Fitch Rates Republic Services, Inc.'s Amended Senior Unsecured Credit Facility 'BBB'

Fitch Ratings rates Republic Services, Inc.'s (RSG) amended and restated senior unsecured credit facility 'BBB'. The $1.25 billion revolving facility has a five-year term with covenants similar to the pre-amended $1.25 billion facility that was due in September 2013. The facility is available for general corporate purposes. Fitch's current Issuer Default Rating (IDR) for RSG is 'BBB', and the Rating Outlook is Stable.

The restated facility amends RSG's current $1.25 billion facility due in 2013. Changes from the previous agreement include a cap on priority indebtedness of 15% of consolidated tangible assets and a release of all subsidiary guarantees. The definition of EBITDA utilized in the financial covenants has also been amended to add back accretion expense, which totaled $78 million in 2011.

Concurrent with the new agreement, borrowing capacity on the company's existing $1.25 billion facility due in April 2016 will be reduced by $250 million, decreasing RSG's total revolver capacity from $2.5 billion to $2.25 billion. Fitch does not believe the reduction in facility commitments will have a meaningful impact on liquidity. As of March 31, 2012, the company's liquidity remained strong, consisting of $74 million of cash on hand and $1.6 billion in availability under the existing revolvers. RSG primarily uses its revolving facilities to support letters of credit, and this practice will likely continue going forward.

RSG's ratings reflect the company's healthy operating margins, stable debt levels, and proven ability to generate substantial free cash flow. Though core waste volumes remain low coming out of the recession, RSG continues to produce strong results, maintaining EBITDA margins around 30%. RSG has begun to see some improvement in pricing both in landfill and commercial & industrial collection. Fitch expects both pricing and volume to grow modestly as the broader economy continues to improve, which should lead to better revenue growth in 2012.

The company's cash flow profile remains robust. RSG produced $440 million in FCF in the last 12 months ending March 31, 2012 and should continue to produce significant free cash for the foreseeable future. Robust cash generation is offset by shareholder friendly activity. The company repurchased some $460 million in shares in 2011 and increased its dividend to $0.22/share from $.20/share in the third quarter. The company is expected to continue to prioritize dividends and buybacks, slowing the pace of debt reduction that has occurred since the purchase of Allied Waste Industries in 2008. As of March 31, 2012 RSG's debt/EBITDA stood at 2.8x, substantially unchanged from a year ago.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Evaluating Corporate Governance' (Dec. 16, 2010);

--'Analysis of U.S. Corporate Pensions' (Dec. 1, 2010);

--'Liquidity Considerations for Corporate Issuers' (June 12, 2007).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Evaluating Corporate Governance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=657143

Analysis of U.S. Corporate Pensions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=578365

Liquidity Considerations for Corporate Issuers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=328666

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Contacts:

Fitch Ratings
Primary Analyst
Joe Rohlena, CFA, [phone]
Associate Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Stephen Brown, [phone]
Senior Director
or
Committee Chairperson
William Warlick, [phone]
Senior Director
or
Media Relations
Brian Bertsch, [phone]
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