Debt and Subordinated Convertible Debentures

Debt consists of the following:



	March 31, 2012			December 31, 2011
URNA and subsidiaries debt:
Accounts Receivable Securitization Facility (1)	$	230		$	255
$1.9 billion ABL Facility (2)	982			810
10⁷/₈ percent Senior Notes	490			489
9¹/₄ percent Senior Notes	493			493
8³/₈ percent Senior Subordinated Notes	750			750
1⁷/₈ percent Convertible Senior Subordinated Notes (3)	22			22
Capital leases	38			39
Total URNA and subsidiaries debt	3,005			2,858
Merger financing notes (4):
5 ³/₄ percent Senior Secured Notes	750			—
7 ³/₈ percent Senior Notes	750			—
7 ⁵/₈ percent Senior Notes	1,325			—
Total merger financing notes	2,825			—
Holdings:
4 percent Convertible Senior Notes (5)	131			129
Total debt (6)	5,961			2,987
Less short-term portion (7)	(371		)	(395		)
Total long-term debt	$	5,590		$	2,592

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(1)

At March 31, 2012, $5 was available under our accounts receivable securitization facility. The interest rate applicable to the accounts receivable securitization facility was 0.9 percent at March 31, 2012. During the three months ended March 31, 2012, the monthly average amount outstanding under the accounts receivable securitization facility was $218, and the weighted-average interest rate thereon was 0.9 percent. The maximum month-end amount outstanding under the accounts receivable securitization facility during the three months ended March 31, 2012 was $230.

(2)

At March 31, 2012, $868 was available under our ABL facility, net of $50 of letters of credit. The interest rate applicable to the ABL facility was 2.4 percent at March 31, 2012. During the three months ended March 31, 2012, the monthly average amount outstanding under the ABL facility was $895, and the weighted-average interest rate thereon was 2.4 percent. The maximum month-end amount outstanding under the ABL facility during the three months ended March 31, 2012 was $982. In March 2012, the size of the ABL facility was increased to $1.9 billion.

(3)

Based on the price of our common stock during the first quarter of 2012, holders of the 1⁷/8 percent Convertible Senior Subordinated Notes may convert the notes during the second quarter of 2012 at a conversion price of $21.83 per share of common stock. Between April 1, 2012 (the beginning of the second quarter) and April 13, 2012, none of the 1⁷/8 percent Convertible Senior Subordinated Notes were converted.

(4)

In connection with the proposed merger with RSC, on March 9, 2012, Funding SPV issued the merger financing notes. The proceeds from the merger financing notes were deposited into segregated escrow accounts and will be released from escrow subject to the satisfaction of certain conditions, including the occurrence of the merger substantially in accordance with the terms and conditions of the merger agreement and the assumption by a newly formed wholly owned subsidiary of URI, into which URNA will be merged in connection with the RSC merger, of all of the obligations of Funding SPV under the indentures governing the notes and related documentation. The aggregate cash received from the merger financing notes, along with $25 of interest payable on the notes, is separately classified in our condensed consolidated balance sheets as restricted cash. See below for additional detail regarding each of the merger financing notes.

(5)

The difference between the March 31, 2012 carrying value of the 4 percent Convertible Senior Notes and the $168 principal amount reflects the $37 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 Senior Notes were convertible at March 31, 2012, an amount equal to the $37 unamortized portion of the original issue discount is separately classified in our condensed consolidated balance sheets and referred to as “temporary equity.” Based on the price of our common stock during the first quarter of 2012, holders of the 4 percent Convertible Senior Notes have the right to redeem the notes during the second quarter of 2012 at a conversion price of $11.11 per share of common stock. Between April 1, 2012 (the beginning of the second quarter) and April 13, 2012, none of the 4 percent Convertible Senior Notes were redeemed.

(6)

In August 1998, a subsidiary trust of Holdings (the “Trust”) issued and sold $300 of 6 ¹/2 percent Convertible Quarterly Income Preferred Securities (“QUIPS”) in a private offering. The Trust used the proceeds from the offering to purchase 6 ¹/2 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 debt at March 31, 2012 and December 31, 2011 excludes $55 of these Debentures, which are separately classified in our condensed 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.


(7)	As of March 31, 2012, our short-term debt primarily reflects $230 of borrowings under our accounts receivable securitization facility and $131 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 March 31, 2012.

Merger Financing Notes

5 ³/₄ percent Senior Secured Notes. In March 2012, Funding SPV issued $750 aggregate principal amount of 5 ³/₄ percent Senior Secured Notes (the “5 ³/₄ percent Notes”) which are due July 15, 2018. Upon the release of the proceeds of the issuance from escrow, the net proceeds from the sale of the 5 ³/₄ percent Notes are expected to be approximately $725 (after deducting the initial purchasers' fees and offering expenses). Upon the release of the proceeds of the issuance from escrow or, in the case of the security interest in respect of the 5 ³/₄ percent Notes, within a certain period of time thereafter, and the assumption by a newly formed wholly owned subsidiary of URI, into which URNA will be merged in connection with the RSC merger, of Funding SPV's obligations under the 5 ³/₄ percent Notes, the 5 ³/₄ percent Notes will be secured and will be guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 5 ³/₄ percent Notes may be redeemed prior to July 15, 2015, at a redemption price equal to 100 percent plus the applicable premium (as defined in the indenture) as of the date of redemption, plus accrued and unpaid interest, and on or after July 15, 2015, at specified redemption prices that range from 102.875 percent in the 12-month period commencing on July 15, 2015, to 100 percent in the 12-month period commencing on July 15, 2017 and thereafter, plus accrued and unpaid interest. The indenture governing the 5 ¾ percent Notes contains certain restrictive covenants, including, among others, limitations on (1) liens; (2) additional indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. The indenture also includes covenants relating to the grant of and maintenance of liens for the benefit of the notes collateral agent. Each of these covenants is subject to important exceptions and qualifications that would allow URI to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URI must make an offer to purchase all of the then-outstanding 5 ³/₄ 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.

