8-KLeadership ChangesMaterial AgreementsFinancial Events+1

Aon plc 8-K Report, Material Agreement (Mar 21, 2012)

Filed March 21, 2012For Securities:AON

Summary

This Form 8-K filing by Aon Corporation on March 20, 2012, primarily details the company's entry into a new $400 million five-year unsecured revolving credit facility with Citibank, N.A. as administrative agent, and the concurrent termination of its previous three-year credit agreement. This move suggests a proactive approach to managing its liquidity and financing structure, potentially to support ongoing operations, strategic initiatives, or to secure more favorable borrowing terms. Additionally, the filing discloses the approval of long-term incentive awards to certain executive officers under the Leadership Performance Program (LPP). These awards are structured as performance share units tied to Aon's cumulative adjusted earnings per share (EPS) performance over a three-year period (2012-2014), aligning executive compensation with shareholder value creation and employee retention goals.

Key Highlights

  • 1Aon Corporation entered into a new $400 million, five-year unsecured revolving credit agreement with Citibank, N.A.
  • 2The new credit facility has a maturity date of March 20, 2017.
  • 3The company terminated its previous $400 million three-year credit agreement, effective March 20, 2012.
  • 4The new credit agreement includes financial covenants related to EBITDA to interest expense ratio and funded debt to EBITDA ratio.
  • 5Aon approved performance-based long-term incentive awards for Named Executive Officers under the Leadership Performance Program (LPP).
  • 6These LPP awards are performance share units tied to cumulative adjusted EPS targets from 2012 to 2014.
  • 7Key executives, including CEO Gregory C. Case, received specific target performance share units under the LPP.

Frequently Asked Questions

The new $400 million, five-year revolving credit agreement signifies Aon's proactive management of its financial resources. It provides a significant liquidity backstop, potentially for working capital needs, acquisitions, or to refinance existing debt. The longer maturity compared to the previous agreement may also indicate improved borrowing terms or a strategic decision to secure financing for a longer horizon.

Aon terminated its previous three-year credit agreement because it has entered into a new, likely more favorable or strategically aligned, five-year facility. This is a common practice for companies to optimize their debt structure and borrowing costs, especially if market conditions or their financial health have improved since the prior agreement was established.

The new credit facility is unsecured and has a maturity date of March 20, 2017. Interest rates are based on either a Eurodollar rate or Citibank's prime rate, plus an applicable margin that can vary based on Aon's public debt ratings. The agreement includes covenants such as maintaining a consolidated adjusted EBITDA to consolidated interest expense ratio of at least 4.00:1.00, and a consolidated funded debt to consolidated adjusted EBITDA ratio not exceeding 3.25:1.00 (with certain flexibility).

The long-term incentives are awarded as performance share units under the Leadership Performance Program (LPP), linked to Aon's cumulative adjusted earnings per share (EPS) performance from January 1, 2012, to December 31, 2014. The awards are designed to be earned and settled in Aon common stock based on achieving specific performance targets, with potential for the payout to range from 0% to 200% of the target units. The Committee also retains discretion to adjust performance results for extraordinary items.