MMC Refinances Over Commissions Loss
NU Online News Service, Dec. 16, 2:57 p.m. EST?Marsh & McLennan Companies Inc. said it has completed a $3 billion refinancing after revenue problems linked to its difficulties over suspect commission charges.[@@]
According to the company, the new credit arrangement became necessary when New York-based MMC said it would eliminate controversial Market Service Arrangements, a form of contingent commission, amounting to more than $800 million in revenue. The loss in revenue resulted in the layoff of more than 3,000 employees.
The move became necessary after New York Attorney General Eliot Spitzer sued insurance MMC, accusing its Marsh brokerage subsidiary of taking payoffs in the form of commissions to rig bids for insurance contracts with carriers who were part of the scheme.
MMC and Mr. Spitzer have yet to announce a settlement of the suit, but it is expected to exceed more than $500 million.
The new financing consists of a new $1.3 billion term loan and the amendment of $1.7 billion of existing revolving credit.
The term loan matures on Dec. 31, 2006 and replaces credit facilities of $700 million and $355 million, which were due to mature in 2005. The amended revolving facilities include $1 billion due June 2007 and $700 million due June 2009.
The new arrangement involved 22 banks, led by Citibank, Bank of America and Deutsche Bank AG New York Branch.