7 ³/₈ percent Senior Notes. In March 2012, Funding SPV issued $750 aggregate principal amount of 7 ³/₈ percent Senior Notes (the “7 ³/₈ percent Notes”) which are due May 15, 2020. Upon the release of the proceeds of the issuance from escrow, the net proceeds from the sale of the 7 ³/₈ percent Notes are expected to be approximately $722 (after deducting the initial purchasers' fees and offering expenses). Upon the release of the proceeds of the issuance from escrow, and the assumption by a newly formed wholly owned subsidiary of URI, into which URNA will be merged in connection with the RSC merger, of Funding SPV's obligations under the 7 ³/₈ percent Notes, the 7 ³/₈ percent Notes will be unsecured and will be guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 7 ³/₈ percent Notes may be redeemed prior to May 15, 2016, at a redemption price equal to 100 percent plus the applicable premium (as defined in the indenture) as of the date of redemption, plus accrued and unpaid interest, and on or after May 15, 2016, at specified redemption prices that range from 103.688 percent in the 12-month period commencing on May 15, 2016, to 100 percent in the 12-month period commencing on May 15, 2018 and thereafter, plus accrued and unpaid interest. The indenture governing the 7 ³/₈ percent Notes contains certain restrictive covenants, including, among others, limitations on (1) liens; (2) additional indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and qualifications that would allow URI to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URI must make an offer to purchase all of the then-outstanding 7 ³/₈ 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.

7 ⁵/₈ percent Senior Notes. In March 2012, Funding SPV issued $1,325 aggregate principal amount of 7 ⁵/₈ percent Senior Notes (the “7 ⁵/₈ percent Notes”) which are due April 15, 2022. Upon the release of the proceeds of the issuance from escrow, the net proceeds from the sale of the 7 ⁵/₈ percent Notes are expected to be approximately $1,281 (after deducting the initial purchasers' fees and offering expenses). Upon the release of the proceeds of the issuance from escrow, and the assumption by a newly formed wholly owned subsidiary of URI, into which URNA will be merged in connection with the RSC merger, of Funding SPV's obligations under the 7 ⁵/₈ percent Notes, the 7 ⁵/₈ percent Notes will be unsecured and will be guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 7 ⁵/₈ percent Notes may be redeemed prior to April 15, 2017, at a redemption price equal to 100 percent plus the applicable premium (as defined in the indenture) as of the date of redemption, plus accrued and unpaid interest, and on or after April 15, 2017, at specified redemption prices that range from 103.813 percent in the 12-month period commencing on April 15, 2017, to 100 percent in the 12-month period commencing on April 15, 2020 and thereafter, plus accrued and unpaid interest. The indenture governing the 7 ⁵/₈ percent Notes contains certain restrictive covenants, including, among others, limitations on (1) liens; (2) additional indebtedness; (3) mergers, consolidations and acquisitions; (4) sales, transfers and other dispositions of assets; (5) loans and other investments; (6) dividends and other distributions, stock repurchases and redemptions and other restricted payments; (7) restrictions affecting subsidiaries; (8) transactions with affiliates; and (9) designations of unrestricted subsidiaries, as well as a requirement to timely file periodic reports with the SEC. Each of these covenants is subject to important exceptions and qualifications that would allow URI to engage in these activities under certain conditions. The indenture also requires that, in the event of a change of control (as defined in the indenture), URI must make an offer to purchase all of the then-outstanding 7 ⁵/₈ 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.

Convertible Note Hedge Transactions

In connection with the November 2009 issuance of $173 aggregate principal amount of 4 percent Convertible Senior Notes, 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 condensed 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 Senior 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 Senior 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 $40.00 or $45.00 per share, assuming an effective conversion price of $15.56 per share, on a net basis, we would issue 9.2 million or 9.9 million shares, respectively.

Loan Covenants and Compliance

As of March 31, 2012, 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.

In October 2011, we amended the ABL facility. In March 2012, the size of the ABL facility was increased to $1.9 billion. The only material financial covenants which currently exist relate to the fixed charge coverage ratio and the senior secured leverage ratio under the ABL facility. Since the October 2011 amendment of the facility and through March 31, 2012, 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 amended ABL facility, the fixed charge coverage ratio and the senior secured leverage ratio under the amended ABL facility will only apply in the future if availability under the amended ABL facility falls below the greater of 10 percent of the maximum revolver amount under the amended ABL facility and $150. Under our 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.