Debt

Debt consists of the following:



	December 31,
	2011			2010
URNA and subsidiaries debt:
Accounts Receivable Securitization Facility (1)	$	255		$	221
$1.80 billion ABL Facility (1)	810			683
10 7/8 percent Senior Notes	489			488
9 1/4 percent Senior Notes	493			492
8 3/8 percent Senior Subordinated Notes	750			750
1 7/8 percent Convertible Senior Subordinated Notes	22			22
Capital leases	39			25
Total URNA and subsidiaries debt	2,858			2,681
Holdings:
4 percent Convertible Senior Notes	129			124
Total debt (2)	2,987			2,805
Less short-term portion	(395		)	(229		)
Total long-term debt	$	2,592		$	2,576


(1)	$929 and $7 were available under our ABL facility and accounts receivable securitization facility, respectively, at December 31, 2011. The ABL facility availability is reflected net of $50 of letters of credit. At December 31, 2011, the interest rates applicable to our ABL facility and accounts receivable securitization facility were 2.4 percent and 0.9 percent, respectively.

(2)

In August 1998, a subsidiary trust of Holdings (the “Trust”) issued and sold $300 of 6¹/2 percent Convertible Quarterly Income Preferred Securities (“QUIPS”) in a private offering. The Trust used the proceeds from the offering to purchase 6¹/2 percent subordinated convertible debentures due 2028 (the “Debentures”), which resulted in Holdings receiving all of the net proceeds of the offering. The QUIPS are non-voting securities, carry a liquidation value of $50 (fifty dollars) per security and are convertible into Holdings’ common stock. Total long-term debt at December 31, 2011 and 2010 excludes $55 and $124 of these Debentures, respectively, which are separately classified in our consolidated balance sheets and referred to as “subordinated convertible debentures.” The subordinated convertible debentures reflect the obligation to our subsidiary that has issued the QUIPS. This subsidiary is not consolidated in our financial statements because we are not the primary beneficiary of the Trust. See note 13 (“Subordinated Convertible Debentures”) for additional detail.

Short-term debt

As of December 31, 2011, our short-term debt primarily reflects $255 of borrowings under our accounts receivable securitization facility and $129 of 4 percent Convertible Senior Notes. The 4 percent Convertible Senior Notes mature in 2015, but are reflected as short-term debt because they are convertible at December 31, 2011. As discussed below, in September 2011, we amended our accounts receivable securitization facility. During the year ended December 31, 2011, the monthly average amount outstanding under the accounts receivable securitization facility, including the former and amended facilities, was $230 and the weighted-average interest rate thereon was 1.4 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility during the year ended December 31, 2011, including the former and amended facilities, was $276.

Accounts Receivable Securitization Facility. In September 2011, we amended our accounts receivable securitization facility. The amended facility expires on September 26, 2012, and may be extended on a 364-day basis by mutual agreement of the Company and the purchasers under the facility. The amended facility provides for, among other things, (i) a decrease in the facility size from $325 to $300, (ii) adjustments to the receivables subject to purchase, (iii) generally lower borrowing costs, which are based on commercial paper rates plus a specified spread, and (iv) a commitment fee based on the utilization of the facility. Borrowings under the amended facility will continue to be reflected as short-term debt on our consolidated balance sheets. Key provisions of the amended facility include the following:


•	borrowings are permitted only to the extent that the face amount of the receivables in the collateral pool, net of applicable reserves, exceeds the outstanding loans by a specified amount. As of December 31, 2011, there were $372 of receivables in the collateral pool;


•	the receivables in the collateral pool are the lenders’ only source of repayment;


•	upon early termination of the facility, no new amounts will be advanced under the facility and collections on the receivables securing the facility will be used to repay the outstanding borrowings; and


•	standard termination events including, without limitation, a change of control of Holdings, URNA or certain of its subsidiaries, a failure to make payments, a failure to comply with standard default, delinquency, dilution and days sales outstanding covenants, or breach of certain financial ratio covenants under the ABL facility.

ABL Facility. In June 2008, Holdings, URNA, and certain of our subsidiaries entered into a credit agreement providing for a five-year $1.25 billion ABL facility, a portion of which is available for borrowing in Canadian dollars. In October 2008 and November 2009, the ABL facility was upsized to $1.285 billion and $1.36 billion, respectively. In October 2011, we amended the ABL facility. The amended facility, which expires on October 13, 2016, provides for, among other things, an increase in the facility size from $1.36 billion to $1.80 billion, an uncommitted incremental increase in the size of the facility of up to $500, and generally lower borrowing costs.

