Zacks_Analysts' Blog : Willis Group Prices Notes - Analyst Blog

Willis Group Holdings plc (WSH) has priced its public offering of senior notes – $300 million of 4.125% senior notes due 2016 and $500 million of 5.75% senior notes due 2021.

Willis Group plans to deploy the net proceeds to repurchase or redeem $500 million 12.875% senior notes due 2016 as well as for general corporate purposes.

Rating agencies Standard & Poor’s has assigned a BBB- credit rating to senior notes while Moody’s Investor Services has assigned a Baa3 credit rating to the senior notes.

Willis Group ended 2010 with a total debt balance of $2.3 billion, compared with $2.4 billion at the end of 2009, reflecting a reduction of $0.1 billion over a one-year period. The debt-to-capital ratio was 47% at 2010 end, lowered from 52% at the end of 2009. The issuance of $800 million of debt will increase the debt-to-capital ratio by 754 basis points.

The company incurred interest expenses of $166 million in 2010, 5% lower than $174 million in the prior-year period. With the new debt issuance, the company will have to defray an additional $41.125 million annually.

However, counting on the positive, the company is redeeming notes having higher coupon with new issues having a lower coupon, thus lowering the burden of paying higher interest.

Willis Group reported a solid fourth quarter on the heels of higher commissions and fees coupled with lower operating expenses.

The Zacks Consensus Estimate for first-quarter 2011 is $1.22 per share. For full years 2011 and 2012, the Zacks Consensus Estimates are, respectively, $2.82 per share and $3.30 per share.

We maintain a “Neutral” recommendation on Willis over the long term. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in London, United Kingdom, Willis Group Holdings plc and its subsidiaries provide a broad range of insurance brokerage, reinsurance and risk management consulting services to its worldwide clients, both directly and through its associates. Its major competitors are Arthur J Gallagher & Co. (AJG), Aon Corporation (AON) and Marsh & McLennan Companies Inc. (MMC).