Business Context and Reporting Period
Company: Willis Group Holdings Public Limited Company (Willis)
Filing Type: Form 8-K (Current Report)
Date of Report: November 27, 2015
Date of Earliest Event: November 20, 2015
Context: The filing discloses the entry into a Material Definitive Agreement to secure financing for the acquisition of Gras Savoye and the contemplated merger with Towers Watson.
Key Financial Metrics and Debt Structure
This filing details a new Term Loan Facility rather than reporting operational financial results (revenue, profit, or cash flow). Key debt metrics include:
- Total Term Loan Facility: Up to €550,000,000 (Tranche A) and up to $400,000,000 (Tranche B).
- Maturity: 364 days following the Initial Funding Date.
- Interest Rates:
- USD Eurocurrency: LIBOR + 1.25% to 2.00%.
- Euro Eurocurrency: EURIBOR + 1.25% to 2.00%.
- USD Base Rate: Highest of (Federal Funds + 0.5%, Prime, or 1-month LIBOR + 1.00%) + 0.25% to 1.00%.
- Security: Obligations are unsecured but guaranteed by Willis and certain subsidiaries.
- Existing Debt Adjustments: The general subsidiary indebtedness basket under the TAL Credit Agreement was reduced from $200,000,000 to $100,000,000.
Material Changes and Use of Proceeds
The primary material change is the establishment of the Term Loan Facility to fund specific strategic transactions:
- Tranche A (€550M): Proceeds will finance the purchase of remaining equity interests in GS & Cie Groupe (Gras Savoye Acquisition).
- Tranche B ($400M): Proceeds will be used to:
- Repay existing indebtedness of Towers Watson & Co. in connection with the merger.
- Pay related transaction expenses and fees.
- Fund general corporate purposes.
- Assumption of Debt: The facility permits the assumption of up to $340 million in term loans from Towers Watson Delaware Inc. (Towers Watson Facility).
Guidance, Risks, and Covenants
Covenants and Conditions:
- Mandatory Prepayment: Required if asset disposals yield net cash proceeds over $10 million or if additional indebtedness/equity is issued (subject to exceptions).
- Voluntary Prepayment: Permitted without penalty.
- Specific Default Condition: An event of default occurs if the Gras Savoye Acquisition is consummated but the operations of Gras Savoye's Sudan branch are not shut down or divested.
- Consents: Lenders under the TAL Credit Agreement and WSI Guaranty Agreement have consented to the transactions, subject to restrictions on amending the Towers Watson Facility adversely to lenders.
Risks and Contingencies:
- Borrowing is contingent on the accuracy of representations regarding the Gras Savoye Acquisition and the Towers Watson Merger.
- Interest margins increase by 0.50% beginning 180 days after the Initial Funding Date.
Investor Verification Checklist
- Verify the closing status of the Gras Savoye Acquisition and the Towers Watson Merger.
- Confirm the divestiture or shutdown of Gras Savoye's Sudan branch to avoid an event of default.
- Monitor the impact of the reduced subsidiary indebtedness basket ($100M cap) on future financing flexibility.
- Review the specific interest rate margins applicable based on Willis's current credit rating.
- Assess the timeline for the 364-day maturity of the new Term Loan Facility.