Summary
Waste Management, Inc. (WM) announced on August 21, 2006, the execution of a new five-year, $2.4 billion revolving credit facility, effective August 17, 2006. This new facility replaces an existing one and will mature in 2011, providing a significant liquidity backstop for the company's operations and letter of credit needs. The facility is backed by a guarantee from Waste Management Holdings, Inc., a wholly-owned subsidiary. Key terms include interest rate options based on the Eurodollar rate plus a spread or a base rate, contingent on WM's public debt ratings. Notably, at the time of closing, there were no outstanding borrowings under the old facility, but approximately $1.4 billion in letters of credit were transferred to the new facility. The agreement includes standard financial covenants, such as minimum interest coverage and maximum total debt to EBITDA ratios, along with customary restrictions on subsidiary debt, liens, investments, and asset disposals, designed to ensure financial prudence and operational flexibility.
Key Highlights
- 1New 5-year, $2.4 billion revolving credit facility executed on August 17, 2006.
- 2The new facility replaces a prior $2.4 billion facility that would have expired in 2009.
- 3Approximately $1.4 billion in outstanding letters of credit were transferred to the new facility.
- 4No borrowings were outstanding under the previous facility at the time of the new facility's closing.
- 5Interest rates are tied to Eurodollar rate plus a spread (0.17% to 0.575%) or a base rate, dependent on debt ratings.
- 6Key financial covenants include maintaining a minimum interest coverage ratio of 2.75x and a maximum total debt to EBITDA ratio of 3.5x.
- 7The agreement contains standard covenants and restrictions on subsidiary debt, liens, investments, and asset dispositions.