Debt and Subordinated Convertible Debentures

Debt consists of the following:



	June 30, 2012			December 31, 2011
URNA and subsidiaries debt:
Accounts Receivable Securitization Facility (1)	$	252		$	255
$1.9 billion ABL Facility (2)	1,287			810
10⁷/₈ percent Senior Notes	490			489
10¹/₄ percent Senior Notes (3)	224			—
9¹/₄ percent Senior Notes	493			493
8³/₈ percent Senior Subordinated Notes	750			750
8¹/₄ percent Senior Notes (3)	698			—
1⁷/₈ percent Convertible Senior Subordinated Notes (4)	5			22
Capital leases (3)	132			39
Merger financing notes (5):
5 ³/₄ percent Senior Secured Notes	750			—
7 ³/₈ percent Senior Notes	750			—
7 ⁵/₈ percent Senior Notes	1,325			—
Total URNA and subsidiaries debt	7,156			2,858
Holdings:
4 percent Convertible Senior Notes (6)	133			129
Total debt (7)	7,289			2,987
Less short-term portion (8)	(421		)	(395		)
Total long-term debt	$	6,868		$	2,592

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(1)

At June 30, 2012, $20 was available under our accounts receivable securitization facility. The interest rate applicable to the accounts receivable securitization facility was 0.9 percent at June 30, 2012. During the six months ended June 30, 2012, the monthly average amount outstanding under the accounts receivable securitization facility was $230, 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 six months ended June 30, 2012 was $252.

(2)

At June 30, 2012, $494 was available under our ABL facility, net of $119 of letters of credit. The interest rate applicable to the ABL facility was 2.3 percent at June 30, 2012. During the six months ended June 30, 2012, the monthly average amount outstanding under the ABL facility was $1,048, and the weighted-average interest rate thereon was 2.4 percent. The maximum month-end amount outstanding under the ABL facility during the six months ended June 30, 2012 was $1,287. In March 2012, the size of the ABL facility was increased to $1.9 billion.


(3)	Upon consummation of the RSC merger, we assumed certain of RSC's debt, including capital leases. See below for additional detail regarding the assumed RSC debt.

(4)

Based on the price of our common stock during the first quarter of 2012, holders of the 1⁷/8 percent Convertible Senior Subordinated Notes had the right to convert the notes during the second quarter of 2012 at a conversion price of $21.83 per share of common stock, and $17 of the 1⁷/8 percent Convertible Senior Subordinated Notes were converted. Upon conversion of the notes, we issued approximately 0.8 million shares of our common stock to the applicable holders of the 1⁷/8 percent Convertible Senior Subordinated Notes. Based on the price of our common stock during the second quarter of 2012, holders of the 1⁷/8 percent Convertible Senior Subordinated Notes may convert the notes during the third quarter of 2012 at a conversion price of $21.83 per share of common stock. Between July 1, 2012 (the beginning of the third quarter) and July 13, 2012, none of the 1⁷/8 percent Convertible Senior Subordinated Notes were converted.


(5)	In connection with the RSC merger, on March 9, 2012, we issued the merger financing notes. See below for additional detail regarding each of the merger financing notes.

(6)

The difference between the June 30, 2012 carrying value of the 4 percent Convertible Senior Notes and the $168 principal amount reflects the $35 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 redeemable at June 30, 2012, an amount equal to the $35 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 second quarter of 2012, holders of the 4 percent Convertible Senior Notes have the right to redeem the notes during the third quarter of 2012 at a conversion price of $11.11 per share of common stock. Between July 1, 2012 (the beginning of the third quarter) and July 13, 2012, none of the 4 percent Convertible Senior Notes were redeemed.

(7)

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 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 debt at June 30, 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.


(8)	As of June 30, 2012, our short-term debt primarily reflects $252 of borrowings under our accounts receivable securitization facility and $133 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 redeemable at June 30, 2012.

