American Home Shield 2008 Annual Report Download - page 19

Table of Contents
have important consequences to holders of our debt and other stakeholders in the Company. Because of our substantial debt:
our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing could become impaired;
our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate
purposes and our ability to satisfy our obligations with respect to our debt may be impaired in the future;
a large portion of our cash flow from operations must be dedicated to the payment of principal and interest on our debt, thereby reducing the
funds available to us for other purposes;
we are exposed to the risk of increased interest rates because a portion of our borrowings, including under the Credit Facilities, and certain
floating rate operating leases are at variable rates of interest;
it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such debt;
we may be more vulnerable to general adverse economic and industry conditions;
we may be at a competitive disadvantage compared to our competitors with less debt or with comparable debt on more favorable terms and, as a
result, they may be better positioned to withstand economic downturns;
our ability to refinance debt may be limited or the associated costs may increase; and
our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited, or we may be prevented
from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins of our
businesses.
Despite our indebtedness levels, we and our subsidiaries may be able to incur substantially more debt, including secured debt. This could further
exacerbate the risks associated with our substantial debt.
We and our subsidiaries may be able to incur substantial additional debt in the future. The terms of the indentures governing our debt securities do not
prohibit us or our subsidiaries from doing so. The Credit Facilities provide us with commitments for additional borrowings of up to $319 million under the
Revolving Credit Facility, as of December 31, 2008, and permit additional borrowings beyond those commitments under certain circumstances. In addition,
we have the option to pay interest on portions of our debt by increasing the principal amount of the outstanding loans ("PIK Interest"), which would increase
our debt by the amount of any such PIK Interest. If new debt is added to our current debt levels, the related risks we face would increase, and we may not be
able to meet all of our debt obligations.
The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our ability to operate our
business.
The Credit Facilities contain covenants that, among other things, restrict our ability to:
incur additional debt (including guarantees of other debt);
pay dividends or make other restricted payments, including investments;
prepay or amend the terms of our other debt;
enter into certain types of transactions with affiliates;
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