The ABL facility is subject to, among other things, the terms of a borrowing base derived from the value of eligible rental equipment and eligible inventory. The borrowing base is subject to certain reserves and caps customary for financings of this type. All amounts borrowed under the credit agreement must be repaid on or before October 2016. Loans under the credit agreement bear interest, at URNA’s option: (i) in the case of loans in U.S. dollars, at a rate equal to the London interbank offered rate or an alternate base rate, in each case plus a spread, or (ii) in the case of loans in Canadian dollars, at a rate equal to the Canadian prime rate or an alternate rate (Bankers Acceptance Rate), in each case plus a spread. The interest rates under the credit agreement are subject to change based on the availability in the facility. A commitment fee accrues on any unused portion of the commitments under the credit agreement at a rate per annum based on usage. Ongoing extensions of credit under the credit agreement are subject to customary conditions, including sufficient availability under the borrowing base. The credit agreement also contains covenants that, unless certain financial and other conditions are satisfied, require URNA to satisfy various financial tests and to maintain certain financial ratios. As discussed below (see “Loan Covenants and Compliance”), the only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio. Since the October 2011 amendment of the facility and through December 31, 2011, availability under the ABL facility has exceeded the required threshold and, as a result, these maintenance covenants have been inapplicable. In addition, the credit agreement contains customary negative covenants applicable to Holdings, URNA and our subsidiaries, including negative covenants that restrict the ability of such entities to, among other things, (i) incur additional indebtedness or engage in certain other types of financing transactions, (ii) allow certain liens to attach to assets, (iii) repurchase, or pay dividends or make certain other restricted payments on capital stock and certain other securities, (iv) prepay certain indebtedness and (v) make acquisitions and investments. The U.S. dollar borrowings under the credit agreement are secured by substantially all of our assets and substantially all of the assets of certain of our U.S. subsidiaries (other than real property and certain accounts receivable). The U.S. dollar borrowings under the credit agreement are guaranteed by Holdings and by URNA and, subject to certain exceptions, our domestic subsidiaries. Borrowings under the credit agreement by URNA’s Canadian subsidiaries are also secured by substantially all the assets of URNA’s Canadian subsidiaries and supported by guarantees from the Canadian subsidiaries and from Holdings and URNA, and, subject to certain exceptions, our domestic subsidiaries. Under the ABL facility, a change of control (as defined in the credit agreement) constitutes an event of default, entitling our lenders, among other things, to terminate our ABL facility and to require us to repay outstanding borrowings.

As of December 31, 2011, the ABL facility was our only long-term variable rate debt instrument. During the year ended December 31, 2011, the monthly average amount outstanding under the ABL facility, including the former and amended facilities, was $707, and the weighted-average interest rate thereon was 3.1 percent. The maximum month-end amount outstanding under the ABL facility during the year ended December 31, 2011, including the former and amended facilities, was $810.

10⁷/8 percent Senior Notes. In June 2009, URNA issued $500 aggregate principal amount of 10⁷/8 percent Senior Notes (the “10⁷/8 percent Notes”), which are due June 15, 2016. The net proceeds from the sale of the 10⁷/8 percent Notes were $471 (after deducting the initial purchasers’ discount and offering expenses). The 10⁷/8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA’s domestic subsidiaries. The 10⁷/8 percent Notes may be redeemed on or after June 15, 2013 at specified redemption prices that range from 105.438 percent in 2013 to 100.0 percent in 2015 and thereafter. The indenture governing the 10 ⁷/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) issuance of preferred stock of restricted subsidiaries; (vi) transactions with affiliates; (vii) dividend and other payment restrictions affecting restricted subsidiaries; (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees and (x) mergers, consolidations or sales of substantially all of its assets. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 10 ⁷/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if any, thereon. The difference between the December 31, 2011 carrying value of the 10⁷/8 percent Notes and the $500 principal amount relates to the $11 unamortized portion of the original issue discount recognized in conjunction with the issuance of these notes, which is being amortized through the above maturity date. The effective interest rate on the 10 ⁷/8 percent Notes is 11.50 percent.

