Rural/Metro reaches agreement with banks to amend and extend credit facility

By Sara Rosenberg

New York, Sept. 30 - Rural/ Metro Corp. reached an agreement in principle with its banks to amend and extend its credit facility. Under the proposed amendment, the maturity date is extended to Dec. 31, 2004, there are no principal amortization requirements until maturity, the interest rate is Libor plus 700 basis points and is initially anticipated at 8.8%, the company is in full covenant compliance and lenders receive a 10% equity stake in the company.

Furthermore, under the agreement, deferred interest of approximately $7 million accrued since March 31, 2000 and certain other amounts will be added to the principal balance of the loan, bringing the total balance of the facility to $152 million.

The company has been in lender negotiations since February 2000 when it was found in non-compliance with three covenants of its revolving credit agreement.

Stockholder approval to convert the lenders' preferred shares to fully diluted common stock will be sought at the next annual meeting.

"The amended facility contains several new provisions that we believe make it the best choice for the company and its stakeholders at this time," said Jack Brucker, president and chief executive officer, in a news release.

"We believe the rate under the amended agreement is reasonable, especially when we consider today's lending environment. That the facility will remain unsecured and requires no mandated principal payments are added points in the company's favor.

"We are hopeful that stockholders will recognize the benefits provided under this agreement. As equity holders in Rural/Metro, we believe the banks take on a greater interest in the Company's success and long-term equity value because they, too, will benefit from future achievements," Brucker continued.

"The company will be in full covenant compliance under its amended credit facility, and can continue to build the financial strength necessary to refinance or renegotiate the line at its new maturity date. All in all, we believe the potential upsides to be significant."

Rural/Metro is a Scottsdale, Ariz. provider of ambulance and fire protection services.

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