Fitch Rates Allied Waste's Proposed $600MM Notes'B+/RR3'.

CHICAGO -- Fitch expects to assign a 'B+/RR3' to Allied Waste Industries' (NYSE: AW) proposed $600 million offering of 10-year senior secured notes maturing in 2016. The new notes will be issued by Allied Waste North America, and will be guaranteed by AW and substantially all of AW's subsidiaries, and be secured by the stock and assets of some of AW's subsidiaries. AW expects to use proceeds from the offering to redeem its 8-7/8% $600 million senior secured notes due April 2008. The Issuer Default Rating (IDR) for AW is 'B'. The Rating Outlook is Stable.

The Rating Outlook was recently revised to Stable from Negative, reflecting improved pricing and volume trends, AW's ongoing cost reduction and asset rationalization programs, lower interest costs, and few near-term debt maturities. The revision also incorporates Fitch's expectation for improvement in free cash flow generation and stabilization of operating margins. Some actions in 2005 (the completion of the CEO search and the execution of the refinancing plan) also contributed to the Outlook revision.

The rating is supported by AW's solid market positions, the relatively low volatility of the waste industry, and the value of AW's landfill assets. Concerns include the company's high debt levels, limited free cash flow, margin deterioration, rising fuel prices, and high capital expenditures. Another concern is the potential for future IRS payments related to the $900 million capital loss recorded by Browning-Ferris Industries, Inc.(BFI) in 1999, which could further pressure free cash flow and/or increase debt, and could lead to a review on ratings and/or the Outlook.

AW's proposed refinancing will allow the company to extend its debt maturities and potentially reduce its annual interest payments. In 2008, AW has approximately $1.5 billion in debt maturities, including the 8-7/8% $600 million senior secured notes it plans to refinance. At Dec. 31, 2005, the company had cash of $56 million and $1.17 billion of availability under its $1.575 billion revolving facility. Debt/EBITDA at Dec. 31, 2005 was 4.8 times(x), compared with 5.4x at the end of 2004. Free cash flow in 2005 was negative, due largely to higher capital expenditures, but Fitch expects it to improve and debt to decline modestly in 2006.

Fitch's Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch's RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at 'www.fitchratings.com/recovery'.

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.