Standard & Poor’s Ratings Services has affirmed its ‘BBB+’ counterparty credit and senior unsecured debt ratings on Aon Corp. and has removed the ratings from CreditWatch, where they had been placed with negative implications on Aug. 22, 2008. The outlook is stable.
“We placed the ratings on CreditWatch following Aon’s announcement that it had signed a definitive agreement to acquire unrated, U.K.-domiciled reinsurance and risk intermediary Benfield Group Ltd. for a total purchase price (including net debt) of approximately £935 million ($1.75 billion) through a cash offer,” said S&P.
Credit analyst Neil Stein explained: “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.
“Aon has addressed these issues to our satisfaction, and we expect the transaction to close soon. We believe that integration risk will be manageable as a result of the company’s extended streak of acquisitions and familiarity with expense management,” he added.
S&P also noted that the company “has 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. Additionally, the company has suspended its share repurchase program for at least the remainder of 2008 to help sustain cash flow and capital and liquidity positions.”
Source: Standard & Poor’s – www.standardandpoors.com
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