Rural/Metro refinances with credit facility based on lender interest

By Jennifer Lanning Drey

Savannah, Ga., Nov. 8 - Rural/Metro Corp.'s decision to revise its course of action for refinancing its outstanding debt was prompted by a significant level of interest shown by prospective bank lenders, Michael P. DiMino, Rural/Metro's chief executive officer, said Monday during the company's first-quarter earnings conference call.

In connection with its earnings, Rural/Metro announced Monday that it intends to negotiate a secured credit facility to replace its existing secured revolving credit, term loan and letter of credit facilities, and to finance the redemption of its outstanding 12¾% senior discount notes due 2016.

"Our decision to refinance when interest rates are considerably lower is a sensible and prudent way to save money as we execute on our business plan," DiMino said.

"We believe our ability to achieve our business objectives will be further enhanced by this flexible and attractively priced capital structure," he added.

The objectives of the transaction are to reduce the overall cost of capital, extend the company's market maturities, maximize flexibility to operate the business and structure a larger revolver and letter of credit facility to support growth and release restricted cash onto the balance sheet, he said.

Under the new facility, the company will not be required to cash collateralize any portion of its letter of credit facility, according to its earnings release.

Rural/Metro's previously announced offer of $200 million principal amount of senior notes due 2018 will not be pursued.

Significant growth opportunities

Looking ahead, Rural/Metro believes significant growth opportunities remain for the company to expand both strategically and organically, DiMino also said Monday.

"The pipeline for acquisitions is abundant, and we will continue to target accretive transactions that will produce solid returns on our invested capital," he said.

Rural/Metro has identified more than $200 million in all-inclusive growth opportunities and is actively pursuing selective targets that meet its criteria.

At the same time, the company also continues to pursue opportunities to grow organically through new 911-contract wins and new non-emergency market startups, he said.

Net revenue, EBITDA improve

Rural/Metro generated net revenue of $140.1 million for the first quarter, compared with net revenue of $130.5 million for the same period last year.

The company generated $15.2 million of cash from operating activities in the first quarter and ended the period with a cash position of $29.9 million.

First-quarter adjusted EBITDA from continuing operations improved to $21.1 million, representing an 18.5% increase over the comparable period in 2009.

Rural/Metro's growth in the first quarter was driven by increased transport volume, new contracts, rate increases and operating efficiencies, DiMino said.

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

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