OREANDA-NEWS. February 09, 2015. Fitch Ratings has affirmed American Tower Corporation's (AMT) 'BBB' Issuer Default Rating (IDR) and 'BBB' senior unsecured notes and credit facilities. The Rating Outlook has been revised to Negative from Stable.

KEY RATING DRIVERS

AMT has announced it has entered into a definitive agreement to acquire the exclusive rights to 11,324 towers and outright acquire 165 towers from Verizon Communications Inc. (Verizon) for approximately \\$5.1 billion. The exclusive rights will allow AMT to lease and operate such towers for a weighted average term of approximately 28 years, and there are fixed price purchase options to acquire the towers at the end of the lease terms. The Verizon towers are expected to generate approximately \\$410 million in annual run rate revenues and \\$235 million in gross margin. The transaction is expected to close in the first half of 2015.

The affirmation of the 'BBB' IDR reflects management's intent to finance the Verizon and other pending transactions consistent with its ratings as conveyed to Fitch, combined with the inherent stability of its contractually-based revenues. The Negative Rating Outlook reflects the increase in leverage due to the transactions. Fitch anticipates moderate delevering will produce gross debt to EBITDA (last twelve months EBITDA) in the range of 5.2x to 5.4x (as calculated by Fitch) at the end of 2016.

In the first half of 2015, AMT also plans to close on tower acquisitions in Brazil and Nigeria at a total cost of approximately \\$2.25 billion. In Brazil, AMT plans to acquire two tower portfolios from TIM Celular S.A. (TIM), which is a wholly-owned subsidiary of Tim Participacoes S.A., with a total value of approximately \\$1.1 billion at current exchange rates. The acquisitions will add substantially to AMT's Brazilian tower portfolio. AMT anticipates upon closing that the acquired towers will generate approximately \\$171 million in annual run rate revenues and \\$75 million in gross margin.

In Nigeria, AMT plans to acquire more than 4,800 towers from a subsidiary of Bharti Airtel Limited (Airtel) for approximately \\$1.05 billion in consideration. AMT anticipates the acquired towers will generate approximately \\$255 million in annual run rate revenues and \\$91 million in gross margin. The acquisition represents AMT's launch of operations in Nigeria.

Tower 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, several of which 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 an earlier stage of development than in the U.S.

U.S. wireless consolidation is not expected to have a material effect on AMT's operations. Revenue growth from continued lease activity (supported by wireless data growth) and contractual escalators in the U.S. market are expected to offset the relatively modest losses that may occur over time due to consolidation.

In Fitch's opinion, AMT has a strong liquidity position supported by its free cash flow (FCF), cash on hand, and availability on its revolving credit facilities. Operationally, cash flow generation should remain strong. For the latest 12 months (LTM) ending Sept. 30, 2014, FCF (cash provided by operating activities less capital spending and dividends) was approximately \\$500 million. As of Sept. 30, 2014, cash on hand approximated \\$296 million and unused revolver capacity was approximately \\$3.1 billion. Of the cash balance, approximately \\$218 million was held by foreign subsidiaries.

AMT has two revolving credit facilities: a \\$1.5 billion facility due in January 2020 and a \\$2 billion multi-currency RCF due in June 2018. The principal financial covenants have been amended, and for the first and second quarter of 2015, total debt-to-adjusted EBITDA (as defined in the agreements) is limited to no more than 8.0x. The total debt-to-adjusted EBITDA ratio declines to 7.0x for the third and fourth quarters of 2015 and are 6.0x thereafter. The covenants limit senior secured debt-to-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. Debt maturities in 2015 total approximately \\$0.3 billion.

RATING SENSITIVITIES

The Negative Outlook could be revised if the company appears to be on a solid path to return to net leverage of 5x or below within a 12 to 24 month period.

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;
--AMT's financing for the pending transactions, once completed, does not allow the company to reached Fitch expected metrics by the end of 2016, or if a subsequent, significant transaction delays anticipated delevering.

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
Mike Weaver
Managing Director
+1-312-368-3156

Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com; Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (May 28, 2014);
--'Generic Ratings Navigator Companion' (Nov. 11, 2014).