Moody's Boosts Progressive Waste (BIN) Corp. Ratings from Ba2 to Ba1; Outlook Stable

October 1, 2012 1:45 PM EDT
Moody's Investors Service raised to Ba1 from Ba2 the corporate family and probability of default ratings of Progressive Waste Solutions Ltd. (NYSE: BIN). Moody's also assigned a Ba1 rating to the company's two proposed bank facilities, a $1.75 billion revolving credit facility and $500 million term loan. This new debt is intended to consolidate the revolving credit facilities outstanding at the company's primary subsidiaries, United States-based IESI ($1.25 billion) and Canada-based BFI ($595 million). Moody's also raised to Ba1 from Ba2 the rating on the IESI facility, the only one of these existing facilities rated. Following completion of the refinancing, the rating on the existing facility is expected to be withdrawn. The outlook is stable.


Progressive Waste Solutions, Ltd.

Corporate Family, to Ba1 from Ba2

Probability of Default, to Ba1 from Ba2

$1,750 million first lien revolving credit facility due 10/2017 assigned at Ba1, LGD3, 46%

$500 million first lien term loan due 10/2019 assigned at Ba1, LGD3, 46%

Speculative Grade Liquidity affirmed at SGL-2

Rating Outlook, Stable

IESI Corporation

$1,254 million first lien revolver due 7/2014 to Ba1, LGD3, 41% from Ba2, LGD3, 46% (to be withdrawn at close of transaction)

Rating Outlook, Stable


The action was driven by the steady improvement in the company's credit profile since the purchase of Waste Services Inc. (WS) in 2010. The Ba1 CFR is driven by Progressive's high margins (Moody's adjusted EBITDA of 28%+ in twelve months ending June 30, 2012 compared to 27% average for Moody's rated solid waste companies), strong cash flow (30% cash from
operations/total debt (CFO/TD)), low leverage (2.7x), and geographic diversification. This geographic diversification is evidenced by substantial operations across Eastern and Western Canada, as well as Northeastern and Southern United States. Progressive also features strong interest coverage (just under 5x Moody's adjusted EBIT/interest), though
some decline would be expected in a rising rate environment given the company's heavy reliance on mostly floating rate bank debt. The acquisition of WS increased leverage to over 3.5x and, since then, the company has grown operating income measurably faster than debt, leading to a reduction in leverage and improvement in other key credit metrics. The replacement of the revolving credit facilities currently issued by IESI and BFI, with a revolver and term loan at the parent company guaranteed by IESI and BFI, represents a fiscal integration and reporting
simplification of the company, another credit positive. Moody's expects the company to continue acquiring and building solid waste and recycling assets, funding the acquisitions primarily with internally generated cash flow as well as debt, keeping in line within its publicly stated (non-Moody's adjusted) leverage range of 2.3x-2.7x.

The stable outlook reflects Moody's expectation for Progressive to maintain its credit profile in line with recent performance. This is driven by our forecast of 2-3% revenue growth for MSW sector over the coming 18 months and for the company to prudently operate within this backdrop.

Reducing Moody's adjusted debt/EBITDA below 2x, increasing free cash flow/total debt above 12%, and EBIT/interest close to 6x could lead to upward rating momentum. Increasing leverage over 3x and decreasing CFO/TD below 25% could lead to downward rating momentum.

The company's liquidity is viewed as good, as reflected in the Speculative Grade Liquidity rating of SGL-2. Following the close of the refinancing, the company will have approximately $700 million of availability under its revolving credit facility, have substantial room under the facilities' covenants, and is expected to substantially cover cash needs with internally generated cash flow. While the company does have assets which could be sold to bolster liquidity, the assets are substantially pledged to the credit facilities.

The principal methodology used in rating Progressive Waste Solutions, Ltd. was the Solid Waste Management Industry Methodology published in February 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

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