Waste Management Inc (WM) entered into a revolving credit agreement with a syndicate of banks, which allows the company to borrow or repay debt as required up to $2 billion within a period of 3 years. Waste Management‘s wholly-owned subsidiary, Waste Management Holdings Inc., guaranteed for all the obligations under the new facility.
The syndicate of banks including Bank of America N.A., a subsidiary of Bank of America Corporation (BAC) acted as administrator. JPMorgan Chase Bank N.A., a wing of JPMorgan Chase & Co. (JPM) and Barclays Capital, an investment banking division of Barclays Bank plc (BCS) acted as co-syndication agents. Deutsche Bank Securities Inc., a subsidiary of Deutsche Bank AG (DB) and the Royal Bank of Scotland plc, part of Royal Bank of Scotland Group Plc (RBS) acted as co-documentation agents for the facility.
The new credit facility replaces the company’s existing five-year, $2.4 billion revolving facility that would have expired on August 2011.
As of March 31, 2010, apart from the $2.4 billion revolving credit facility, the company had an aggregate capacity of $580 million for letters of credit with a $175 million letter of credit facility expiring on June 2010, a $105 million letter of credit facility expiring on June 2013, a $100 million letter of credit facility expiring December 2014, and a $200 million letter of credit facility expiring June 2015.
These facilities provide for commitments from counterparties to issue letters of credit at the company’s request. As of March 31, 2010, no borrowings were outstanding under the revolving credit facility or the letter of credit facilities.
The new revolving facility announcement closely follows the announcement made on June 3, 2010 of pricing of an underwritten public offering of its $600 million of 4.75% senior notes due June 30, 2020.
The substitution of the $2 billion revolving credit facility in place of the $2.4 billion is cogent as per the usage of credit by the company.
We believe the combination of financial instruments will result in a strengthened balance sheet, a significant reduction in the group’s borrowings, an improved maturity profile and improved credit ratios.
On June 24, 2010, the closing share price of Waste Management was $32.14 as compared with $30.34 for Republic Services Inc. (RSG) and $3.87 for Casella Waste Systems Inc. (CWST), both of which are its peers.
Based in Houston, Texas, Waste Management is a provider of comprehensive waste management services in North America. The company provides integrated waste management services including collection, transfer, disposal, recycling and resource recovery, as well as other hazardous waste services to commercial, industrial, municipal and residential customers.
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