Fitch Places Willis Group's Ratings on Watch Positive Following Towers Watson Merger Announcement

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has placed 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 on Rating Watch Positive. A full list of ratings actions follows at the end of this release.

KEY RATING DRIVERS

Fitch's rating action follows today's announcement that Willis and professional services and analytics firm Towers Watson & Co. (TW) have agreed to an all-stock merger valued at approximately $18 billion that will be known as Willis Towers Watson (WTW).

The transaction 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 current debt/EBITDA of 3.0x at March 31, 2015, although ultimate long term capital management plans and tolerance for debt leverage of 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 meaningfully as well compared with Willis reported EBITDA/interest expense of 5.6x for the trailing 12 months ending March 31, 2015.

Key challenges and sources of uncertainty for WTW upon closing of the transaction by Dec. 31, 2015 include: integration of corporate and systems function, realization of anticipated expense savings, 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 17.1% at March 31, 2015, that 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 and the purchase of remaining shares of Gras Savoye, both anticipated to close in 4Q15, 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 has placed 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-';

--5.625% senior unsecured notes due 2015 '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

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987265

Endorsement Policy

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

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150701005962/en/

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:
Alyssa Castelli, New York, +1 212-908-0540
Email: [email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• IBM tumbles on soft Q1 revenue; announces HashiCorp $6.4bn acquisition
• Netlist (NLST) Misses Q1 EPS by 1c
• Standard BioTools (LAB) Announces Operational Restructuring Plan, Cuts 10% Staff