Dec 11 - Fitch Ratings has assigned a 'BBB-' rating to CC Holdings GS V LLC
(GS V) proposed $1.5 billion senior secured notes. The two tranche issuance
includes $1 billion in secured notes due 2023 and $500 million in senior secured
notes due 2017. Crown Castle has also received preliminary commitments to
increase its revolving credit facility by an additional $500 million, and
expects to consummate such increase prior to the closing of the secured notes
Fitch has affirmed the following ratings for Crown Castle International Corp.
(CCIC) and its subsidiaries GS V and Crown Castle Operating Company
(CCOC) as follows:
--IDR at 'BB';
--Senior unsecured debt at 'BB-'.
--IDR at 'BB';
--$1.5 billion senior secured credit facility at 'BB+';
--$488 million secured term loan A at 'BB+';
--$1.6 billion secured term loan B at 'BB+'.
CC Holdings GS V LLC (GS V)
--Senior secured notes at 'BBB-';
--IDR at 'BB'.
The Outlook is Stable. Fitch will withdraw issuance ratings at CCIC and GS V
once the debt obligations have been fully repaid.
GS V intends to use the net proceeds of this offering to complete a tender offer
for any and all of its outstanding 7.75% senior secured notes due 2017 and to
redeem any existing notes that remain outstanding. The remaining net proceeds
will be distributed to CCIC to fund, together with borrowings under Crown
Castle's upsized revolving credit facility, a tender offer for any and all of
its outstanding 9% Senior Notes due 2015.
The secured notes will be guaranteed by certain of GS V's direct and indirect
subsidiaries. The notes and the guarantees will be secured on a first priority
basis by a pledge of the equity interests of the guarantors. The notes will not
be guaranteed by CCIC or any of its other subsidiaries.
The two notch ratings uplift for the secured debt of GS V to 'BBB-' reflects the
superior recovery and over collateralization of the debt at the GS V operating
company level. Absolute debt levels at GS V are increasing as a result of the
new issuance to $1.5 billion from $1.2 billion when Fitch first rated the
secured debt at GS V. However, since this time, increased lease-up rates and
rent escalators have materially increased cash flows that provide support for
the higher debt level.
Fitch views this refinancing as neutral to the overall credit profile even
though a greater mix of senior level debt will be placed ahead of CCIC's
unsecured debt. Fitch believes the strong recurring cash flows and over
collateralization provides a level of support that is consistent with CCIC's
current unsecured debt ratings. As such Fitch has notched CCIC's unsecured debt
one notch below its IDR, at 'BB-'.
Current leverage pro forma for the T-Mobile tower acquisition is in the mid-6x
range. This is materially outside of Fitch's current range for Crown's 'BB'
rating. Fitch expects Crown to de-lever through a mix of cash flow growth and
debt reduction in the next 12 to 15 months. This should improve credit
protection measures back within rating expectations. Fitch projects leverage to
be approximately 6x or lower by the end of 2013. Any deviation from the expected
deleveraging path would likely result in Fitch taking a negative rating action.
Crown's ratings are supported by strong recurring cash flows generated from its
leasing operations, a robust EBITDA margin that should continue to increase
through new lease-up opportunities, and the scale of its tower portfolio. The
substantial operational scale provided by its large tower portfolio combined
with favorable wireless demand characteristics should translate into sustainable
operating performance and free cash flow (FCF) growth over the longer-term. As a
result, Crown maintains significant flexibility with prioritizing the use of its
liquidity and discretionary cash flow.
Crown has used a significant portion of its liquidity to fund the acquisition
and proposed debt refinancing. Crown has meaningful FCF generation, balance
sheet cash, and favorable maturity schedule relative to available liquidity.
Cash, excluding restricted cash, was $118 million as of Sept. 30, 2012. For the
latest-twelve-month (LTM) period FCF was approximately $340 million. Crown spent
$365 million on capital during this period with a significant portion allocated
for land purchases, which is discretionary in nature.
Crown has drawn down materially on its $1.5 billion (expected upsize by $500
million) senior secured revolving credit facility maturing in 2017. Fitch
expects Crown will pay down the facility to restore availability under the
revolver. The financial covenants within the credit agreement are more
restrictive than in the past. This is evident in total net leverage ratio, which
is 6.0x compared to 7.5x, and consolidated interest coverage of 2.5x compared to
2.0x. The financial leverage covenant has an additional stepdown to 5.5x in
2014. The credit agreement also has security fallaway provisions in the event
CCIC achieves investment grade ratings.
For 2012, Crown expects adjusted funds from operations of approximately $850
million. With the expected debt tender for the 2015 notes, Crown will now have
approximately $550 million in maturities for 2015 primarily associated with its
tower securitizations. Common stock repurchases have been scaled back
significantly compared to past levels and were less than $40 million for the
last twelve months.
WHAT COULD TRIGGER A RATING ACTION
Negative: Fitch believes Crown's leverage is outside of the current expectations
for the 'BB' rating category as a result of the acquisition. Future developments
that may, individually or collectively, lead to Fitch taking a negative rating
--If Crown does not deleverage the company below 6x in the next 12-to-15 months;
--If Crown makes additional material acquisitions that are debt financed.
Positive: Fitch believes Crown's longer-term ratings have upward potential from
further operational and credit profile improvements. In the 2015 - 2016
timeframe, Crown has indicated the potential for a REIT conversion. Future
developments that may, individually or collectively, lead to Fitch taking a
positive rating action include:
--The stability and operating leverage within its leasing operations;
--Growth in broadband data leading to increased lease-up opportunities;
--Maintaining less aggressive financial policies than in the past; and
--If Crown continues to following the potential path of a REIT conversion and
materially de-levers the company.
Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Rating Telecom Companies: Sector Credit Factors' (Aug. 9, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating Telecom Companies