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Marsh & McLennan Issues $600M Notes

Zacks Equity Research

Marsh & McLennan Cos. Inc. (MMC) announced the pricing of senior unsecured notes worth $600 million for multi-purpose shelf registration. The proceeds are expected to be utilized for enhancing business operations.

The aforementioned long-term notes are dated to mature in 2024. These five-year fixed rate notes bear an interest of 3.50%. Meanwhile, management intends to culminate the offering by May 30, 2014.

Marsh & McLennan appointed J.P. Morgan Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC of as joint book-running managers for the offering.

The company also appointed co-managers, which include, Deutsche Bank Securities, GC Securitities of MMC Securities Corp., Goldman, Sachs & Co., HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Inc.

Ratings Action on Notes

Moody’s Investor Service of Moody’s Corp. (MCO) rendered a “Baa1” rating to these set of notes. Additionally, the ratings agency affirmed its ratings of “Baa1” and “P-2” on Marsh & McLennan’s unsecured long-term debt and short-term debt, respectively. The outlook for all ratings remained stable.

Armed with four globally-recognized brands, namely, Marsh, Guy Carpenter, Mercer and Oliver Wyman, Marsh & McLennan holds a dominant position in the insurance brokerage and consulting sector. Although risks from pricing competitiveness and professional liabilities raise concerns, the ratings agency is confident of Marsh & McLennan’s growth prospects. The optimism is derived from the company’s diversified business model, strong global client base and technical expertise.

Meanwhile, the latest notes issue is not expected to have any material impact on the company’s credit profile, thereby maintaining its debt-to-EBITDA ratio between 2.5x and 3.0x. Moody’s also anticipates Marsh & McLennan to keep net profit margin within 8−11% and interest coverage of 5x−8x. This will pave the way for steady improvement in operating leverage going forward.

Currently, Marsh & McLennan and Moody’s have a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Aon Plc (AON) and Erie Indemnity Co. (ERIE), both of which bear a Zacks Rank #2 (Buy).

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