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MMC alleviates liquidity concerns with $3bn credit agreement

Troubled broking giant MMC finalised $3bn of financing last week soothing fears of a liquidity crunch as the firm strives to settle with the New York attorney general Eliot Spitzer.

The agreement with 22 banks adds $300mn to the preliminary $2.7bn deal announced last month when the industry was still coming to terms with the fall-out from Spitzer’s 14 October suit against the broker.

$1.3bn comes from a term loan maturing at the end of 2006, together with $1.7bn in revolving credit lines with $1bn due in June 2007 and $700mn in 2009. Banks involved in the consortium include Citibank, Deutsche Bank and Bank of America.

Insiders suggest MMC remains close to completing a settlement with Spitzer, which will result in the creation of a restitution fund to enable the broker to disgorge “illegal” profits back to its clients. However, reports in the Wall Street Journal last week suggested that a settlement may not occur before the year-end – despite earlier suggestions to the contrary from MMC’s new chief executive Michael Cherkasky.

Vinay Saqi, writing in Morgan Stanley’s “Insurance & Risk Briefing”, commented: “The finalisation of these agreements should alleviate near-term liquidity concerns that some investors might have had, given Marsh’s outstanding commercial paper balance, which surpassed $1.5bn just a month ago.

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