8-KMaterial AgreementsExhibits & Filings

REPUBLIC SERVICES, INC. 8-K Report, Material Agreement (Jul 17, 2020)

Filed July 17, 2020For Securities:RSG

Summary

Republic Services, Inc. (RSG) announced on July 17, 2020, that it entered into Amendment No. 2 to its Credit Agreement on July 14, 2020. This amendment, effective as of July 14, 2020, primarily aims to enhance financial flexibility for future acquisitions by modifying existing covenants. While the company did not require immediate relief from previous restrictions, it sought to align its credit agreement with more favorable terms recently offered by its lenders. The key changes involve the elimination of the consolidated interest coverage ratio covenant and an adjustment to the total debt to EBITDA ratio covenant. The maximum allowed total debt to EBITDA ratio has been increased from 3.50 to 1.00 to 3.75 to 1.00. Furthermore, the amendment introduces an "elevated ratio period" provision, allowing a higher total debt to EBITDA ratio of up to 4.25 to 1.00 for a limited time following significant acquisitions (over $200 million), with a cap of two such periods during the credit agreement's term. The company anticipates its total debt to EBITDA ratio for the period ending June 30, 2020, to remain consistent with the ratio from the first quarter of 2020.

Key Highlights

  • 1Republic Services amended its Credit Agreement on July 14, 2020, to increase financial flexibility, particularly for future acquisitions.
  • 2The amendment eliminates the consolidated interest coverage ratio covenant.
  • 3The maximum total debt to EBITDA ratio has been increased from 3.50:1.00 to 3.75:1.00.
  • 4A new provision allows for an "elevated ratio period" with a higher total debt to EBITDA limit of 4.25:1.00 following acquisitions exceeding $200 million.
  • 5The elevated ratio period is capped at three fiscal quarters and a maximum of two such periods during the credit agreement's term.
  • 6The company expects its total debt to EBITDA ratio for Q2 2020 to be consistent with Q1 2020 levels.
  • 7These changes provide RSG with more strategic maneuverability for growth through acquisitions without immediately violating debt covenants.

Frequently Asked Questions

The primary purpose of the amendment is to provide Republic Services with greater financial flexibility to pursue future acquisitions. It adjusts the existing debt covenants to allow for higher leverage ratios, especially in connection with significant M&A activity.

The amendment removes the consolidated interest coverage ratio covenant entirely. It also increases the maximum allowable total debt to EBITDA ratio from 3.50 to 1.00 to 3.75 to 1.00. Additionally, it introduces an 'elevated ratio period' that permits a ratio of up to 4.25 to 1.00 for a limited time after large acquisitions.

An 'elevated ratio period' can be elected by the company if it completes one or more acquisitions in a fiscal quarter with a combined consideration exceeding $200 million. During this period, the total debt to EBITDA ratio is allowed to be up to 4.25 to 1.00. This elevated ratio is permitted for the quarter of the acquisition and the following three quarters, but the company can only enter into a maximum of two such periods during the life of the credit agreement.

The filing states that the company did not require relief under the previous covenants, but rather sought to conform the Credit Agreement to more favorable terms. The expectation that the total debt to EBITDA ratio for Q2 2020 will remain consistent with Q1 2020 levels suggests the company is managing its debt within existing parameters but is proactively enhancing its ability to finance future growth opportunities.