--Issuer Default Rating (IDR) at 'BBB';

--Senior unsecured credit facility at 'BBB';

--Senior unsecured debt at 'BBB'.

Fitch's ratings apply to approximately $5 billion of senior unsecured notes and debentures and a $2.4 billion unsecured revolving credit facility. The Rating Outlook for WM is Stable.

WM's ratings reflect the waste services company's continued financial flexibility and free cash flow generation potential despite the current decline in collection and disposal volumes brought about by the U.S. recession. Although waste volumes have declined materially over the past year, WM and its primary competitors have remained disciplined on pricing, which has resulted in improved yields and increased margins in spite of lower demand. Further supporting margin growth has been the relatively variable cost structure of WM's collection operations and additional expense savings from a February 2009 corporate restructuring. Although WM has increased its focus on acquisitions over the past 18 months and recently announced resumption of its share repurchase program, Fitch expects WM's credit profile to remain stable and consistent with its 'BBB' ratings over at least the intermediate-term.

In the past year, WM's volumes declined as the U.S. recession deepened. In the first half of 2009 (1H'09), lower volumes reduced WM's revenue by $564 million, which accounted for 57% of the $993 million decline in WM's revenue year-over-year. However, WM and the industry in general have stayed focused on pricing despite the weakened demand environment, and increased collection, landfill and transfer yields contributed an additional $171 million to WM's revenue in 1H'09. Beyond WM's core collection and disposal operations, significant components of the company's overall revenue decline in 1H'09 were lower recycling commodity prices, which reduced revenue by $343 million, and lower fuel surcharges, which had a $180 million negative effect on revenue. Looking ahead, collection and disposal volumes are expected to remain down from last year through much of 2009, although the rate of decline should lessen as year-over-year comparables become easier. Recycling commodity prices are also expected to remain depressed until late in the fourth quarter, again due to easier year-over-year comparables late in the year. Collection and disposal pricing is expected to remain positive, however, as the significant industry participants remain focused on margin growth and return on invested capital (ROIC), even at the expense of market share.

In addition to the positive effect of improved yields, WM's margin growth also can be attributed to effective cost control. The cost structure on the collection side of WM's business is largely variable, while disposal costs are more fixed. WM's ability to flex down its collection costs by parking trucks and reducing driver hours, combined with lower fuel costs, resulted in a $762 million or 18% reduction in cost of operations in 1H'09.