American Home Shield 2008 Annual Report Download - page 108

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 14. Long-Term Debt (Continued)
10.75%/11.50% Senior Toggle Notes
On the Closing Date, in connection with the completion of the Merger, Acquisition Co. entered into the Interim Loan Facility. The rights and obligations
of Acquisition Co. under the Interim Loan Facility were assumed by ServiceMaster on the Closing Date of the Merger.
The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted into
Permanent Notes. The Permanent Notes were issued pursuant to a refinancing indenture. In connection with the issuance of Permanent Notes, ServiceMaster
entered into a registration rights agreement, pursuant to which ServiceMaster filed with the SEC a registration statement with respect to the resale of the
Permanent Notes, which was declared effective on January 16, 2009.
Pursuant to the refinancing indenture, ServiceMaster may, at its option prior to the start of any six month interest period through July 2011, elect to pay
Cash Interest, PIK Interest, or 50% as Cash Interest and 50% as PIK Interest. Cash Interest will accrue on the Permanent Notes at a rate per annum equal to
10.75%. PIK Interest will accrue on the Permanent Notes at a rate per annum equal to 11.50%. If we elect to pay PIK Interest, we will increase the principal
amount of the notes in an amount equal to the amount of PIK Interest payable for the applicable payment period to the holders of the Permanent Notes on the
relevant record date. All interest payments due through January 2009 were paid entirely as Cash Interest. The Company has elected to pay all interest payable
in 2009 entirely as Cash Interest.
The Permanent Notes are senior unsecured obligations of ours and rank equally in right of payment with all of our other existing and future senior
unsecured indebtedness. The Permanent Notes are guaranteed by certain of our subsidiaries on a senior unsecured basis. The subsidiary guarantees are general
unsecured senior obligations of the subsidiary guarantors and rank equally in right of payment with all of the existing and future senior unsecured
indebtedness of our non-guarantor subsidiaries. The Permanent Notes are effectively junior to all of our existing and future secured indebtedness to the extent
of the value of the assets securing such indebtedness.
During the first quarter of 2009, the Company completed open market purchases of $89.0 million in face value of our Permanent Notes for a cost of
$41.0 million. The debt acquired by the Company has been retired, and the Company has discontinued the payment of interest. The Company expects to
record a gain on debt extinguishment of approximately $48.0 million in its condensed consolidated statement of operations for the first quarter of 2009 related
to these retirements.
Revolving Credit Facility
On the Closing Date, in connection with the completion of the Merger, ServiceMaster entered into the Revolving Credit Facility. The Revolving Credit
Facility provides for senior secured revolving loans and stand-by and other letters of credit of up to a maximum aggregate principal amount of $500 million.
The Revolving Credit Facility limits outstanding letters of credit to $75 million. There was $165 million and $0 million of revolving loans outstanding under
the Revolving Credit Facility on December 31, 2008 and 2007, respectively. There was $16 million and $0 million of letters of credit outstanding under the
Revolving Credit Facility on December 31, 2008 and 2007, respectively. As of December 31, 2008, the Company had $319 million of remaining capacity
available under the Revolving Credit Facility.
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