American Home Shield 2008 Annual Report Download - page 55

Table of Contents
The Company was advised by Holdings that, during the year ended December 31, 2008, Holdings completed open market purchases totaling
$54.0 million in face value of our Permanent Notes for a cost of $16.9 million. The debt acquired by Holdings has not been retired, and the Company has
continued to pay interest in accordance with the terms of the debt. Interest accrued by the Company and payable to Holdings as of December 31, 2008
amounted to $0.4 million. There were no interest payments by the Company to Holdings in 2008.
The Company was advised by Holdings that, during January 2009, Holdings completed additional open market purchases of $11.0 million in face value
of our Permanent Notes for a cost of $4.5 million.
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 the debt extinguishment of approximately $48.0 million pre-tax in its consolidated statement of operations for the first quarter of 2009 related
to these retirements.
In light of the uncertainty in the credit and financial markets, in September 2008, we borrowed $165 million under our existing $500 million Revolving
Credit Facility to increase our cash position to preserve our financial flexibility. Although we are not currently experiencing any limitation of access to the
Revolving Credit Facility and are not aware of any issues currently impacting the ability of the lenders under them to honor their commitments to extend
credit, there is no assurance that the U.S. and global credit crisis will not adversely affect our ability to borrow on the Revolving Credit Facility or otherwise
in the future.
The Company has entered into an accounts receivable securitization arrangement under which TruGreen LawnCare and Terminix sell certain eligible
trade accounts receivable to ServiceMaster Funding Company LLC ("Funding"), the Company's wholly-owned, bankruptcy-remote subsidiary which is
consolidated for financial reporting purposes. Funding, in turn, may transfer, on a revolving basis, an undivided percentage ownership interest of up to
$50 million in the pool of accounts receivable to one or both of the unrelated purchasers who are parties to the accounts receivable securitization arrangement
("Purchasers"). The amount of the eligible receivables varies during the year based on seasonality of the business and could, at times, limit the amount
available to the Company from the sale of these interests.
The accounts receivable securitization arrangement is a 364-day facility that is renewable annually at the option of Funding, with a final termination date
of July 17, 2012. Only one of the Purchasers is required to purchase interests under the arrangement. If this Purchaser were to exercise its right to terminate its
participation in the arrangement, which it may do in the third quarter of each year, the amount of cash available to the Company may be reduced or
eliminated. This Purchaser did not exercise its right to terminate its participation in the arrangement during 2008.
During the third quarter of 2008, Funding transferred a $10 million interest in the pool of accounts receivable to a Purchaser to increase our cash position
to preserve our financial flexibility in light of the uncertainty in the credit and financial markets. During the Successor period from July 25, 2007 to
December 31, 2007, the Predecessor period from January 1, 2007 to July 24, 2007, there were no transfers of interests in the pool of accounts receivables to
Purchasers under this arrangement.
As a holding company, we depend on our subsidiaries to distribute funds to us so that we may pay our obligations and expenses, including our debt
service obligations. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and
financial condition and general business conditions. As previously described, certain of our subsidiaries are subject to legal and regulatory restrictions on the
payment of dividends to us.
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