Fitch Ratings has assigned a 'BB-' rating to USI
Holdings Corporation's (USIH) five-year secured term loan credit
facility. Additionally, Fitch has affirmed the 'BB-' issuer default
rating on USIH. The Rating Outlook is Stable.
Fitch's rating actions come in response to the recent closing of USIH's restructured bank credit facilities, including both the above mentioned $210 million secured term loan and a $75 million revolving line of credit.
Fitch views the restructuring of USIH's bank credit facilities positively as Fitch believes the new structure enhances the company's liquidity and financial flexibility for future growth while it still limits financial leverage and promotes adherence to financial projections. In addition to increasing the credit facilities size, the terms provide for an 'accordion' feature in both facilities to add further borrowing capacity without lender approval. The credit facilities continue to be secured by USIH's stock.
Additionally, Fitch's rating continues to reflect USIH's adequate capitalization and recent operating performance improvement, good cash flow and financial flexibility, niche market position, and management experience. Partially offsetting these positives include historically high financial leverage, a significant amount of intangible assets related to USIH's past acquisition activity, lower (albeit improving) operating margins relative to middle-market peers, a lack of business diversity relative to the large global brokers, and the effects of a softening property/casualty insurance market.
Although 2005 operating results were negatively affected by the sale of discontinued businesses, operating performance and balance sheet strength have continued to improve as USIH has taken steps to improve operating margins, reduce debt, and consistently generate positive cash flow. Year-ended 2005 pretax operating income from continuing operations was $30.7 million versus $28.7 million in 2004.
Historically, USIH's growth strategy was focused on quick growth through acquisitions, resulting in high debt and goodwill levels as well as integration issues. At Dec. 31, 2005, total debt-to-total capital was 36.6% and goodwill was 98.9% of equity. Fitch views USIH's current transition toward an organic growth focus with a greater emphasis on client retention and cross-selling, with only select strategic acquisitions and improved expense control, as a positive development.
Although USIH has less business diversity than the largest global brokers, it is a leading provider of employee benefits brokerage services in addition to its property/casualty brokerage operations. Employee benefits business tends to be counter-cyclical to the property/casualty market. USIH's employee benefits business generates 35.9% of the company's total commission and fee revenues.
Fitch has assigned the following rating:
USI Holdings Corporation
-- $210 million secured term loan due March 24, 2011 'BB-'.
Fitch has affirmed the following rating with a Stable Outlook:
USI Holdings Corporation
-- Issuer default affirmed at 'BB-'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch's rating actions come in response to the recent closing of USIH's restructured bank credit facilities, including both the above mentioned $210 million secured term loan and a $75 million revolving line of credit.
Fitch views the restructuring of USIH's bank credit facilities positively as Fitch believes the new structure enhances the company's liquidity and financial flexibility for future growth while it still limits financial leverage and promotes adherence to financial projections. In addition to increasing the credit facilities size, the terms provide for an 'accordion' feature in both facilities to add further borrowing capacity without lender approval. The credit facilities continue to be secured by USIH's stock.
Additionally, Fitch's rating continues to reflect USIH's adequate capitalization and recent operating performance improvement, good cash flow and financial flexibility, niche market position, and management experience. Partially offsetting these positives include historically high financial leverage, a significant amount of intangible assets related to USIH's past acquisition activity, lower (albeit improving) operating margins relative to middle-market peers, a lack of business diversity relative to the large global brokers, and the effects of a softening property/casualty insurance market.
Although 2005 operating results were negatively affected by the sale of discontinued businesses, operating performance and balance sheet strength have continued to improve as USIH has taken steps to improve operating margins, reduce debt, and consistently generate positive cash flow. Year-ended 2005 pretax operating income from continuing operations was $30.7 million versus $28.7 million in 2004.
Historically, USIH's growth strategy was focused on quick growth through acquisitions, resulting in high debt and goodwill levels as well as integration issues. At Dec. 31, 2005, total debt-to-total capital was 36.6% and goodwill was 98.9% of equity. Fitch views USIH's current transition toward an organic growth focus with a greater emphasis on client retention and cross-selling, with only select strategic acquisitions and improved expense control, as a positive development.
Although USIH has less business diversity than the largest global brokers, it is a leading provider of employee benefits brokerage services in addition to its property/casualty brokerage operations. Employee benefits business tends to be counter-cyclical to the property/casualty market. USIH's employee benefits business generates 35.9% of the company's total commission and fee revenues.
Fitch has assigned the following rating:
USI Holdings Corporation
-- $210 million secured term loan due March 24, 2011 'BB-'.
Fitch has affirmed the following rating with a Stable Outlook:
USI Holdings Corporation
-- Issuer default affirmed at 'BB-'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.