Rural/Metro considering options to reduce debt

By Stephanie N. Rotondo

Portland, Ore., April 3 - Rural/Metro Corp. is continuing to evaluate its options to deleverage its balance sheet, company management said during its Investor Day conference Friday.

As of the six months ended Dec. 31, Rural/Metro had $254 million of net debt, which equaled a total net leverage of 4.4 times. That level is the function of the company's quest to deleverage since 2005, when total net leverage was at 6.8 times.

"The biggest advantage that we have is that 76% of our debt has long-term maturities and relative to today's market, the rates are not too bad," Kristi Ponczak, chief financial officer, told investors.

Given that, and the company's "strong cash flow generation," Ponczak said that any plans to retire debt "would be at the company's discretion."

However, Rural/Metro is hampered by certain covenants, notably those under its 2005 credit facility refinancing and under its senior subordinated debenture, Ponczak stated. Both structures "limit our ability" to repurchase debt on the open market. Additionally, the company also has limitations on repurchasing its stock on the open market.

"But we are still looking at our options to reduce debt," Ponczak said. She noted that the company's options include "staying at the status quo," an exchange offer or a credit amendment that would allow the company to use free cash flow to repurchase debt or equity.

Ponczak declined to give any timing as far as when the company might decide to use one of those options. She also declined to disclose whether the costs of obtaining a credit agreement waiver had been priced.

Rural/Metro is a Scottsdale, Ariz.-based provider of private ambulance and fire services.

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