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TEXT-S&P puts Waste Connections 'BBB' rating on watch negative
September 17, 2012 / 9:23 PM / 5 years ago

TEXT-S&P puts Waste Connections 'BBB' rating on watch negative

Overview
     -- Waste Connections Inc. today announced that it has entered into an 
agreement to acquire R360 Environmental Solutions Inc. for $1.3 billion in 
cash.  
     -- The transaction is subject to certain closing conditions, including 
receipt of regulatory approvals, and the company expects the closing to occur 
in the fourth quarter of 2012.
     -- We are placing our 'BBB' corporate credit rating on the company on 
CreditWatch with negative implications. This reflects our expectation that the 
acquisition will likely have a negative impact on the company's financial risk 
profile, which could lead to a downgrade.

Rating Action
On Sept 17, 2012, Standard & Poor's Ratings Services placed it 'BBB' rating on 
Texas-based Waste Connections Inc. on CreditWatch with negative implications.

Rationale
The CreditWatch placement reflects the likelihood that Waste Connections 
Inc.'s financial risk profile will weaken beyond expectations at the current 
rating, given the expectation that the company will primarily fund the R360 
Environmental Solutions acquisition with debt. The CreditWatch placement will 
also allow for a reassessment of Waste Connections' business risk profile 
following the acquisition, and a more thorough understanding of management's 
financial policy objectives.  

Waste Connections ranks among the leading solid waste companies in the U.S. 
and generated revenues of $1.6 billion for the 12 months ended June 30, 2012, 
through a balance of collection services, disposal and transfer services, 
recycling and other services in mostly secondary (non-urban) markets. A key to 
resolving the CreditWatch will be assessing the implications of the 
acquisition on Waste Connections' competitive position, growth strategy, and 
the company's track record of consistent profitability.  

As of June 30, 2012, credit measures were appropriate for the rating, with 
funds from operations (FFO)-to-total debt (adjusted for capitalized operating 
leases) at 36%, and free operating cash flow-to-total adjusted debt of 22%. At 
the current ratings, we expect FFO-to-total adjusted debt to average near the 
30% level.  

The company expects the acquisition to close in the fourth quarter of 2012 and 
the acquisition is subject to customary regulatory approvals and closing 
conditions.

CreditWatch
We placed the ratings on CreditWatch with negative implications. We will 
monitor developments relating to this transaction and will resolve the 
CreditWatch listing once further details related to the transaction become 
available. We intend to meet with management to discuss a variety of topics 
related to the transaction, such as integration risks, the pro forma capital 
structure, and management's strategic objectives and financial policies. The 
CreditWatch placement indicates the heightened risk that we will lower the 
ratings following our review of the transaction and implications for credit 
quality. 

Related Criteria And Research
     -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, 
May 27, 2009
     -- Corporate Ratings Criteria 2008, April 15, 2008

Ratings List
CreditWatch/Outlook Action
                            To                 From
Waste Connections Inc.
 Corporate credit rating    BBB/Watch Neg/--   BBB/Stable/--


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.

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