Marsh & McLennan Companies (MMC) has completed a new $1.3 billion term loan and amended $1.7 billion of its existing revolvers, which contain new terms and higher interest rates than the previous lines. "Lenders are definitely in better shape," noted Gretchen Roetzer, an associate director with Fitch Ratings.
Previously, lenders were dealing with a very high-grade company that did not have guarantees on the loan. "The lenders definitely won in that respect, but it's a give and take situation," Roetzer noted. "The lenders got guarantees, but I don't think they're restricting dividends, which is pretty important since Marsh has a long track record of paying dividends. The lenders could have insisted on that." There is also no hard security, which also could have been required. "Clearly they see value in the guarantees," she added.
The term loan does require mandatory prepayments from the net proceeds of specific asset sales and debt issuances. The facilities are guaranteed by Marsh, Putnam Investments Trust and Mercer and require additional subsidiary guarantees to be provided if certain guaranty coverage levels are not satisfied. Pricing is tied to a grid based on ratings and leverage ratio. The revolvers range from LIBOR plus 82.5-125 basis points, while the term loan ranges from LIBOR plus 1-1 1/2%, according to an 8-K.
Citibank severed as global coordinator and Banc of America Securities and Deutsche Bank were joint leads. Lenders on the agreement include UBS, Goldman Sachs' William Street Commitment Corp., Merrill Lynch, ABN Amro, Wells Fargo Bank, The Bank of New York, Lloyds TSB Bank, The Northern Trust Co., Mellon Bank, The Bank of Nova Scotia, Royal Bank of Canada, Barclays Bank, Calyon, National Australia Bank, U.S. Bank, Morgan Stanley, and Australia and New Zealand Banking Group.
As first reported on LMW's Web site, MMC was lining up immediate discussions with its lenders to amend or replace its $2.755 billion credit facilities as Eliot Spitzer continued his assault on the company over brokerage fees (LMW, 10/20). According to a Securities and Exchange Commission filing, the matters raised by the civil complaint may have prohibited MMC from borrowing under the facilities.
Fitch still has MMC on negative watch based on several factors. "The credit agreement to the banks is certainly something we're looking at," noted Peter Patrino, a senior director with Fitch. "Additional issues include really what the outcome of the investigations will be and also what Marsh's operating profile will look like going forward."
The new term loan replaces the company's existing $700 million and $355 million revolvers. The term loan matures in December 2006, while the $1 billion amended revolver matures in June 2007 and the $700 million amended revolver matures in June 2009. An MMC spokeswoman said, "This provides the company the liquidity and the financial flexibility it needs for its businesses."