9¹/4 percent Senior Notes. In November 2009, URNA issued $500 aggregate principal amount of 9¹/4 percent Senior Notes (the “9¹/4 percent Notes”), which are due December 15, 2019. The net proceeds from the sale of the 9¹/4 percent Notes were $480 (after deducting the initial purchasers’ discount and offering expenses). The 9¹/4 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA’s domestic subsidiaries. The 9¹/4 percent Notes may be redeemed on or after December 15, 2014 at specified redemption prices that range from 104.625 percent in 2014 to 100.0 percent in 2017 and thereafter. The indenture governing the 9¹/4 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) indebtedness; (ii) restricted payments; (iii) liens; (iv) asset sales; (v) issuance of preferred stock of restricted subsidiaries; (vi) transactions with affiliates; (vii) dividend and other payment restrictions affecting restricted subsidiaries; (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees and (x) mergers, consolidations or sales of substantially all of its assets. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 9¹/4 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if any, thereon. The difference between the December 31, 2011 carrying value of the 9¹/4 percent Notes and the $500 principal amount relates to the $7 unamortized portion of the original issue discount recognized in conjunction with the issuance of these notes, which is being amortized through the above maturity date. The effective interest rate on the 9¹/4 percent Notes is 9.50 percent.

8³/8 percent Senior Subordinated Notes. In October 2010, URNA issued $750 aggregate principal amount of 8³/8 percent Senior Subordinated Notes (the “8³/8 percent Notes”), which are due September 15, 2020. The net proceeds from the sale of the 8³/8 percent Notes were $732 (after deducting the initial purchasers’ discount and offering expenses). The 8³/8 percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA’s domestic subsidiaries. The 8³/8 percent Notes may be redeemed by URNA on or after September 15, 2015, at specified redemption prices that range from 104.188 percent in 2015 to 100.0 percent in 2018 and thereafter. The indenture governing the 8³/8 percent Notes contains certain restrictive covenants, including, among others, limitations on (i) additional indebtedness, (ii) restricted payments, (iii) liens, (iv) asset sales, (v) preferred stock of certain subsidiaries, (vi) transactions with affiliates, (vii) dividends and other payments, (viii) designations of unrestricted subsidiaries; (ix) additional subsidiary guarantees; and (x) mergers, consolidations or sales of substantially all of our assets. The indenture also requires that, in the event of a change of control (as defined in the indenture), URNA must make an offer to purchase all of the then outstanding 8³/8 percent Notes tendered at a purchase price in cash equal to 101 percent of the principal amount thereof plus accrued and unpaid interest, if any, thereon.

1⁷/8 percent Convertible Senior Subordinated Notes. In October and December 2003, URNA issued approximately $144 aggregate principal amount of 1⁷/8 percent Convertible Senior Subordinated Notes (the “1⁷/8 percent Convertible Notes”), which are due October 15, 2023. The net proceeds from the sale of the 1⁷/8 percent Convertible Notes were approximately $140, after deducting the initial purchasers’ discount and offering expenses. The 1⁷/8 percent Convertible Notes are unsecured and are guaranteed by Holdings. Holders of the 1⁷/8 percent Convertible Notes may convert them into shares of common stock of Holdings prior to their maturity at a current conversion price of approximately $21.83 per share (subject to further adjustment in certain circumstances), if (i) the price of Holdings’ common stock reaches a specific threshold, (ii) the 1⁷/8 percent Convertible Notes are called for redemption, (iii) specified corporate transactions occur or (iv) the trading price of the 1⁷/8 percent Convertible Notes falls below certain thresholds. The 1⁷/8 percent Convertible Notes mature on October 15, 2023. In October 2010, we redeemed $93 principal amount of the 1⁷/8 percent Convertible Notes following the exercise of a mandatory repurchase option by holders of the notes. Holders of the 1⁷/8 percent Convertible Notes may require URNA to repurchase all or a portion of the 1⁷/8 percent Convertible Notes in cash on each of October 15, 2013 and October 15, 2018 at 100 percent of the principal amount of the 1⁷/8 percent Convertible Notes to be repurchased. If the total $22 outstanding principal amount of the 1⁷/8 percent Convertible Notes was converted, the total cost to settle the notes would be $30, assuming a conversion price of $29.55 (the closing price of our common stock on December 31, 2011) per share of common stock. The total cost to settle would change approximately $1 for each $1 (actual dollars) change in our stock price. The 1⁷/8 percent Convertible Notes were not convertible at December 31, 2011.

