Fitch Affirms & Removes Marsh & McLennan's Ratings from Rating Watch Negative.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed and removed from Rating Watch Negative the 'A+' senior debt rating and 'F1' short-term rating of Marsh & McLennan Companies, Inc. (MMC See MultiMediaCard and Microsoft Management Console. ). Fitch also assigned 'A+' senior debt ratings to MMC's two senior note tranches issued July 7th, including a three-year floating rate $500 million note and a ten-year fixed rate note for $650 million. The Rating Outlook is Stable. Today's action follows the completion of MMC's acquisition of Kroll, Inc. (Kroll) for $1.9 billion. On May 20, 2004, Fitch placed MMC's ratings on Rating Watch Negative due to uncertain financing plans related to the announced Kroll acquisition. MMC's recent issuance of $1.15 billion senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. has resolved this uncertainty. Thus, based on the roughly 60/40 split between debt and cash financing for Kroll, MMC's pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma balance sheet remains strong, albeit with higher leverage and supports Fitch's rating action at this time. Further, it is expected that financial leverage will return to historical levels over the next several quarters and overall cash flow quality will continue to grow from currently strong levels. Kroll is a leading global consultant in the area of investigation, intelligence, financial, security and technology services. Strategically, Fitch believes the acquisition aligns with MMC's objective to provide risk management services to corporations. Kroll has generated good operating margins in recent periods and the combined operation Noun 1. combined operation - a military operation carried out cooperatively by two or more allied nations or a military operation carried out by coordination of sea, land, and air forces is expected to generate expense synergies of at least $30 million. The ratings are supported by MMC's strong operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before , diverse business profile and excellent cash flow generation. Although internal and external factors at Putnam depressed assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. growth in recent periods causing a material decline in investment management's operating profits, MMC's overall earnings have grown through strong results in the insurance brokerage operation. The rating analysis also considers MMC's large cash demands, which include fixed obligations, rents, common-stock dividends, potential stock buybacks and employee retirement costs. In addition, Fitch continues to monitor issues surrounding Putnam and anticipates that assets under management will continue to show a slowdown in outflows during 2004. Further, Fitch recognizes that other investigations and class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax are ongoing surrounding the Putnam market-timing activity, but at the current time considers these items to be secondary relative to the charges settled in April 2004. If this view should change, Fitch will revisit its rating analysis as needed as needed prn. See prn order. . In a similar context, Fitch's ratings reflect the opinion that the contingent commission issue will not lead to any material financial impact for MMC. Note: These ratings were initiated by Fitch as a service to users of Fitch ratings. The ratings are based primarily on public information. Entity/Issue/Type Action Rating/Outlook Marsh & McLennan Companies, Inc. --Senior debt Affirm & Remove from RW Negative 'A+'/Stable; --Commercial paper Affirm 'F1'. Marsh USA Inc. --Commercial paper Affirm 'F1'. |
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