Rural/Metro to hold tender offer, consent bid for 12¾% notes and consent bid for 9 7/8% notes

By Susanna Moon

Chicago, Oct. 20 - Rural/Metro Corp. said it expects to launch a tender offer and consent solicitation for all of its 12¾% senior discount notes due 2016 and a consent solicitation for its 9 7/8% senior subordinated notes due 2015.

In the offer for the 12¾% notes, the company will pay 104% of the accreted value of the notes as of the payment date for each $1,000 principal amount tendered. The total amount includes a consent payment of 1% of the accreted value for notes tendered by the consent date.

The proposed amendments to the 12¾% notes would eliminate or modify substantially all of the restrictive covenants, some events of default and some other provisions contained in the indenture.

The company also plans to solicit consents for the 9 7/8% notes to modify the restricted payment covenant, allowing for a dividend payment to Rural/Metro to be used to repurchase the 12¾% notes.

Rural/Metro expects to offer a consent fee of $50 for each $1,000 principal amount of 9 7/8% notes.

Approval of the proposed amendment requires the consent of holders of at least a majority in principal amount of the 9 7/8% notes. The consent solicitation also is expected to be contingent upon the tender of at least a majority of the 12¾% notes.

The tender offer and the consent solicitation for the 12¾% notes are expected to be contingent upon the tender of at least a majority of the outstanding principal amount of the notes, the refinancing of the company's credit facility due 2011 and the successful completion of the consent solicitation for the 9 7/8% notes.

At its investor day conference on April 3, 2009 the company said it was continuing to evaluate its options to deleverage its balance sheet.

"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 at the time.

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."

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

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

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