Marsh & McLennan Cos. Inc. MMC announced the pricing of senior unsecured notes worth $500 million for multi-purpose shelf registration. The proceeds are expected to be utilized for enhancing business operations.
The aforementioned long-term notes are dated to mature in 2020. These five-year fixed rate notes bear an interest rate of 2.35%. Meanwhile, management intends to culminate the offering by Mar 6, 2015.
Marsh & McLennan has appointed Citigroup, HSBC, Barclays and Goldman, Sachs & Co. as joint book-running managers for the offering.
The company also appointed co-managers, namely, Deutsche Bank Securities, GC Securities of MMC Securities Corp., Scotiabank and Wells Fargo Securities.
Ratings Action on Notes
Moody’s Investor Service of Moody’s Corp. MCO rendered a “Baa1” rating to this set of notes. Additionally, the ratings agency affirmed its ratings of “Baa1” and “P-2” on Marsh & McLennan’s unsecured long-term debt and short-term debt, respectively. The outlook for all ratings remained stable.
The latest notes issuance is not expected to have any material impact on the company’s credit profile, thereby maintaining its 2014-level of debt-to-EBITDA ratio of 2.7x and interest coverage of 6.6x.
While risks from pricing competitiveness in some operating lines, sluggish growth in Continental Europe and professional liabilities raise concerns, the ratings agency is confident of Marsh & McLennan’s growth prospects. This is evident from the company’s steadily growing EBITDA and net profit margins over the past several years. The buoyancy also stems from Marsh & McLennan’s diversified business model, strong global client base and technical expertise.
Marsh & McLennan dominates the insurance brokerage and consulting sector as the second-largest player, after industry leader Aon Plc AON, but very highly-placed from its peer, Erie Indemnity Co. ERIE. Moreover, the company reigns the insurance brokerage space with its globally-recognized brands like Marsh and Guy Carpenter, while its consulting segment boasts of renowned brands like Mercer and Oliver Wyman.
Going forward, Moody’s also anticipates Marsh & McLennan to keep the net profit margin within 8−11% and interest coverage in the range of 5x−8x. These levels indicate a steady capital position along with stable liquidity and operating leverage.
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