Fitch Maintains Positive Watch on Willis Group's Ratings on Announcement of Shareholder Approval

CHICAGO--()--Fitch Ratings maintains the Rating Watch Positive on the ratings of Willis Group Holdings PLC (Willis), including the 'BBB-' Issuer Default Ratings (IDRs) of Willis, Willis North America Inc. (WNA), and Trinity Acquisition plc. A full list of ratings follows at the end of this release.

KEY RATING DRIVERS

Fitch placed the ratings on Rating Watch Positive on June 30, 2015, following the announcement that Willis and professional services and analytics firm Towers Watson & Co. (TW) have agreed to an all-stock merger.

Today's action follows the announcement that shareholders of Willis and TW have approved the proposals necessary to complete the merger. The companies expect that the transaction will close very early in 2016. The merged company will be known as Willis Towers Watson (WTW).

The merger creates a larger, more diverse entity with operating franchises in several non-capital-intensive fee and commission-based businesses including: insurance brokerage, and consulting services in employee benefits, human resources and risk and capital management. The transaction also creates opportunities to leverage existing TW relationships to increase penetration in the larger U.S. P/C corporate market and to expand TW's international profile.

Relatively low debt utilization at TW fosters considerably lower pro forma financial leverage for the combined WTW entity relative to Willis debt/EBITDA of 3.3x at Sept. 30, 2015, although ultimate long-term capital management plans and tolerance for debt leverage are uncertain. Maintenance of debt/EBITDA ratios of 2.0x or lower would be viewed positively in the rating assessment.

Lower leverage, coupled with the inherent profitability of Willis and TW's operations, boosts pro forma interest coverage to low double-digits, a meaningful increase compared with Willis reported EBITDA/interest expense of 5.6x for the trailing 12 months ending Sept. 30, 2015.

Key challenges and sources of uncertainty for WTW upon closing of the transaction include: integration of corporate and systems function, realization of anticipated expense savings, and retaining key employee and clients going forward.

Willis' ratings continue to reflect the company's strong liquidity profile with good cash flow generation and increasing financial flexibility, favorable competitive position as one of the top three global insurance brokers, positive organic growth and an operating EBIT margin of 15.8% at Sept. 30, 2015, which remains in line with the company's closest peers.

RATING SENSITIVITIES

Key rating triggers that could result in an upgrade include successful execution of the TW merger in early 2016 and the purchase of remaining shares of Gras Savoye in fourth quarter 2015, as well as maintaining profit margins in key Willis and TW segments that are similar to historical norms, sustaining a debt-to-EBITDA ratio of 2.0x or better, and generating EBITDA-to-interest ratios averaging in the high single-digits.

Key rating triggers that could result in a return to a Stable Outlook include the unsuccessful close of the TW transaction or a material near-term change in financial profile or operating performance of the combined company, a failure to maintain average EBITDA-to-interest ratios of 5x or higher, an increase in financial leverage evidenced by debt/EBITDA above 3.0x, or a material goodwill impairment that cast doubt on the new entities' ability to generate future earnings and cash flows.

FULL LIST OF RATING ACTIONS

Fitch maintains the following ratings on Rating Watch Positive:

Willis Group Holdings PLC
--IDR 'BBB-';
--4.125% senior unsecured notes due 2016 'BBB-';
--5.75% senior unsecured notes due 2021 'BBB-'.

Willis North America Inc.
--IDR 'BBB-';
--6.2% senior unsecured notes due 2017 'BBB-';
--7.00% senior notes due 2019 'BBB-'.

Trinity Acquisition plc
--IDR 'BBB-';
--4.625% senior unsecured notes due Aug. 15, 2023 'BBB-';
--6.125% senior unsecured notes due Aug. 15, 2043 'BBB-'.

Additional information is available on www.fitchratings.com

THE ISSUER DID NOT PARTICIPATE IN THE RATING PROCESS, OR PROVIDE ADDITIONAL INFORMATION, BEYOND THE ISSUER'S AVAILABLE PUBLIC DISCLOSURE.

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=996711

Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Martha M. Butler, CFA
Senior Director
+1-312-368-3191
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Gretchen Roetzer
Director
+1-312-606-2327
or
Committee Chairperson
Douglas Meyer
Managing Director
+1-312-368-2061
or
Media Relations
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Martha M. Butler, CFA
Senior Director
+1-312-368-3191
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Secondary Analyst
Gretchen Roetzer
Director
+1-312-606-2327
or
Committee Chairperson
Douglas Meyer
Managing Director
+1-312-368-2061
or
Media Relations
Hannah James, +1 646-582-4947
hannah.james@fitchratings.com