|[August 04, 2014]
Fitch Rates American Tower's Debt Offering 'BBB'; Outlook Stable
CHICAGO --(Business Wire)--
Fitch Ratings has assigned a 'BBB' rating to American Tower
Corporation's (AMT (News - Alert)) proposed offering of benchmark-sized senior
unsecured debt due in 2021. Proceeds from the offering will be used to
repay outstanding revolver borrowings, which on a June 30, 2014 adjusted
basis totaled approximately $923 million, and for general corporate
purposes. The adjusted basis includes $140 million borrowed in July
2014. AMT has a Fitch Issuer Default Rating (IDR) of 'BBB', with a
Stable Rating Outlook.
KEY RATING DRIVERS
The ratings and Outlook reflect Fitch's expectations that AMT remains on
the path to delever to levels established upon its October 2013
acquisition of MIP Tower Holdings LLC - the parent of Global Tower
Partners (GTP) for $4.8 billion (including assumed debt). Owing to debt
level expectations at the end of 2014, combined with recently increased
expectations for EBITDA as a result of acquisitions in 2013 and 2014 and
the continued strong performance of its legacy tower business, Fitch
expects the company to remain on a path to reduce quarterly run-rate net
leverage to approximately 5.0x by the end of 2014 or early 2015.
Fitch believes the May 2014 issuance of the mandatory convertible
preferred stock (net proceeds of approximately $583 million) signals the
company's intent to get back to the high end of its 3x to 5x net
leverage target by the end of 2014 or early 2015.
Tower revenues are predictable, and contractual escalators combined with
strong prospects for additional business provide for growth. Revenues
are generated primarily from non-cancellable long-term lease contracts
with national wireless operators, several of which are investment-grade.
AMT, and the tower industry as a whole, are benefiting from wireless
carriers expanding their fourth generation (4G) networks to supply
rapidly growing demand for mobile broadband services. Similar trends are
occurring internationally, with wireless data services at an earlier
stage of development than in the U.S.
U.S. wireless consolidation is not expected to have a material effect on
AMT's operations. Revenue growth from continued lease activity
(supported by wireless data growth) and contractual escalators in the
U.S. market will more than offset the relatively modest losses that may
occur over time due to consolidation.
In Fitch's opinion, AMT has a strong liquidity position supported by its
free cash flow (FCF), cash on hand, and availability on its revolving
credit facilities. Operationally, cash flow generation should remain
strong. For the LTM ending June 30, 2014, FCF (cash provided by
operating activities less capital spending and dividends) was
approximately $518 million. s of June 30, 2014, cash on hand
approximated $283 million and unused revolver capacity was approximately
$3.2 billion. Of the cash balance, approximately $171 million was held
by foreign subsidiaries. Adjusted for $140 million of borrowing in July
2014, available borrowing capacity was $3.066 billion.
AMT has three revolving credit facilities: a $1 billion, 364-day RCF due
in September 2014, a $1 billion RCF due in January 2017, and a $2
billion RCF due in June 2018. The principal financial covenants limit
total debt-to-adjusted EBITDA (as defined in the agreements) to no more
than 6.5x until Sept. 30, 2014 and 6.0x thereafter, and senior secured
debt-to-adjusted EBITDA to 3.0x for the company and its subsidiaries. If
debt ratings are below a specified level at the end of any fiscal
quarter, the ratio of adjusted EBITDA expense must be no less than 2.5x
for as long as the ratings are below the specified level. The next
material maturities are in 2015 and total approximately $1.15 billion.
At the current 'BBB' level, Fitch's sensitivities do not currently
anticipate developments with a material likelihood of leading to a
A negative rating action could occur if:
--Operating performance falls short of expectations of at least
mid-single-digit organic growth combined with margin pressure;
--2014 acquisitions do not extend the time to reach the target leverage
range from Fitch's initial expectations, as a result, a subsequent,
significant leveraging transaction that delays anticipated delevering
could lead to a downgrade.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012).
Applicable Criteria and Related Research:
Rating Telecom Companies
Corporate Rating Methodology - Including Short-Term Ratings and Parent
and Subsidiary Linkage
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