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Fitch Rates American Tower's $750MM Debt Offering 'BBB'; Outlook Stable
June 27, 2017 / 9:12 PM / 6 months ago

Fitch Rates American Tower's $750MM Debt Offering 'BBB'; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, June 27 (Fitch) Fitch Ratings has assigned a 'BBB' rating to American Tower Corporation's (AMT) offering of $750 million senior unsecured notes due 2027. Net proceeds from the offering will be used to repay existing debt, including debt under its 2013 and 2014 revolving credit facilities. Proceeds may also be used for general corporate purposes. As of March 31, 2017, pro forma outstanding borrowings on AMT's RCFs totalled approximately $2.9 billion. The pro forma amount reflects the net repayment of approximately $95 million on is 2013 credit facility subsequent to the end of the first quarter of 2017. AMT currently has a Fitch Issuer Default Rating (IDR) of 'BBB' with a Stable Rating Outlook. KEY RATING DRIVERS Strong FCF and Margins: AMT's ratings are supported by the financial flexibility provided by its strong FCF and its high EBITDA margin, which has been consistently around 60% in recent years. The tower business model translates into strong, sustainable operating performance and FCF growth, aided by the company's significant scale and the favorable demand characteristics for wireless services (particularly data). Stable Growth Model: AMT is expected to continue to post strong FCF, generate mid- to high-single-digit organic growth and maintain relatively stable margins. Tower revenues are predictable, and growth is provided by contractual escalators embodied in long-term lease contracts and there are strong prospects for additional business. The tower industry is benefiting from wireless carriers continued investment in their fourth generation (4G) networks to meet rapidly growing demand for mobile broadband services. Stable Outlook: At March 31, 2017, net leverage was 5.0x, and Fitch expects AMT's net leverage to decline slightly to under 5.0x at the end of 2017. Leverage has gradually declined following AMT's acquisitions over the last couple of years, including the acquisition of the rights to towers and outright purchases of towers from Verizon Communications Inc. in 2015. Consolidation Risk Manageable: Fitch believes U.S. wireless consolidation, if it were to occur, would not have a material effect on AMT's operations. Revenue growth from continued lease activity and contractual escalators in the U.S market would more than offset the relatively modest losses occurring over time due to consolidation. International Exposure: Similar wireless service demand trends are occurring internationally, with wireless data services at an earlier stage of development than in the U.S. Excluding pass-through revenues, the company's international operations generated approximately 34% of total property revenues in the first quarter of 2017. KEY ASSUMPTIONS --In 2017, consolidated revenue grows to approximately $6.6 billion, based on expectations for property revenue to be near the mid-point of company guidance of $6.5 billion. In 2018 and thereafter, Fitch assumes revenue grows in the 4%-5% range due to contractual escalators and new-business growth. --EBITDA margins decline slightly in 2017 due to the lower margins associated with acquired properties but increase moderately thereafter as additional tenants are added to towers. --Capital spending of approximately $850 million in 2017. --Moderate stock repurchases as net leverage under 5x is reached, with further deleveraging arising from EBITDA growth (rather than debt repayment). RATING SENSITIVITIES Positive: At the current 'BBB' level, Fitch does not currently anticipate near-term developments that could lead to an upgrade of the rating. Negative: A negative rating action could occur if operating performance falls short of expectations of at least mid-single-digit organic growth combined with margin pressure, or if a significant transaction, or share repurchases, results in expectations for net leverage sustained above 5x for longer than an 18-24 month period. LIQUIDITY In Fitch's opinion, AMT has a strong liquidity position supported by its FCF, cash on hand and availability on its revolving credit facilities. Operationally, cash flow generation should remain strong. For 2016, FCF (cash provided by operating activities less capital spending and dividends) was approximately $1 billion. As of March 31, 2017, cash approximated $713 million and unused revolver capacity was approximately $1.77 billion. Of the cash balance, approximately $564 million was held by foreign subsidiaries. AMT has two revolving credit facilities: a $2 billion, multi-currency facility due in January 2022 (the 2014 RCF) and a $2.75 billion revolving credit facility due in June 2020 (the 2013 RCF). The principal financial covenants limited total debt/adjusted EBITDA (as defined in the agreements) to no more than 6.0x (up to 7.0x for specified time periods following a qualified acquisition). The covenants limit senior secured debt/adjusted EBITDA to 3.0x for the company and its subsidiaries. If debt ratings are below a specified level at the end of any fiscal quarter, the ratio of adjusted EBITDA to interest expense must be no less than 2.5x for as long as the ratings are below the specified level. There are no material maturities in 2017, and approximately $1.5 billion matures in 2018. Contact: Primary Analyst John C. Culver, CFA Senior Director +1-312-368-3216 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Bill Densmore Senior Director +1-312-368-3125 Committee Chairperson Sharon Bonelli Senior Director +1-212-908-0581 Date of relevant committee: April 13, 2016 Summary of Financial Statement Adjustments - Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below: --Historical and projected mandatory convertible preferred stock is given 100% equity credit. Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: Additional information is available on Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage - Effective from 17 August 2015 to 27 September 2016 (pub. 17 Aug 2015) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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