Assumed RSC Debt

10 ¹/₄ percent Senior Notes. In November 2009, RSC issued $200 aggregate principal amount of 10¹/4 percent Senior Notes (the “10¹/4 percent Notes”), which are due November 15, 2019. Upon consummation of the RSC merger, URNA assumed the 10¹/4 percent Notes. The 10¹/4 percent Notes are unsecured and are guaranteed by URNA's domestic subsidiaries, subject to limited exceptions. The 10¹/4 percent Notes may be redeemed on or after November 15, 2014 at specified redemption prices that range from 105.125 percent in 2014 to 100 percent in 2017 and thereafter. The indenture governing the 10¹/4 percent Notes contains certain restrictive covenants that apply to URNA and its restricted subsidiaries, including, among others, limitations on their ability to (1) incur additional debt, (2) pay dividends or distributions on their capital stock or repurchase their capital stock, (3) make certain investments, (4) create liens on their assets to secure debt, (5) enter into transactions with affiliates, (6) create limitations on the ability of the restricted subsidiaries to make dividends or distributions to their respective parents, (7) merge or consolidate with another company and (8) transfer and sell 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 10¹/4 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 June 30, 2012 carrying value of the 10¹/4 percent Notes and the $200 principal amount relates to the $24 unamortized portion of the fair value adjustment recognized upon consummation of the RSC merger, which is being amortized through the above maturity date. The effective interest rate on the 10¹/4 percent Notes is 8.3 percent.

8¹/4 percent Senior Notes. In January 2011, RSC issued $650 aggregate principal amount of 8¹/4 percent Senior Notes (the “8¹/4 percent Notes”), which are due February 1, 2021. Upon consummation of the RSC merger, URNA assumed the 8¹/4 percent Notes. The 8¹/4 percent Notes are unsecured and are guaranteed by URNA's domestic subsidiaries, subject to limited exceptions. The 8¹/4 percent Notes may be redeemed on or after February 1, 2016 at specified redemption prices that range from 104.125 percent in 2016 to 100 percent in 2019 and thereafter. The indenture governing the 8 1/4 percent Notes contains certain restrictive covenants that apply to URNA and its restricted subsidiaries, including, among others, limitations on their ability to (1) incur additional debt, (2) pay dividends or distributions on their capital stock or repurchase their capital stock, (3) make certain investments, (4) create liens on their assets to secure debt, (5) enter into transactions with affiliates, (6) create limitations on the ability of the restricted subsidiaries to make dividends or distributions to their respective parents, (7) merge or consolidate with another company and (8) transfer and sell 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 8¹/4 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 June 30, 2012 carrying value of the 8¹/4 percent Notes and the $650 principal amount relates to the $48 unamortized portion of the fair value adjustment recognized upon consummation of the RSC merger, which is being amortized through the above maturity date. The effective interest rate on the 8¹/4 percent Notes is 7.0 percent.

Merger Financing Notes

5 ³/₄ percent Senior Secured Notes. In March 2012, a special purpose entity formed for the purpose of issuing the notes and subsequently merged into URNA ("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. The net proceeds from the sale of the 5 ³/₄ percent Notes were approximately $733 (after deducting the initial purchasers' fees and offering expenses). Upon consummation of the RSC merger, URNA assumed the 5 ³/₄ percent Notes. The 5 ³/₄ percent Notes are secured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 5 ³/₄ percent Notes may be redeemed 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 ³/₄ 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. The net proceeds from the sale of the 7 ³/₈ percent Notes were approximately $732 (after deducting the initial purchasers' fees and offering expenses). Upon consummation of the RSC merger, URNA assumed the 7 ³/₈ percent Notes. The 7 ³/₈ percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 7 ³/₈ percent Notes may be redeemed 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. The net proceeds from the sale of the 7 ⁵/₈ percent Notes were approximately $1,295 (after deducting the initial purchasers' fees and offering expenses). Upon consummation of the RSC merger, URNA assumed the 7 ⁵/₈ percent Notes. The 7 ⁵/₈ percent Notes are unsecured and are guaranteed by Holdings and, subject to limited exceptions, URNA's domestic subsidiaries. The 7 ⁵/₈ percent Notes may be redeemed 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 $35.00 or $40.00 per share, assuming an effective conversion price of $15.56 per share, on a net basis, we would issue 8.4 million or 9.2 million shares, respectively.

Loan Covenants and Compliance

As of June 30, 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 June 30, 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.