Fitch Rates Allied Waste's Proposed Sr Secured, Unsecured & Convertible Sub Notes.

Business Editors

CHICAGO--(BUSINESS WIRE)--April 6, 2004

Fitch Ratings has assigned the following ratings to Allied Waste Industries (AW):

-- Proposed $250 million senior secured notes due 2011 'BB-';

-- Proposed $400 million senior unsecured notes due 2014 'B+'

-- Proposed $200 million senior subordinated convertible bond due 2034 'B'.

AW has also has funded an additional $150 million term loan (term loan D due 2010) under its senior credit facility, which is rated 'BB' by Fitch. Net proceeds will be used towards a reduction of the majority of its outstanding 10% senior unsecured sub notes due 2009. The Rating Outlook is Stable.

AW's existing 10% senior sub notes are due 2009 and at Dec. 31, 2003, $1.49 billion was outstanding. Through the proposed refinancing transactions, AW will extend its maturity profile and reduce interest expense, providing further improvement in cash flow generation and liquidity. AW meaningfully improved its capital structure in 2003, which resulted in debt reduction of $650 million and an increase in equity to $2.52 billion at year-end (YE) 2003 from $689 million at YE 2002. Additionally, the series A senior convertible preferred stock was converted to common stock in 2003, which eliminated approximately $90 million in annual cash dividends that would have started in July 2004. Following YE 2003, AW paid down debt by over $300 million from cash on hand. Currently, there are no large maturities due in 2004 and 2005.

The current refinancings are estimated to save approximately $30 million per year in interest expense, on top of $115 million in interest savings from the 2003 refinancings, January 2004 refinancings, roll-off of interest swaps, and debt reduction. This should help AW partially offset an anticipated increase in capex this year and to maintain healthy free cash flow of approximately $300 million. Capex is expected to rise by 20% in 2004.

On a pro forma basis, an increase of $150 million in bank debt from December-end will marginally increase bank debt (including receivables secured loan)/EBITDA to 1.1 times (x) from 1.0x, and the increase in total senior secured debt of $400 million will result in a slight deterioration in senior secured debt/EBITDA to 4.3x from 4.1x. Total debt/EBITDA at Dec. 31, 2003 was 5.2x at YE 2003 versus 5.3x at YE 2002. Given AW's consistent free cash flow generation, progress in debt reduction, and potential EBITDA improvement upon an upturn in the economy, the marginal increase in senior secured debt does not raise concerns. The new senior unsecured debt benefits from having the remaining subordinated debt beneath it. Total debt at Dec. 31, 2003 was $8.23 billion, and Fitch expects debt reduction in 2004 to exceed $665 million in total, further improving AW's balance sheet.