NEW YORK--(BUSINESS WIRE)--Fitch Ratings today assigned ratings of 'BBB-' to the new senior debt offerings of Trinity Acquisition plc (Trinity), an indirect wholly-owned subsidiary of Willis Group Holdings PLC (Willis). The ratings for the new issues, which will be fully and unconditionally guaranteed by all of Trinity's direct and indirect parent entities, are equivalent to the ratings on Willis' existing debt.
Trinity intends to use the net proceeds of the offering, which includes $250 million of 4.625% senior unsecured notes due Aug. 15, 2023 and $275 million of 6.125% senior unsecured notes due Aug. 15, 2043, to help fund the previously announced tender offers of Willis North America Inc. (WNA).
The tender offers were to repurchase (1) any and all of WNA's 5.625% senior notes due 2015 and (2) up to a maximum amount of WNA's 6.200% senior notes due 2017 and 7.000% senior notes due 2019, with a maximum aggregate purchase price of $525 million (plus payment of tender premium and accrued interest).
Fitch expects Willis' financial leverage to be largely unchanged following completion of the transactions outlined above. Willis' interest coverage could improve modestly due to the lower coupon rate on the new debt.
Fitch also affirmed the 'BBB-' Issuer Default Ratings (IDRs) of Willis Group Holdings PLC (Willis), Willis North America Inc. (WNA), and Trinity. The Rating Outlook is Stable. A full list of ratings actions is shown below.
KEY RATING DRIVERS
The ratings affirmations reflect Fitch's expectation that projected ranges for two key credit ratios will remain at levels that are manageable for an insurance broker, while consolidated pre-tax profit margins remain near recent levels in the low 20% range.
Fitch expects that Willis' reported debt-to-adjusted EBITDA ratio will ultimately stabilize at levels near 2.5x after climbing to approximately 3.2x in 2011 due to non-recurring expenses related to the company's most recent operational review.
Fitch anticipates that Willis' full-year 2013 debt-to-EBITDA will be approximately 2.5x or lower.
Fitch also expects the company's EBITDA-to-interest expense ratio to remain at least in the mid-single digits where it has averaged over the past several years.
The ratings rationale for Willis reflects that the performance of the company's insurance brokerage operations has compared favorably to its closest competitors for several years and that it will continue to do so in the near term. Fitch further expects that organic growth and margin expansion opportunities will be challenged in the near-to-medium term by a difficult operating environment.
Similar to other insurance brokers that Fitch rates, Willis' ratings also reflect that the company faces contingent risks as an occasional target of litigation. While Willis purchases errors and omissions insurance coverage to protect itself against this exposure, such protection is not always adequate to fully indemnify the broker for monetary damages.
RATING SENSITIVITIES
Key rating triggers that could result in a downgrade include an increase in Willis' debt-to-EBITDA ratio to levels in excess of 2.75x or a decrease in EBITDA-to-interest ratio to the low single-digit range for a period of consecutive years.
Additionally, if Willis' required pension contributions were to increase to the point where it strained the company's ability to generate sufficient cash flows to service existing debt, Fitch could downgrade Willis' ratings.
Key rating triggers that could result in an upgrade include a decrease in Willis' debt-to-EBITDA ratio to levels below 2.0x for a period of several years accompanied by EBITDA-to-interest ratios averaging in the high single digits.
Fitch has assigned the following ratings:
Trinity Acquisition plc
--$250 million of 4.625% senior unsecured notes due Aug. 15, 2023 'BBB-';
--$275 million of 6.125% senior unsecured notes due Aug. 15, 2043 'BBB-'.
Fitch has affirmed the following ratings with a Stable Outlook:
Willis Group Holdings plc
--IDR at 'BBB-';
--$300 million of 4.125% senior unsecured notes due 2016 at 'BBB-';
--$500 million of 5.75% senior unsecured notes due 2021 at 'BBB-'.
Willis North America Inc.
--IDR at 'BBB-';
--$350 million 5.625% senior unsecured notes due 2015 at 'BBB-';
--$600 million 6.2% senior unsecured notes due 2017 at 'BBB-';
--$300 million 7.00% senior notes due 2019 at 'BBB-'.
Trinity Acquisition plc
--IDR at 'BBB-'.
Additional information is available on Fitch's web site at 'www.fitchratings.com'
Applicable Criteria and Relevant Research:
--'U.S. Insurance Broker Industry Sector Credit Factors' (May 4, 2012);
--'Corporate Rating Methodology' (Aug. 8, 2012).
Applicable Criteria and Related Research:
U.S. Insurance Broker Industry Sector Credit Factors
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=677409
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=799210
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.