American Home Shield 2010 Annual Report Download - page 51

Table of Contents
Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain
agreed upon liability level and in other circumstances required by the counterparty. As of December 31, 2010, the estimated fair value of the Company's fuel
swap contracts was a net asset of $6.6 million, and the Company posted $1.5 million in letters of credit as collateral under its fuel hedging program, none of
which were issued under the Company's Revolving Credit Facility. The continued use of letters of credit for this purpose could limit the Company's ability to
post letters of credit for other purposes and could limit the Company's borrowing availability under the Revolving Credit Facility. However, the Company
does not expect the fair value of its outstanding fuel swap contacts to materially impact its financial position or liquidity.
The Company's ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required,
borrowings under the Revolving Credit Facility and accounts receivable securitization arrangement (discussed below). We expect that cash provided from
operations and available capacity under the Revolving Credit Facility and accounts receivable securitization arrangement will provide sufficient funds to
operate our business, make expected capital expenditures and meet our liquidity requirements for the following 12 months, including payment of interest and
principal on our debt. As of December 31, 2010, the Company had $500.0 million of remaining capacity available under the Revolving Credit Facility and
$21.5 million of remaining capacity under the accounts receivable securitization arrangement.
On February 2, 2011, ServiceMaster entered into an amendment to its Revolving Credit Facility, which provides for senior secured revolving loans and
stand-by and other letters of credit. Prior to the amendment, the facility was scheduled to mature on July 24, 2013 and provided for maximum borrowing
capacity of $500.0 million with outstanding letters of credit limited to $75.0 million. The Company desired to extend the maturity date of the facility by one
year, and as an inducement for such extension offered to allow any lenders in the syndicate group that were willing to extend the maturity date by one year a
20 percent reduction of such lender's loan commitment. As a result of the amendment, the Company will have available borrowing capacity under its amended
Revolving Credit Facility of approximately $442.0 million through July 24, 2013 and will have approximately $229.0 million of available borrowing capacity
from July 25, 2013 through July 24, 2014. The Company will continue to have access to letters of credit up to $75.0 million through July 24, 2014.
The Company may from time to time repurchase or otherwise retire the Company's debt and take other steps to reduce the Company's debt or otherwise
improve the Company's financial position. These actions may include open market debt repurchases, negotiated repurchases, and other retirements of
outstanding debt and opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on
market conditions, trading levels of the Company's debt, the Company's cash position, compliance with debt covenants and other considerations. Affiliates of
the Company may also purchase the Company's debt from time to time, through open market purchases or other transactions. In such cases, the Company's
debt may not be retired, in which case the Company would continue to pay interest in accordance with the terms of the debt, and the Company would continue
to reflect the debt as outstanding in its Consolidated Statements of Financial Position.
Between the Merger and December 31, 2010, Holdings completed open market purchases totaling $65.0 million in face value of the Permanent Notes for
a cost of $21.4 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. During the years ended December 31, 2010, 2009 and 2008, the Company recorded interest expense of $7.0 million, $6.9 million and $0.4 million,
respectively, related to Permanent Notes held by Holdings. During the years ended December 31, 2010 and 2009, the Company made cash payments to
Holdings in the amount of $7.0 million and $6.5 million, respectively. There were no cash payments made by the Company to Holdings in
47