Scottsdale, Ariz -- Allied Waste Industries' Board of Directors has approved a plan to replace its bank credit facility, extend maturities and enhance its liquidity and capital structure while divesting itself from non-core assets. The company expects divestitures will generate about $300 million in after-tax proceeds during 2003. Net proceeds will be used to repay oustanding balances with its existing creditor, the company says. Additionally, Allied plans to issue approximately $100 million in common stock; $300 million of three-year convertible preferred stock; issue approximately $300 million in 10-year senior notes; issue approximately $150 million of accounts receivable securitization; and place a $3 billion credit facility.
"We are pleased to announce these exciting plans to improve the capital structure of our company," said Tom Ryan, Executive Vice President and CFO of Allied Waste. "We believe investors will benefit from the multiple steps taken to significantly extend maturities, increase covenant flexibility and enhance liquidity. Cash generated from the financing and divestiture activities combined with the 2003 free cash flow should enable us to retire $1 billion of debt this year, bringing our year- end debt balance below $7.9 billion."
Allied also has announced because of the increase in fuel costs, the severe winter and continued economic downturn, its first quarter results could be weaker than initially anticipated. In response, the company will initiate a pricing program aimed at the collection and landfill businesses beginning in May. Coupled with the workforce reduction of 500 employees that occurred in April, the company expects the new pricing program to help generate approximately $45 million.
"We are adjusting the workforce level to reflect the current economic conditions without restructuring the business," said Tom Van Weelden, Chairman and CEO. "We also are taking a proactive approach to appropriately price for the value of our assets and recover rising operating costs. We are confident in our ability to meet our original goals for the year given these actions and are pleased to be in a position to execute our financing and divestiture plans which we believe will be value enhancing to all stakeholders."
Allied's outlook for 2003 includes generating revenue of approximately $5.5 billion, EBITDA of approximately $1.775 billion, free cash flow of approximately $380 million and a debt balance at December 31, 2003, of approximately $8.462 billion, prior to the financing plan and divestitures, the company says.