider increasing that portion, with proceeds directed toward paying down the firm’s debt.

During its most recent quarterly conference call in February, CI Financial CEO Kurt MacAlpine said the firm didn’t have “a target percentage [of its U.S. business] that we’re looking to sell, or a specific number that we’re managing for. We’re looking to maximize the value for our Canadian shareholders while allowing CI to retain meaningful ongoing participation in that business.”

In late April, CI announced it was selling its minority stake in Boston-based RIA Congress Wealth Management, LLC to Audax Private Equity, with proceeds directed toward paying down CI Financial’s debt.

In a note about S&P’s rating decision published on Tuesday, James Shanahan, a senior analyst with Edward Jones in St. Louis, Mo., said the U.S. IPO market activity “remains weak. If an IPO can be accomplished, it could still be months away.”

A sale of 20% of CI’s U.S. wealth management business could generate more than US$500 million in revenue, which “would be a positive development” but still leave debt levels at the firm “relatively high,” Shanahan said.

However, Scott Chan, director of research for financials with Canaccord Genuity Group Inc. in Toronto, characterized the ratings downgrade as only “modestly negative.”

“I don’t think CI is looking to raise any more debt in the market anyway, so this downgrade [just] impacts higher yields,” said Chan, who pointed out that over two-thirds of CI’s debt is long-term U.S. debt at fixed rates.

Chan said he expects CI Financial’s debt to EBITDA to drop below four times this year, factoring in CI’s sale of its stake in Congress Wealth Management.

If CI restricted itself to modest share buybacks and did not pull the trigger on any large acquisitions this year, “they should be on the right path outside of [any negative] market performance.”

CI maintains investment-grade ratings from Moody’s and DBRS Morningstar.

At the end of March, CI Financial reported total assets of $391.1 billion, with its US. wealth management business representing $187.5 billion of total assets.

CI Financial reports first quarter earnings on May 11.