Zacks_Analysts' Blog : Willis Group Redeems Notes - Analyst Blog

Willis Group Holdings plc (WSH) will redeem $35 million 12.875% Senior Notes due 2016 on April 17, 2011.

As per the terms of the agreement governing the 12.875% Senior Notes, Trinity Acquisition plc, an indirect wholly-owned subsidiary of Willis Group and the issuer of the 12.875% Senior Notes, will redeem all of the remaining 12.875% Senior Notes for an amount equal to the aggregate principal amount plus any accrued interest to the redemption date. Following the redemption, there will be no 12.875% Senior Notes outstanding.

The company recently completed the offering of $800 million Senior Notes comprising $300 million of 4.125% senior notes due 2016 and $500 million of 5.75% senior notes due 2021. It has bought back $465 million 12.875% Senior Notes from the net proceeds.

Willis Group is trying to lower its debt level as well as the interest burden. Willis Group ended 2010 with a total debt balance of $2.3 billion, compared with $2.4 billion at the end of 2009. Though the company is issuing new notes (at a lower coupon), it is issuing them to replace notes with higher coupons, thus lowering the burden of paying higher interest. The company incurred interest expenses of $166 million in 2010, 5% lower than $174 million in the prior-year period.

With Willis recording new business growth along with high client retention and expanding operating margins by virtue of cost reduction, we expect the company to post solid results with economic recovery gaining pace.

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  clients worldwide, both directly and through its associates. Its major competitors are Arthur J Gallagher & Co. (AJG), Aon Corporation (AON) and Marsh & McLennan Companies Inc. (MMC).