Aug 7 - Fitch Ratings has assigned a 'BBB-' rating to American Tower
Corporation's (AMT) $750 million senior unsecured term loan due 2017.
The company's Long-term Issuer Default Rating (IDR) is 'BBB-' and the Rating
Outlook is Stable.
Proceeds from the term loan were used to repay $632 million of borrowings on the
company's senior unsecured revolving credit facility due 2017 and for general
corporate purposes. The term loan has covenants that are substantially
consistent with its senior unsecured revolving credit facilities.
AMT's ratings are supported by the financial flexibility provided by its strong
free cash flow (FCF). The ratings are also supported by its high EBITDA margin,
which was 63% for the last 12 months (LTM) ending June 30, 2012. AMT also has
significant operational scale provided by its large tower portfolio. This
combined with favorable demand characteristics for wireless services
(particularly data) translates into strong, sustainable operating performance
and FCF growth.
AMT's predictable and growing revenue base is generated primarily from long-term
lease contracts with national wireless operators, of which several are
investment-grade. This leads to a low business risk profile. 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 US. As a
result, Fitch expects these dynamics to more than offset the effects of recent
and potential future wireless operator consolidation on AMT's results.
The rating also reflects AMT's commitment to a net leverage target in a range of
3.0 times (x) to 5.0x. AMT's gross leverage metric was 4.4x for the LTM ended
June 30, 2012 and was elevated due to acquisitions completed in late 2011. AMT's
leverage metric reflects EBITDA from acquisitions from the date of closing.
In 2012, Fitch estimates AMT's gross leverage ratio will approximate 3.8x -
4.0x. This is stronger than the low-to-mid-4x level that Fitch believes may be a
reasonable range for the rating category for AMT's business and financial risk
The rating also takes into account AMT's Jan. 1, 2012 reorganization of its
operations allowing AMT to be taxed as a real estate investment trust (REIT). As
a REIT, AMT will be required to distribute required levels of REIT earnings to
shareholders. Despite the required distributions, Fitch believes AMT will retain
significant flexibility to manage its leverage. This is primarily due to its
strong EBITDA growth prospects and the continuation in the near-term of its
depreciation shield, which lowers its required distributions.
Risks reflected in AMT's ratings include the expansion of operations
internationally and the potential for acquisitions. Fitch expects AMT's
international revenue, about 30% of the total (24% if certain pass-through
revenues are excluded) in second quarter-2012, to continue to grow over the
longer term. The effect of future acquisitions on AMT's credit profile will
depend on the size, timing and financing of such acquisitions. Fitch believes
that AMT would consider the use of equity to maintain a relatively stable credit
profile in the event it entered into an agreement to acquire a sizeable tower
Fitch views AMT's liquidity position as strong. This is due chiefly to its
balance sheet cash, meaningful FCF generation and favorable maturity schedule
relative to available liquidity. Cash, excluding restricted cash, was $482
million as of June 30, 2012.
For the LTM ending June 30, 2012, FCF (cash provided by operating activities
less capital spending and dividends) was approximately $636 million. This
compares favorably to FCF for 2011 of approximately $505 million. In 2012, Fitch
expects AMT's free cash flow to range from $525 million to $575 million. Fitch's
estimate includes a distribution ranging from $330 million to $355 million.
As of June 30, 2012, AMT had a total of $996 million available on its $1 billion
senior unsecured RCF maturing in 2017, net of letters of credit, and $1 billion
available on its senior unsecured RCF maturing in 2016. The principal financial
covenants limit total debt to adjusted EBITDA (as defined in the agreements) to
6.0x and senior secured debt to adjusted EBITDA to 3.0x. The ratio of adjusted
EBITDA expense must be no less than 2.5x. The next material maturity consists of
the $1.75 billion commercial mortgage pass-through certificates which mature in
What Could Trigger a Rating Action
A positive rating action could occur if:
--The pace of acquisitions was to slow;
--The company operated on a consistent basis at the low end of its targeted
A negative rating action could occur if:
--AMT operates at the high end of its target range for an extended period of
--There is a change in financial policy targeting higher leverage;
--The company enters into a material leveraging transaction and leverage is not
reduced to the low to mid 4x range within a 12 to 18 month period.
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. 12, 2011);
--'Rating Global Telecoms Companies' (Sept. 16, 2010);
--'Criteria for Rating U.S. Equity REITs and REOCs' (Feb. 27, 2012).
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating Global Telecoms Companies - Sector Credit Factors
Criteria for Rating U.S. Equity REITs and REOCs