4 percent Convertible Senior Notes. In November 2009, Holdings issued $173 aggregate principal amount of unsecured 4 percent Convertible Senior Notes (the “4 percent Convertible Notes”), which are due November 15, 2015. The net proceeds from the sale of the 4 percent Convertible Notes were approximately $167, after commissions, fees and expenses, but before the $26 cost of the convertible note hedge transactions described below. Holders of the 4 percent Convertible Notes may convert them into shares of Holdings’ common stock prior to the close of business on the business day immediately preceding May 15, 2015 (subject to earlier conversion in certain circumstances) at an initial conversion price of approximately $11.11 per share of common stock (subject to further adjustment in certain circumstances), if (i) the price of Holdings’ common stock reaches a specific threshold, (ii) the trading price of the 4 percent Convertible Notes falls below certain thresholds or (iii) specified corporate transactions occur. The difference between the December 31, 2011 carrying value of the 4 percent Convertible Notes and the outstanding principal amount of $168 reflects the $39 unamortized portion of the original issue discount recognized upon issuance of the notes, which is being amortized through the maturity date of November 15, 2015. Because the 4 percent Convertible Notes were convertible at December 31, 2011, an amount equal to the $39 unamortized portion of the original issue discount is separately classified in our consolidated balance sheets and referred to as “temporary equity.” Based on the price of our common stock during 2011, holders of the 4 percent Convertible Notes had the right to convert the notes during each of the quarters in 2011 at a conversion price of $11.11 per share of common stock. During the year ended December 31, 2011, $5 of the 4 percent Convertible Notes were converted. Upon the conversion of these notes, we received $1 from the hedge counterparties, and recognized a $1 increase in additional paid-in capital. Additionally, upon the conversion of these notes, additional paid-in capital was reduced by $7, reflecting the excess of the cash transferred upon settlement over the $5 principal amount of the converted notes. Based on the price of our common stock during the fourth quarter of 2011, holders of the 4 percent Convertible Notes have the right to convert the notes during the first quarter of 2012 at a conversion price of $11.11 per share of common stock. Between January 1, 2012 (the beginning of the first quarter) and January 23, 2012, none of the 4 percent Convertible Notes were converted.

If the total $168 outstanding principal amount of the 4 percent Convertible Notes was converted, the total cost to settle the notes would be $446, assuming a conversion price of $29.55 (the closing price of our common stock on December 31, 2011) per share of common stock. The $168 principal amount would be settled in cash, and the remaining $278 could be settled in cash, shares of our common stock, or a combination thereof, at our discretion. Based on the December 31, 2011 closing stock price, approximately 9 million shares of stock would be issued if we settled the entire $278 of conversion value in excess of the principal amount in stock. The total cost to settle would change approximately $15 for each $1 (actual dollars) change in our stock price. If the full principal amount was converted at our December 31, 2011 closing stock price, we estimate that we would receive approximately $40 in either cash or stock from the hedge counterparties, after which the effective conversion price would be approximately $13.78.

If Holdings undergoes a fundamental change (as defined in the indenture governing the 4 percent Convertible Notes), holders of the 4 percent Convertible Notes may require Holdings to repurchase all or any portion of their 4 percent Convertible Notes for cash at a price equal to 100 percent of the principal amount of the 4 percent Convertible Notes to be purchased plus any accrued and unpaid interest, including any additional interest, through but excluding the fundamental change purchase date. The difference between the December 31, 2011 carrying value of the 4 percent Convertible Notes and the $168 principal amount relates to the $39 unamortized portion of the original issue discount recognized in conjunction with the issuance of these notes, which is being amortized through the above maturity date. The original issue discount increased additional paid-in capital by $33, net of taxes, in our accompanying consolidated statements of stockholders’ equity (deficit), and represents the difference between the $173 of gross proceeds from the 4 percent Convertible Notes issuance and the fair value of the debt component of the 4 percent Convertible Notes at issuance. The effective interest rate on the debt component of the 4 percent Convertible Notes is 11.60 percent. Upon conversion of the 4 percent Convertible Notes, we pay cash for the principal amount of the note, and cash, shares of our common stock, or a combination thereof, at our discretion, for the portion of the conversion value that exceeds the principal amount of the note.

In connection with the 4 percent Convertible Notes offering, Holdings entered into convertible note hedge transactions with option counterparties. The convertible note hedge transactions cost $26, and decreased additional paid-in capital by $17, net of taxes, in our accompanying consolidated statements of stockholders’ equity (deficit). The convertible note hedge transactions cover, subject to anti-dilution adjustments, 15.1 million shares of our common stock. The convertible note hedge transactions are intended to reduce, subject to a limit, the potential dilution with respect to our common stock upon conversion of the 4 percent Convertible Notes. The effect of the convertible note hedge transactions is to increase the effective conversion price to $15.56 per share, equal to an approximately 75 percent premium over the $8.89 closing price of our common stock at issuance. The effective conversion price is subject to change in certain circumstances, such as if the 4 percent Convertible Notes are converted prior to May 15, 2015. In the event the market value of our common stock exceeds the effective conversion price per share, the settlement amount received from such transactions will only partially offset the potential dilution. For example, if, at the time of exercise of the conversion right, the price of our common stock was $30.00 or $35.00 per share, assuming an effective conversion price of $15.56 per share, on a net basis, we would issue 7.3 million or 8.4 million shares, respectively. Based on the price of our common stock during 2011, holders of the 4 percent Convertible Notes had the right to convert the notes during each of the quarters in 2011 at a conversion price of $11.11 per share of common stock. During the year ended December 31, 2011, $5 of the 4 percent Convertible Notes were converted at an effective conversion price of $13.70.

