Fitch Rates Republic Services Inc.'s Proposed Notes 'BBB'

Fitch Ratings has assigned a rating of 'BBB' to Republic Services, Inc.'s (RSG) proposed $750 million senior unsecured note offering. Fitch's current Issuer Default Rating (IDR) for RSG is 'BBB', and the Rating Outlook is Stable.

Proceeds from the 10-year issuance are expected to be used to fund the redemption of $750 million of Allied Waste's 6.875% notes due in 2017. RSG now has no major debt maturities until 2018. The company expects to incur a $97 million charge related to the redemption, of which $26 million will be cash. Provisions for the new debt are similar to the company's other recent note issuances.

Recent company performance has been in-line with Fitch's expectations. The ratings reflect the company's healthy operating margins, stable debt levels, and proven ability to generate substantial free cash flow (FCF). 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 $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 per Fitch's calculations stood at 2.8 times (x), substantially unchanged from a year ago. Debt/EBITDA as calculated for RSG's debt covenant was 3.0x for the same time period.

RSG also recently amended and extended its $1.25 billion credit facility due in 2013. The amendment primarily extends the maturity from 2013 to 2017. Other changes to the facility include initiating 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, and to add back all non-cash losses on the extinguishment of debt, where the previous agreement only added back non-cash losses on debt at Allied Waste.

The full list of ratings is as follows:

Republic Services, Inc.

--Issuer Default Rating (IDR) 'BBB';

--Senior unsecured bank credit facilities 'BBB';

--Senior unsecured long-term debt 'BBB'.

Allied Waste Industries, Inc.

--IDR 'BBB'.

Allied Waste North America

--IDR 'BBB';

--Senior unsecured rating 'BBB'.

Browning-Ferris Industries

--IDR 'BBB';

--Senior unsecured rating 'BBB'.

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

Applicable Criteria and Related Research:

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

Applicable Criteria and Related Research:

Corporate Rating Methodology

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

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Contacts:

Fitch, Inc.
Primary Analyst
Joe Rohlena, CFA, [phone]
Associate Director
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]
[e-mail]