One possible obstacle to completion of any transaction would be Genstar’s ability to obtain financing. In last year’s fourth quarter, the junk bond market, where highly leveraged transactions are g financed, dried up over concerns about an economic slowdown, higher interest rates and stock market volatility. In November, not a single junk bond deal came to market.
However, Genstar invested a hefty $700 million in equity capital in Cetera, providing the IBD network with a more robust capital infusion than many other leveraged transactions. Were it to make a similar level of equity investment in Advisor Group, it could go a long way to reassuring junk bond investors.
Several executives at Advisor Group held senior positions at Cetera when it was owned by Lightyear from 2010 to 2014. Valerie Brown, non-executive chairman of Advisor Group, served as CEO of Cetera when it was owned by Lightyear. One source said it was likely she would be appointed to an expanded board of directors if the deal were consummated.
A spokesman for Genstar declined to comment.