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Fitch Rates Marsh & McLennan's New Senior Notes 'A-'
January 11, 2017 / 4:09 PM / a year ago

Fitch Rates Marsh & McLennan's New Senior Notes 'A-'

(The following statement was released by the rating agency) CHICAGO, January 11 (Fitch) Fitch Ratings has assigned a senior unsecured debt rating of 'A-' to Marsh & McLennan Companies, Inc.'s (MMC) new issuance of $1 billion senior unsecured notes. A full list of MMC's ratings follows at the end of this release. KEY RATING DRIVERS Fitch expects MMC to use the net proceeds of this offering for general corporate purposes including debt refinancing. The company's debt maturities remain well-laddered and interest expense remains manageable as MMC was able to take advantage of the current interest rate environment. Fitch expects that MMC's key credit ratios will continue to approximate current levels over the next 12-24 months. MMC's consolidated EBIT operating margin, debt/EBITDA ratio, and EBITDA/interest coverage ratios have each been consistently strong and are projected to remain so following the incremental debt issue. Given MMC's prospects for solid earnings growth in 2017, Fitch expects these key credit metrics to remain within guidelines for the current rating category. The ratings continue to reflect MMC's continued trend of improved operating performance and stronger credit metrics that has continued for several years. At trailing 12-months Sept. 30, 2016, EBITDA/interest coverage was excellent at over 16x, and financial leverage as measured by debt/EBITDA remained moderate at roughly 1.5x according to Fitch's calculations. Pro forma leverage for the new debt issuance, not assuming any debt refinancing or earnings growth, will increase to 1.9x, which remains within Fitch's expectations. Fitch anticipates that leverage will decrease over the next several quarters from near-term debt refinancing of $250 million maturing in April 2017 and earnings growth. Following the refinancing, pro forma leverage will likely be under 1.8x. The ratings also reflect MMC's continued strong balance sheet, financial flexibility and excellent operating performance. The company reported $1.4 billion of cash and equivalents at Sept. 30, 2016 and also maintains a $1.5 billion multi-currency unsecured revolving credit facility that expires in 2020. Fitch expects free cash flow (FCF) to continue increasing over time due in part to expense reductions and projected earnings growth. Favorably, restructuring expenses have recently been immaterial, and share repurchases are considered to be discretionary in order to preserve liquidity ($625 million repurchased through nine months ending Sept. 30, 2016 compared to $1.4 billion repurchased in all of 2015). RATING SENSITIVITIES Key rating triggers that could lead to a downgrade if observed over a sustained period of time include: --Debt/EBITDA exceeding 2x; --EBITDA/interest expense coverage deteriorating to levels below 10x; --If MMC incurred material charges arising from litigation or regulatory rulings that could affect long-term performance; --If MMC were to report a material goodwill impairment that casts doubt on its ability to generate future earnings and cash flows. Key rating triggers that could lead to an upgrade if observed over a sustained period of time include: --Consolidated EBIT operating margins of 20% or better; --Debt/EBITDA approaching 1.2x; --EBITDA/interest expense in excess of 18x. FULL LIST OF RATING ACTIONS Fitch has assigned the following ratings: Marsh & McLennan Companies, Inc. --$500 million 2.75% senior notes due 2022 'A-'; --$500 million 4.35% senior notes due 2047 'A-'. Fitch currently rates MMC as follows: Marsh & McLennan Companies, Inc. --Long-Term Issuer Default Rating (IDR) at 'A-'; --Short-Term IDR at 'F2'; --Commercial paper at 'F2'; --$250 million 2.30% senior debt due 2017 at 'A-'; --$250 million 2.55% senior debt due 2018 at 'A-'; --$300 million 2.35% senior debt due 2019 at 'A-'; --$500 million 2.35% senior debt due 2020 at 'A-'; --$500 million 4.80% senior notes due 2021 at 'A-'; --$250 million 4.05% senior debt due 2023 at 'A-'; --$350 million 3.3% senior notes due 2023 at 'A-'; --$600 million 3.50% senior notes due 2024 at 'A-'; --$500 million 3.50% senior debt due 2025 at 'A-'; --$600 million 3.75% senior debt due 2026 at 'A-'; --$300 million 5.875% senior debt due 2033 at 'A-'. The Rating Outlook is Stable. Contact: Primary Analyst Gretchen Roetzer Director +1-312-606-2327 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Martha Butler, CFA Senior Director +1-312-368-3191 Committee Chairperson Donald F. Thorpe, CPA, CFA Senior Director +1-312-606-2353 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Date of Relevant Rating Committee: Dec. 8, 2016. Additional information is available on Applicable Criteria Criteria for Rating Non-Financial Corporates (pub. 27 Sep 2016) here Additional Disclosures Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT 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. 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As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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