Retirement of Debt. During the years ended December 31, 2011 and 2010, we repurchased or redeemed and subsequently retired certain of our outstanding debt securities. In connection with these repurchases/redemptions, we recognized losses based on the difference between the net carrying amounts of the repurchased securities and the repurchase prices. A summary of our debt repurchase activity for the years ended December 31, 2011 and 2010 is as follows:



	Year ended December 31, 2011						Year ended December 31, 2010
	Repurchase price		Principal		Loss (1)		Repurchase price		Principal		Loss (1)
7 3/4 percent Senior Subordinated Notes (2)	$	—	$	—	$	—	$	490	$	484	$	(14	)
7 percent Senior Subordinated Notes (2)	—		—		—		267		261		(8		)
6 1/2 percent Senior Notes (2)	—		—		—		435		435		(4		)
1 7/8 percent Convertible Senior Subordinated Notes	—		—		—		93		93		(2		)
4 percent Convertible Senior Notes (3)	5		5		(*)		—		—		—
Total	$	5	$	5	$ (*)		$	1,285	$	1,273	$	(28	)

* Amount is insignificant (less than $1).

(1)

The amount of the loss is calculated as the difference between the net carrying amount of the related security and the repurchase price. The net carrying amounts of the securities are less than the principal amounts due to capitalized debt issuance costs and any original issue discount. Aggregate costs of less than $1 and $16 were written off in the years ended December 31, 2011 and 2010, respectively, in connection with the repurchases/redemptions. The $16 of aggregate costs written off in the year ended December 31, 2010 was comprised of $12 of write-offs of debt issuance costs and a $4 write-off of a previously terminated derivative transaction. The losses are reflected in interest expense, net in our consolidated statements of income.


(2)	Prior to December 31, 2010, we repurchased and retired the entire principal amounts of these debt securities, which are not reflected in our consolidated balance sheets as of December 31, 2011 and 2010.

(3)

As discussed above, based on the price of our common stock during 2011, holders of the 4 percent Convertible Senior Notes had the right to convert the notes during each of the quarters in 2011. We paid a total of $12 to settle the $5 principal amount of the 4 percent Convertible Senior Notes that were settled in 2011. The $5 repurchase price represents the repurchase price for the debt component of the settled securities. In connection with the settlement, as discussed above, additional paid-in capital was reduced by $7, reflecting the excess of the cash transferred upon settlement over the $5 principal amount of the converted notes.

In addition to the loss in the table above, during the year ended December 31, 2011, we recognized a loss of $3 associated with the amendment of our ABL facility discussed above. This loss is reflected in interest expense, net in our consolidated statements of income and reflects the write-off of debt issuance costs associated with creditors of the former ABL facility that did not participate in the amended ABL facility.

Loan Covenants and Compliance

As of December 31, 2011, we were in compliance with the covenants and other provisions of the ABL facility, the accounts receivable securitization facility, the senior notes and the QUIPS. Any failure to be in compliance with any material provision or covenant of these agreements could have a material adverse effect on our liquidity and operations.

As discussed above, in October 2011, we amended the ABL facility. The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio under the amended ABL facility. Since the October 2011 amendment of the facility and through December 31, 2011, availability under the ABL facility has exceeded the required threshold and, as a result, these maintenance covenants have been inapplicable. Subject to certain limited exceptions specified in the ABL facility, the fixed charge coverage ratio and the senior secured leverage ratio under the ABL facility will only apply in the future if availability under the ABL facility falls below the greater of 10 percent of the maximum revolver amount under the ABL facility and $150. As discussed above, in September 2011, we amended the accounts receivable securitization facility. Under the accounts receivable securitization facility, we are required, among other things, to maintain certain financial tests relating to: (i) the default ratio, (ii) the delinquency ratio, (iii) the dilution ratio and (iv) days sales outstanding.

Maturities

Maturities of the Company’s debt (exclusive of any unamortized original issue discount) for each of the next five years and thereafter at December 31, 2011 are as follows:



2012	$	266
2013	7
2014	7
2015	173
2016	1,312
Thereafter	1,279
Total	$	3,044

Our 4 percent Convertible Senior Notes mature in 2015, but are reflected as short-term debt in our consolidated balance sheet because they are convertible at December 31, 2011. The 4 percent Convertible Senior Notes are reflected in the table above based on the contractual maturity date in 2015.