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Citing its efforts to reduce leverage, Morningstar DBRS revised its rating outlook on TMX Group Ltd. to stable from negative.

The rating agency said it changed the trend on all of its credit ratings for TMX Group to stable based on the progress the company has made in deleveraging since its acquisition of VettaFi Holdings LLC in January 2024. As a result, TMX has reduced its leverage ratio to the high end of its rating category.

“Deleveraging to date has been driven by [cash flow] growth as well as debt repayment throughout 2024,” the rating agency said, and it expects that to continue as outstanding commercial paper is repaid.

Looking ahead, DBRS said it now expects TMX to reach its target leverage range faster than expected.

“Given TMX’s high credit rating level, a further credit ratings upgrade is unlikely, especially considering the acquisitive nature of the group,” the rating agency said in a research note.

As it stands, the exchange company’s credit ratings are backed by its “strong franchise with leading domestic market positions across a diversified set of businesses, including exchanges and clearinghouses,” DBRS noted.

“The group has successfully expanded its data and analytics business, which provides an important source of recurring revenue, resulting in strong earnings generation despite a continued challenging operating environment for some of TMX’s business lines,” the rating agency said.

In 2024, TMX’s earnings rose 16%, as revenues increased 22%, and continued to diversify. About half of its revenues now come from outside Canada, up from 41% in 2023, DBRS noted. As well, TMX has enjoyed strong growth in its data business, along with securities trading and clearing. However, revenues from its capital formation business only rose 2%, “as macroeconomic conditions remain challenging for capital raising.”

Additionally, DBRS said TMX has robust risk management capabilities and strong governance.