Moody's lifts Allied Waste view to positive

Moody's Investors Service said it changed the outlook of Allied Waste Industries, Inc. to positive from stable and affirmed the long-term debt ratings of Allied Waste, Allied Waste North America, Inc. and Browning-Ferris Industries, LLC.

Ratings affirmed include Allied Waste's B2 corporate family and probability-of-default ratings, Caa1 (LGD5, 87%) $230 million 4.25% guaranteed senior subordinated convertible bonds due 2034, Caa1 (LGD6, 98%) $600 million 6.25% senior mandatory convertible preferred stock and SGL-1 speculative grade liquidity rating; Allied Waste North America's Ba3 (LGD2, 30%) guaranteed senior secured credit facilities, B2 (LGD4, 57%) guaranteed senior secured notes and B3 (LGD4, 70%) guaranteed senior unsecured notes; and Browning-Ferris Industries' B2 (LGD4, 57%) senior secured notes and B3 (LGD4, 70%) industrial revenue bonds.

The agency said the improvement in outlook reflects continuing strength in the industry as a whole and the company's pricing initiatives in driving enhanced internal revenue growth, which was 7.6% in the nine months ended Sept. 30 versus 5% in 2005 and 2.2% in 2004; the stabilization of the level of required capital expenditures; and the emergence of positive free cash flow-to-debt ratios in 2006.

The ratings benefit from a stable underlying business with limited available substitutes, the relative lack of cyclicality in the municipal solid waste industry, the company's prominent market position, its size and diversified revenue stream and its ownership of valuable, permitted disposal assets, Moody's said, although the ratings continue to be constrained by the company's high financial leverage and weak free cash flow generation.

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