Oct. 13, 2009 (Business Wire) -- Fitch Ratings has assigned a 'BBB-' rating to American Tower Corporation's (AMT) proposed offering of senior unsecured notes. The company's Issuer Default Rating (IDR) is currently 'BBB-', and the Rating Outlook is Stable.
Proceeds from the offering are expected to be used to finance the repurchase and/or redemption of certain outstanding debt securities, which may include the redemption of the company's 7.125% senior unsecured notes due in October 2012, of which there is approximately $500 million outstanding, and for general corporate purposes.
AMT's ratings incorporate the financial flexibility provided by the company's strong free cash flows and high EBITDA margin, which was 68% for the last twelve months (LTM) ending June 30, 2009. The significant operational scale provided by its large tower portfolio, combined with favorable demand characteristics for wireless voice and data services, translate into strong, sustainable operating performance and free cash flow growth.
AMT's predictable and growing revenue base, which is generated primarily from long-term lease contracts with national wireless operators (of which a substantial portion are investment-grade), leads to a low business risk profile. AMT, and the tower industry as a whole, are expected to benefit from wireless carriers expanding their networks following the Advanced Wireless Services auction (completed in 2006) and 700-MHz spectrum auctions (2008). Carrier spending to improve network quality, coverage and improve data throughput benefit the tower industry as well. Fitch expects these dynamics to more than offset the effects of 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. In July 2009, the company lowered its targets from its previous range of 4.0x to 6.0x, citing the desirability of better access to the capital markets as well as the belief the lower leverage optimizes its cost of capital. Fitch believes AMT is likely to operate in the middle of the range, on average, over Fitch's rating horizon, and in the event an acquisition increases leverage toward the upper end of the range, Fitch believes the company would use its strong free cash flows to return leverage to the middle of the range. Although not expected, if AMT does operate at the high end of its target range for an extended period of time, Fitch would consider revising the company's rating downward. AMT's gross leverage metric was 4.0 times (x) for the LTM ending June 30, 2009.
Operational concerns are relatively modest and consist of slightly higher bad debt expense due to uncertainty regarding the timing of payments to AMT by an international customer. International expansion, including the acquisition of XCEL Telecom in India, slightly increases the company's risk profile.
