OREANDA-NEWS. February 25, 2016.  Fitch Ratings expects to assign a 'BBB+' rating to Aon plc's (Aon) proposed senior unsecured notes issuance due 2025.

Fitch affirmed all of Aon's ratings on Nov. 13, 2015, including the Issuer Default Rating (IDR) and senior debt ratings at 'BBB+', and the commercial paper ratings at 'F2'. The Rating Outlook is Stable. A complete list of ratings follows at the end of this release.

KEY RATING DRIVERS
The new notes are fully and unconditionally guaranteed by Aon Corporation (Aon Corp.) and the ratings are therefore based on Aon Corp.'s existing Fitch 'BBB+' IDR. Net proceeds from this new issuance will be used for general corporate purposes which Fitch anticipates may include the future refinancing of maturing debt, share repurchases, and mergers and acquisitions.

Fitch views the proposed debt favorably as the new senior debt will likely be issued at an attractive rate given current market conditions and will have a relatively long-dated maturity, resulting in an improved liquidity profile with reduced near-term refinancing risk.

Financial leverage as measured by debt-to-EBITDA will modestly increase from roughly 2.3x at year-end 2015 to 2.5x including the new debt (excluding the one-time legal settlement in early 2015, pro forma leverage would be closer to 2.4x). Fitch notes Aon paid off debt during the fourth quarter of 2015 and the proposed debt essentially returns financial leverage to the third quarter 2015 level. Leverage will continue to be manageable and within both Fitch's expectations for the company and the broker-sector credit factor guidelines for the current rating category, with any debt increases being offset by growing EBITDA and increased cash flow.

Longer term, Fitch expects that leverage should remain relatively stable with some modest improvement, assuming continued EBITDA growth, and anticipated capital planning including share repurchases, which Fitch considers discretionary.

The ratings reflect Aon's continued strong competitive position, balance sheet and cash flow generation, very good financial flexibility, and manageable financial leverage which are all within guidelines for the rating category.

Fitch believes Aon's liquidity profile is strong with cash and short-term investments of \\$740 million as of Dec. 31, 2015. Cash flow remains significant with earnings-based EBITDA interest coverage of roughly 9.2x for the period and averaging roughly 10x over the past five years. For the full year 2015, cash flow from operations increased by nearly \\$200 million to \\$2 billion compared to 2014, and free cash flow (less capital expenditures) also grew, due primarily to reduced expenses.

Financial flexibility has been improving year over year. Interest coverage remains solid despite some earnings pressure and a temporary increase in interest expense from prefunded debt due in part to lower expenses including reduced pension liabilities and completed restructuring program expenses, and decreasing capital expenditures. Fitch expects Aon's financial flexibility to remain strong going forward.

RATING SENSITIVITIES

The key rating triggers that could result in an upgrade include the following:

--A sustained strong improvement in operating performance on an absolute basis and relative to peers with operating EBIT consistently over \\$1 billion and an operating EBIT margin near 15%;
--A run-rate debt-to-EBITDA ratio less than 1.5x;
--Interest coverage as measured by an EBITDA-to-interest more than 12x.

The key rating triggers that could result in a downgrade include the following:

--A sustained increase in debt-to-EBITDA to more than 2.5x (adjusted for large one-time items) while maintaining an operating EBIT margin near 12%;
--A deterioration of the company's average EBITDA-to-interest expense to lower single digits;
--An impairment to goodwill that would materially impact the balance sheet and related ratios.

FULL LIST OF RATING ACTIONS

Fitch expects to assign the following rating:

Aon plc
--Senior debt due 2025 'BBB+'.

Fitch currently rates Aon as follows:

Aon plc
--IDR 'BBB+';
--\\$350 million 4% senior debt due 2023 'BBB+';
--\\$600 million 3.5% senior debt due 2024 'BBB+';
--EUR500 million 2.875% senior debt due 2026 'BBB+';
--\\$256 million 4.25% senior debt due 2042 'BBB+';
--\\$250 million 4.45% senior debt due 2043 'BBB+';
--\\$550 million 4.6% senior debt due 2044 'BBB+';
--\\$600 million 4.75% senior debt due 2045 'BBB+';
--Short-term IDR 'F2';
--Commercial paper 'F2'.

Aon Corporation
--IDR 'BBB+';
--\\$500 million 3.125% senior debt due 2016 'BBB+';
--\\$600 million 5% senior debt due 2020 'BBB+';
--\\$521 million 8.205% junior subordinated deferrable interest debentures due 2027 'BBB-';
--\\$300 million 6.25% senior debt due 2040 'BBB+';
--Short-term IDR 'F2';
--Commercial paper 'F2'.

The Rating Outlook is Stable.