Republic Services Inc. (RSG) announced that it will redeem its 7.125% Senior Notes due 2016 on May 16, 2011. The Notes will be redeemed at 103.563% of the principal amount of the Notes plus accrued and unpaid interest.
To fund the redemption, Republic Services intends to use incremental borrowings under its revolving credit facility and cash on hand. The company may also explore capital market opportunities to fund the redemption if market conditions are favorable.
For the redemption, the company expects to incur a charge, for extinguishment of the Notes, of approximately $82.7 million, of which $21.4 million pertains to the cash premium. This charge will be reflected in its second quarter 2011 financial results.
Republic Services ended fiscal 2010 with a cash and cash equivalent balance of $88.3 million, noticeably up from $48 million at the end of fiscal 2009. Republic Services had $6.74 billion of debt as of December 31, 2010 compared with $6.96 billion as of December 31, 2009.
The company’s debt to capitalization ratio at year end 2010 was 46.2% compared with 47.9% at the end of the prior year. The financial strength of the company fares better than its peer, Waste Management Inc. (WM), which had a debt to capitalization ratio of 58.7% as of December 31, 2010.
We expect the company’s solid cash position, lower debt levels and share buyback program to help deliver improving results going forward. However, revenue declines at the majority of its business lines remain a concern. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
Republic Services is the second largest domestic non-hazardous solid waste company in the U.S. It provides non-hazardous solid waste disposal services for commercial, industrial, municipal and residential applications through a network of 375 collection companies in 40 states and Puerto Rico.
REPUBLIC SVCS (RSG): Free Stock Analysis Report
WASTE MGMT-NEW (WM): Free Stock Analysis Report
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