Fitch Upgrades American Tower's IDR to 'BBB'; Outlook Stable
CHICAGO -- June 14, 2013
Fitch Ratings has upgraded American Tower Corporation's (AMT) ratings as
--Long-term Issuer Default Rating (IDR) to 'BBB' from 'BBB-';
--Senior unsecured $1 billion revolving credit facility due 2016 to 'BBB' from
--Senior unsecured $1 billion revolving credit facility due 2017 to 'BBB' from
--Senior unsecured $750 million term loan due 2017 to 'BBB' from 'BBB-';
--Senior unsecured notes to 'BBB' from 'BBB-'.
The Rating Outlook remains Stable.
KEY RATING DRIVERS
The upgrade reflects the company's strong free cash flow (FCF) and margins, as
well as its low business risk model. In addition, the 'BBB' rating is
consistent with other Fitch-rated real estate investment trusts (REITs) that
own niche property types and have net debt to recurring EBITDA in the 5x to
AMT's ratings are supported by the financial flexibility provided by its
strong FCF. The ratings are also supported by its high EBITDA margin, which
was 63% for the last 12 months (LTM) ending March 31, 2013. Other key ratings
factors include the favorable demand characteristics for wireless services
(particularly data) translates into strong, sustainable operating performance
and FCF growth. AMT also has significant operational scale provided by its
large tower portfolio.
AMT's business risk profile is low. Revenues are predictable and contractual
escalators combined with strong prospects for additional business provide for
growth. Revenues are generated primarily from non-cancellable long-term lease
contracts with national wireless operators, of which several are
investment-grade. 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 U.S. 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 ratings also reflect AMT's commitment to a net leverage target in a range
of 3.0x to 5.0x. AMT's gross leverage metric was 4.4x for the quarter ended
March 31, 2013 on an annualized basis.
Fitch estimates AMT's gross leverage ratio will decline to approximately 4.2x
at the end of 2013, owing to expectations for revenue growth in the low teens
and a relatively stable EBITDA margin of approximately 64%. Fitch believes the
company will operate within or slightly 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 ratings also take into account AMT's REIT status. Fitch believes AMT will
retain significant flexibility to manage its leverage as a REIT even though it
will be required to distribute required levels of REIT earnings to
Risks reflected in AMT's ratings include the expansion of operations
internationally and the potential for acquisitions. Fitch expects AMT's
international revenue, about 33% of the total (26% if certain pass-through
revenues are excluded) in first quarter of 2013, 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
Expected U.S. wireless consolidation is not expected to have a material effect
on AMT's operations. AMT has disclosed that where Sprint and Clearwire
(Sprint's acquisition of Clearwire is pending approval) are located on the
same sites, the revenue generated is approximately 1% of total revenues.
Similarly, the overlapping sites in the recently completed T-Mobile USA and
MetroPCS combination generate approximately 1% of revenues. Revenue growth
from continued lease activity and contractual escalators in the U.S market
will more than offset the relatively modest losses that may occur over time
due to consolidation.
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 $442
million as of March 31, 2013.
For the LTM ending March 31, 2013, FCF (cash provided by operating activities
less capital spending and dividends) was approximately $480 million. In 2013,
Fitch estimates AMT's FCF will be in the $525 million to $575 million range.
As of March 31, 2013, and net of letters of credit, AMT had a total of $675
million available on its $1 billion senior unsecured RCF maturing in 2017 and
$998 million 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 $600 million of senior unsecured notes due in
Considering this current upgrade to 'BBB':
--Fitch's sensitivities do not currently anticipate developments with a
material likelihood leading to a rating upgrade.
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'.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012);
--'Criteria for Rating U.S. Equity REITs and REOCs' (Feb. 26, 2013).
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating Telecom Companies
Criteria for Rating U.S. Equity REITs and REOCs
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John C. Culver, CFA, +1-312-368-3216
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
Bill Densmore, +1-312-368-3125
Mike Weaver, +1-312-368-3156
Brian Bertsch, New York, +1-212-908-0549
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