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TEXT-Fitch rates Crown Castle debt offering 'BB-'
October 3, 2012 / 3:45 PM / 5 years ago

TEXT-Fitch rates Crown Castle debt offering 'BB-'

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Oct 3 - Fitch Ratings has assigned a 'BB-' rating to Crown Castle
International Corp.'s (CCIC) $1.65 billion unsecured senior notes due
2023. The company intends to use the net proceeds from the notes offering,
together with cash on hand and funds from its revolving credit facility, to
finance its towers acquisition from T-Mobile USA, Inc. The Rating Outlook is
Stable.

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.

Leverage pro forma for the acquisition would increase to 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 after the transaction closes. This should
improve credit protection measures to 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.

Fitch views Crown's liquidity position as solid. However, Crown is expected to
use a significant portion of its liquidity to fund the acquisition. Crown has
meaningful FCF generation, balance sheet cash, and favorable maturity schedule
relative to available liquidity. Cash, excluding restricted cash, was $96
million as of June 30, 2012. For the LTM ending March 31, 2012, FCF was
approximately $278 million. Crown spent $391 million on capital during this
period with approximately $200 million allocated for land purchases, which is
discretionary in nature.

For 2012, Crown expects adjusted funds from operations of approximately $850
million. The next large maturity is not until 2015 when $1.7 billion of notes
come due including three tranches of securitized debt. Common stock repurchases
have been scaled back, totaling $36 million for the first two quarters of 2012
compared to $193 million a year ago.

As of June 30, 2012, Crown had full availability on its $1 billion senior
secured revolving credit facility maturing in 2017. Fitch expects Crown will pay
down the facility post the transaction closing 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.

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
action include:

--If Crown does not deleverage the company below 6x in the next 12-to-15 months;
or
--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.

Fitch's ratings for Crown include:

Crown Castle International Corp. (CCIC)
--IDR at 'BB';
--Senior unsecured debt at 'BB-'.

Crown Castle Operating Company (CCOC)
--IDR at 'BB';
--Senior secured credit facility at 'BB+'.

CC Holdings GS V LLC (GS V)
--IDR at 'BB';
--Senior secured notes at 'BBB-'.

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

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