Standard & Poor's Ratings Services affirmed the debt ratings on Chicago-based insurance broker Aon Corp. and removed the firm from credit watch, saying it was satisfied the Aon deal to buy Benfield would work.
The New York-based rating service today affirmed the "triple-B-plus" counterparty credit and senior unsecured debt ratings on Aon. At the same time, S&P removed the ratings from credit watch, where it was placed with negative implications on Aug. 22. The outlook is stable.
S&P said it placed the ratings on credit watch following Aon's announcement that it signed a definitive agreement to acquire unrated, U.K.-domiciled reinsurance broker Benfield Group Ltd. for a total purchase price (including net debt) of approximately ?935 million ($1.75 billion) through a cash offer.
"The action reflected our uncertainty regarding integration risks and the transaction's effects on cash flow, capital structure, and coverage ratios in light of Aon's continued support of its capital-allocation priorities," said S&P's credit analyst Neil Stein in a statement.
"Aon has addressed these issues to our satisfaction, and we expect the transaction to close soon," said Mr. Stein. "We believe that integration risk will be manageable as a result of the company's extended streak of acquisitions and familiarity with expense management."
S&P said Aon also worked quickly to put a team in place to address the integration and management structure following the close of the transaction, with senior leaders from both organizations represented on the team. The acquisition will have little effect on the company's capital structure and coverage ratios because it will be funded through cash on hand using proceeds from the sale of its underwriting units earlier this year, rather than through debt issuance, the rating service noted.
Aon's suspension of its share repurchase program for at least the remainder of 2008 would also help to sustain cash flow and capital and liquidity positions, S&P noted.
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