Moody’s Ratings has assigned a B3 corporate family rating and a B3-PD probability of default rating to the Charlotte domiciled, Truist Insurance Holdings, LLC (TIH), with a stable rating outlook.
The rating company has also assigned a B2 rating to a $4 billion seven-year senior secured first-lien term loan and a Caa2 rating to a $1.9 billion eight-year senior secured second-lien term loan being co-issued by TIH and McGriff Insurance Services, LLC (McGriff).
Proceeds of these offerings, together with new and rolled equity, will be used to fund the purchase of the remaining 80% stake in TIH by Stone Point Capital, Clayton Dubilier & Rice and additional co-investors from Truist Financial Corporation.
The parties expect to complete the purchase in the second quarter of 2024, subject to regulatory approvals and other customary closing conditions.
Moody’s also assigned a B2 rating to a $1.175 billion five-year senior secured first-lien revolving credit facility being co-issued by TIH and McGriff.
According to Moody’s, TIH’s ratings reflect its market position as the fifth-largest US insurance broker by revenue with good diversification across wholesale, retail and specialty programs.
These credit strengths are offset by TIH’s large debt burden and execution and operational risks associated with its separation from TFC. As TIH centralises key functions to operate as a standalone company, risks include revenue growth and/or operating performance disruptions, says Moody’s.
Following the transaction, Moody’s estimates that TIH will have a pro forma debt-to-EBITDA ratio of around 8x, (EBITDA – capex) interest coverage of around 1.5x, and a free-cash-flow-to-debt ratio in the low-to mid-single digits. The rating agency expects TIH to reduce its leverage below 7.5x over the next 12-18 months through organic revenue growth, cost savings and debt reduction. These pro forma metrics reflect Moody’s accounting adjustments for operating leases, contingent earnout obligations and certain non-recurring items.
