Standard & Poor’s Ratings Services announced that it has placed its “BB-” counterparty credit and bank loan ratings on USI Holdings Corp. on CreditWatch with negative implications.
“This rating action follows the company’s announcement on Oct. 29, 2004, that it expects to receive a subpoena from the New York State Attorney General regarding the payment of contingent commissions related matters that has led to the decision by various insurance companies and insurance brokers to end certain compensation agreements,” said the bulletin. “The subpoena from the New York Attorney General follows a similar action by the Connecticut Attorney General and ongoing private litigation in which the company is a named co-defendant along with the other top 10 domestic insurance brokers in addition to major commercial lines insurers. Furthermore, the company has indicated that it does not expect contingent commissions to continue in their current form.”
S&P noted: “Historically, the company has had to amend restrictive debt covenants under prior credit facilities to remain in compliance. The increasing legal expense of responding to numerous requests — coupled with the prospective loss of contingent commission income — could lead to a similar sequence of events with respect to the company’s compliance with debt covenants.”
The rating agency indicated it “will be meeting with the company in the near future to assess the potential effect of these developments on the company’s bottom line and ability to continue to meet its debt covenants.”
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