CHICAGO -- (BUSINESS WIRE) -- Fitch Ratings has assigned ratings to American Tower Corporation's (AMT) debt as follows:
--Senior unsecured $1.5 billion term loan due 2019 rated 'BBB';
--Senior unsecured $1 billion 364-day revolving credit facility due Sept. 19, 2014 rated 'BBB'.
The 'BBB' rating on AMT's senior unsecured $750 million term loan due 2017 has been withdrawn as it has been repaid by proceeds from the term loan due 2019.
The Rating Outlook remains Stable.
Proceeds from the $1.5 billion term loan plus cash on hand were used to repay $800 million of outstanding revolver borrowings and repay the $750 million term loan due 2017.
KEY RATING DRIVERS
The ratings and Outlook reflect Fitch's expectations that AMT will delever over the next two years following the $4.8 billion acquisition (including assumed debt) on Oct. 1, 2013 of MIP Tower Holdings LLC, which is the parent of Global Tower Partners (GTP). AMT, following the acquisition, is expected to continue to post strong free cash flows (FCF), generate mid- to high- single digit organic growth and maintain stable margins. While pro forma leverage at the close of the transaction approximated 5.8x, Fitch believes organic EBITDA growth combined with debt repayment will enable the company to reduce leverage on a quarterly annualized basis to below 5x within a 12 to 18 month period. Fitch estimates AMT's gross leverage ratio will decline to approximately 5.3x to 5.4x by the end of 2014 and to 4.7x by 2015.
The ratings are also supported by the growth inherent in the tower leasing business model and management's strong public statements that it intends to delever over the next 12 to 18 months to within its net leverage target of 3x to 5x. 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, of which several 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 a much earlier stage of development than in the U.S.
On Oct. 1, 2013, AMT completed the acquisition of GTP for $4.8 billion including assumed debt. GTP was the largest independent, privately owned tower operator in the U.S.
Strategically, GTP materially expands AMT's domestic footprint by adding approximately 5,400 towers and rights to an additional 9,000 rooftop sites. Approximately 70% of GTP's revenues are produced by the four national wireless operators and approximately two-thirds of its operations are in the top 100 metropolitan areas.
The ratings also take into account AMT's real estate investment trust (REIT) status. Fitch believes AMT will retain significant flexibility to manage its leverage as a REIT even though it will be required to distribute required levels of REIT earnings to shareholders.
U.S. wireless consolidation is not expected to have a material effect on AMT's operations. Revenue growth from continued lease activity and contractual escalators in the U.S. market will more than offset the relatively modest losses that may occur over time due to consolidation.
AMT has maintained a strong liquidity profile upon the close of the GTP transaction. Following the repayment of $800 million in revolver borrowings, cash on hand and unused revolver capacity approximate $2.6 billion, with liquidity improving as acquisition-related borrowings are reduced. In addition to entering into the 364-day revolving credit facility due in September 2014, the company exercised the accordion feature of its revolving credit facility due 2018, expanding its capacity by $500 million to $2 billion.
Operationally, cash flow generation should remain strong. For the LTM ending Sept. 30, 2013, FCF (cash provided by operating activities less capital spending and dividends) was approximately $408 million. For 2013, Fitch estimates AMT's FCF will be in the $535 million to $585 million range.
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. An amendment arising from the GTP acquisition temporarily increased the maximum leverage ratio to 6.5x from 6.0x. 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 maturity consists of $600 million of senior unsecured notes due in 2015.
At the current 'BBB' level, Fitch's sensitivities do not currently anticipate developments with a material likelihood leading to a rating upgrade.
A negative rating action could occur if:
--operating performance falls short of expectations of mid-single digit organic growth combined with margin pressure;
--a significant leveraging transaction that delays anticipating delevering could lead to a downgrade.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 5, 2013);
--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012);
--'Criteria for Rating U.S. Equity REITs and REOCs' (Feb. 26, 2013).
Applicable Criteria and Related Research:
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Rating Telecom Companies
Criteria for Rating U.S. Equity REITs and REOCs