Fitch Rates Allied Waste's Proposed Sr. Secured Notes 'BB-'.Business Editors CHICAGO--(BUSINESS WIRE)--Jan. 21, 2004 Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has assigned a rating of 'BB-' to Allied Waste North America's (NYSE NYSE See: New York Stock Exchange :AW) proposed $825 million senior secured notes due 2011. The notes are expected to be issued in seven and ten-year tranches, with the amounts of each tranche to be determined. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). will be used towards reduction of its outstanding 7.875% senior notes due 2009. The Rating Outlook is Stable. During 2003, AW has significantly improved its capital structure and maturity schedule through the issuance of mandatory convertible Mandatory Convertible A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock. preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. , the conversion of $1.3 billion of preferred stock to common stock, asset divestitures, free cash flow, and equity issuance In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to . Total debt at September 30, 2003 was approximately $8.2 billion, and Fitch estimates that fourth quarter free cash flow and proceeds from asset sales should provide the capacity to reduce debt by an additional $200 million. Despite continued debt reduction, leverage remains high in relation to cash flow. Interest and other fixed obligations will be meaningfully reduced in 2004 as a result of debt reduction in 2003 and projected further reductions in 2004 (including recent asset sales), lower effective interest rates related to the company's numerous refinancing Refinancing An extension and/or increase in amount of existing debt. activities and the elimination of the Series A preferred dividend preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) obligation. Interest costs could be reduced by $100 million in 2004, while the Series A dividend payments were scheduled to total approximately $90 million annually starting in July 2004. Debt reduction from free cash flow is expected to continue in 2004, with lower interest costs and any improvement in economic conditions supporting an increase from 2003 levels. The company's high leverage, however, indicates that free cash flow as a percentage of total debt will still be limited to 5%-8%. Even upon a reversal in the economic environment, Allied Waste is expected to remain in a consistent free cash flow position. Following $225 million debt (7.375% senior notes) that comes due in January 2004, there are no significant maturities in 2004 and 2005. Continued debt reduction could warrant a review of the Outlook or the rating during 2004. The notes will be guaranteed by Allied Waste Industries, Inc., and substantially all of its subsidiaries. The notes will rank equally with AW's outstanding senior secured notes, and will be subordinated to debt under the company's senior secured bank facility. Total bank debt of $1,435 million at September 30, 2003, consisting of $1,185 million of Term Loan B and $250 million of Term Loan C, accounted for 21.5% of total secured debt. The company's debt reduction and growth in its equity base continue to improve the position of all creditors, with bank creditors in particular benefiting over the last several years as the proportion of bank debt has declined in relation to total debt. |
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