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Rating Action:

Moody's assigns Baa1 rating to Omnicom's proposed notes

02 Aug 2010

New York, August 02, 2010 -- Moody's Investors Service assigned a Baa1 rating to Omnicom Group, Inc.'s ("Omnicom") proposed senior unsecured notes due 2020. Proceeds from the offering will be used for general corporate purposes. The rating outlook remains stable.

Assignments:

..Issuer: Omnicom Group, Inc.

....Senior Unsecured Regular Bond/Debenture, Assigned Baa1

....Senior Unsecured Shelf, Assigned (P)Baa1

Moody's anticipates Omnicom will utilize the bulk of the proceeds for general corporate purposes which could include working capital expenditures, fixed asset expenditures, acquisitions, refinancing of other debt, repurchases of common stock, or other capital transactions. Accordingly, Moody's expects debt-to-EBITDA leverage will increase toward the upper end of the 3.0x-3.5x range (incorporating Moody's standard adjustments) anticipated for the rating. Moody's expects leverage to decline as earnings recover from the cyclical advertising downturn. The offering will effectively reverse the majority of Omnicom's debt reduction during the recession, although balance sheet debt will remain below the levels at which the company operated in 2007 and 2008.

Moody's believes the company is managing its liquidity position aggressively by allowing the June 2011 maturity of the $2.5 billion revolver to fall below one year. However, the proposed offering is liquidity-enhancing in the near term as Moody's expects the proceeds will be deployed over time. The company is thus likely to operate with lower intra-month borrowings and/or a higher cash balance until the incremental cash resources are fully deployed. Moody's anticipates in the ratings that Omnicom will renew its revolver prior to the maturity date with the bond offering proceeds providing interim liquidity support.

The proposed notes rank equally with Omnicom's existing senior unsecured obligations and are joint and several obligations of Omnicom and co-borrowers Omnicom Capital, Inc. ("OCI") and Omnicom Finance Inc. ("OFI"). Omnicom provides a downstream senior unsecured guarantee on the notes to OCI and OFI but there are no upstream guarantees from the operating agencies. The notes do not have covenants that provide protection from significant asset sales, debt issuance, share repurchases, change of control, dividends or other leveraging events. The limitation on liens covenant is the same as that in the 6.25% notes due 2019 and 5.9% notes due 2016 -- providing a carve-out for secured debt of up to 20% of Consolidated Net Worth (approximately $750 million as of 6/30/10). The value of the liens if the company issued secured debt would likely be limited as the primary assets (creative talent and the client list) could leave if confidence in the firm erodes in a distress scenario. Omnicom's $660 million of convertible notes do not have a limitation on liens covenant.

The last rating action on Omnicom was on June 24, 2009 when Moody's assigned a Baa1 rating to the company's senior unsecured notes due 2019 and changed the rating outlook to stable from negative.

Moody's subscribers can obtain additional information on Omnicom's rating rational in the credit opinion posted to www.moodys.com. Omnicom's ratings were assigned by evaluating factors that Moody's considers relevant to the credit profile of the issuer, such as the company's (i) business risk and competitive position compared with others within the industry; (ii) capital structure and financial risk; (iii) projected performance over the near to intermediate term; and (iv) management's track record and tolerance for risk. Moody's compared these attributes against other issuers both within and outside Omnicom's core industry and believes Omnicom's ratings are comparable to those of other issuers with similar credit risk.

Omnicom, headquartered in New York City, is one of the largest global advertising, marketing and corporate communications agencies with revenue of $12.1 billion for the LTM ended 6/30/10. Omnicom's branded networks and numerous specialty firms provide advertising, strategic media planning and buying, digital and interactive marketing, direct and promotional marketing, public relations and other specialty communications services to numerous clients in a variety of countries.

New York
John E. Puchalla
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's assigns Baa1 rating to Omnicom's proposed notes
No Related Data.
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