Waste Management Inc.

The stable rating outlook on Waste Management reflects S&P Global Ratings' expectation that the company's strong position in solid waste services will enable it to maintain its operating performance and financial ratios in the next two years. The outlook encompasses our view that the company will maintain discipline regarding its financial policy decisions, including share repurchases and acquisitions, such that the funds from operations (FFO)-to-adjusted debt ratio remains between 20%-30% and adjusted debt to EBITDA remains between 3.0x-4.0x. We could lower the ratings if an unexpectedly severe downturn in the economy significantly weakens pricing and volumes of waste services, such that revenue contracts decline by over 5% and EBITDA margins deteriorate to below 22%, resulting in an FFO to adjusted

... Management Inc.'s vertical integration of collection, recycling, transfer, and disposal provides the company with a solid competitive advantage, including pricing power, allowing for control of the waste stream from its origination to disposal. The Advanced Disposal Services Inc. (ADS) acquisition will provide the company with complementary assets and expand its customer base. ADS has annual revenue of over $1.5 billion and EBITDA of about $400 million. The company offers nonhazardous solid waste collection, transfer, recycling, and disposal. The proposed acquisition would modestly improve Waste Management's business by increasing the scale and scope of its operations while providing opportunities for cost and capital expenditure synergies. Temporary leverage fluctuation won't impact key financial ratios. While the proposed acquisition of ADS will moderately increase Waste Management's leverage, S&P Global Ratings anticipates adjusted...

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