8-KMaterial AgreementsFinancial EventsExhibits & Filings

Aon plc 8-K Report, Material Agreement (Jun 15, 2011)

Filed June 15, 2011For Securities:AON

Summary

Aon Corporation (AON) filed an 8-K on June 15, 2011, to report the entry into a new $450 million unsecured term credit agreement. This new facility, with a maturity date of October 1, 2013, was secured with a syndicate of prominent financial institutions including Bank of America, Morgan Stanley, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, The Royal Bank of Scotland, and Wells Fargo. The primary purpose of this new credit facility was to repay all outstanding amounts under Aon's prior $1 billion term credit agreement, which was originally put in place for the Hewitt Associates merger. This refinancing demonstrates Aon's proactive management of its debt obligations and likely aimed at improving its debt structure and potentially lowering borrowing costs. The agreement includes financial covenants related to EBITDA and debt-to-EBITDA ratios, indicating continued focus on financial discipline.

Key Highlights

  • 1Aon entered into a new $450 million unsecured term credit agreement maturing October 1, 2013.
  • 2The new facility was used to repay the entire outstanding balance of a previous $1 billion term credit agreement (August 2010).
  • 3The prior credit agreement was terminated concurrently with the execution of the new agreement.
  • 4The new term loan financing was provided by a syndicate of major financial institutions led by Bank of America and Morgan Stanley.
  • 5Borrowing interest rates are tied to either a Eurodollar Rate or a prime rate, plus an applicable margin that may vary based on public debt ratings.
  • 6The agreement includes financial covenants, specifically a minimum consolidated adjusted EBITDA to consolidated interest expense ratio of 4.0x and a maximum consolidated funded debt to consolidated adjusted EBITDA ratio of 3.0x.
  • 7Aon has existing commercial and service relationships with several of the lenders involved in the new credit facility.

Frequently Asked Questions

The primary purpose of the new $450 million term credit agreement is to repay all outstanding amounts under Aon's previous $1 billion term credit agreement, which was established in connection with the merger with Hewitt Associates, Inc. This action effectively refinances that prior debt.

The new unsecured term loan facility has a maturity date of October 1, 2013.

The agreement includes two main financial covenants: the ratio of consolidated adjusted EBITDA to consolidated interest expense must not be less than 4.0 to 1.0, and the ratio of consolidated funded debt to consolidated adjusted EBITDA must not be more than 3.0 to 1.0. These covenants are typical for credit agreements and aim to ensure the company maintains a healthy financial leverage.

Yes, Aon has a number of other commercial relationships with the lenders, lead arrangers, and co-arrangers of this new term credit facility. Additionally, Aon and its affiliates have provided, and may continue to provide, insurance brokerage and consulting services to these financial institutions or their affiliates.