NU Online News Service, Sept. 23, 2:58 p.m. EDT
The announcement from Willis insurance brokerage of a bond-raising effort to pay down debt has led two rating agencies to revise the firm's outlook upwards.
News that the company planned to raise $300 million through bonds to pay off a $250 million bond used for an acquisition last year led Moody's and Standard & Poor's yesterday to change the Willis outlook from negative to stable.
The agencies said the company had demonstrated that it will be more disciplined in its finances.
"The stable rating outlook is predicated on our view that Willis will continue to apply free cash flow toward debt repayment," Bruce Ballentine, Moody's lead analyst for Willis, said in a statement.
Mr. Ballentine added, "We understand that Willis will refrain from share repurchase activity while reducing its financial leverage toward pre-acquisition levels."
The acquisition was Hilb, Rogal & Hobbs Co. brokerage last year that was completed with a substantial amount of debt.
"The outlook revision primarily reflects our view that Willis has changed strategy to encompass a more disciplined financial risk tolerance posture," said Tracy Dolin, S&P's credit analyst, in a separate statement. "We believe the company will choose to deleverage its balance sheet over repurchasing shares in the short to intermediate term."
For its part, Willis North America Inc., the subsidiary of Willis Group Holdings Ltd., said it would buy back $250 million in bonds due next year. To help pay for the transaction, Willis is offering $300 million in bonds that will be due on 2019.
Willis said any remaining proceeds from the bond would be used for general corporate purposes.
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