June 18 - Fitch Ratings has affirmed American Tower Corporation's
(AMT) ratings as follows:
--Long-term IDR at 'BBB-';
--Senior unsecured $1 billion revolving credit facility due 2016 at 'BBB-';
--Senior unsecured $1 billion revolving credit facility due 2017 at 'BBB-';
--Senior unsecured notes at 'BBB-'.
The Rating Outlook is Stable.
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 March 31, 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 a substantial portion
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. Fitch would consider downgrading AMT's ratings and/or
Outlook if they operate at the high end of its target range for an extended
period of time. AMT's gross leverage metric was 4.5x for the LTM ended March 31,
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 below 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 profile.
The rating also takes into account AMT's Jan. 1, 2012 reorganization of its
operations. The reorganization allowed 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
Risks reflected in AMT's ratings include the expansion of operations
internationally and the potential for acquisitions. Fitch expects AMT's
international revenue, about 29% of the total (23% if certain pass-through
revenues are excluded) in first 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 $471
million as of March 31, 2012.
For the LTM ending March 31, 2012, FCF was approximately $600 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. This
is based on AMT's guidance with respect to the 2012 expected REIT distribution.
As of March 31, 2012, AMT had a total of $365 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. Following the
repayment of the June 2012 bank facilities in January 2012, the next material
maturity consists of the $1.75 billion commercial mortgage pass-through
certificates which mature in 2014.
Additional information is available on Fitch's web site 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
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