OREANDA-NEWS. Fitch Ratings has assigned a 'BBB' rating to American Tower Corporation's (AMT) offering of benchmark-sized senior unsecured debt due in 2020 and 2025. Proceeds from the offering will be used to repay outstanding revolver borrowings on its 2013 credit facility, which on a March 31, 2015, adjusted basis totaled approximately \$1.952 billion, and for general corporate purposes, including the financing of acquisitions and to repay other existing debt. AMT has a Fitch Issuer Default Rating (IDR) of 'BBB' with a Negative Rating Outlook.

As of March 31, 2015, borrowings on the company's 2013 revolver (due 2018) increased \$1.552 billion to \$1.952 billion, due to the redemption of its \$500 million 7% senior unsecured notes due 2017, the repayment of the approximately \$255 million on its Mexican loan and the partial funding of \$644 million of cash payments for the TIM acquisition.

KEY RATING DRIVERS

The 'BBB' IDR reflects the material equity financing raised in the first quarter of 2015 for the transaction with Verizon Communications Inc. (Verizon) and other pending transactions, 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.

At the end of March 2015, AMT completed the \$5.053 billion acquisition from Verizon of exclusive rights to 11,285 towers and outright acquisition of 163 towers. The exclusive rights allow AMT to lease and operate the 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.

In the first half of 2015, AMT also plans to close on tower acquisitions in Brazil and Nigeria. 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 \$1.0 billion. In April 2015, the company closed on the first portfolio, for a purchase price of approximately \$644 million. The acquisitions will add substantially to AMT's Brazilian tower portfolio. AMT anticipates upon closing that the acquired tower portfolios will generate approximately \$145 million in annual run rate revenues and \$64 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 \$248 million in annual run rate revenues and \$87 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 March 31, 2015, FCF (cash provided by operating activities less capital spending and dividends) was approximately \$661 million. As of March 31, 2015, cash on hand approximated \$323 million and unused revolver capacity was approximately \$800 million. Of the cash balance, approximately \$202 million was held by foreign subsidiaries.

AMT has two revolving credit facilities: a \$2 billion facility due in January 2020 and a \$2.75 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/adjusted EBITDA (as defined in the agreements) is limited to no more than 7.25x. The ratio declines to 7.0x for the third and fourth quarters of 2015 and 6.0x thereafter. 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.

Debt maturities in 2015 are nominal, following the redemption in February 2015 of \$600 million of notes and the repayment of the Mexican Loan. In 2016, approximately \$758 million matures. In April 2015, the company redeemed the entire \$500 million of its 7.0% notes due 2017.

KEY ASSUMPTIONS

--Fitch assumes organic revenue growth will be in the mid to high single digits over the next two to three years, and that margins, will remain relatively stable in the high-50% to low-60% range.

--Fitch anticipates moderate deleveraging will produce gross debt/EBITDA (last twelve months EBITDA) in the range of 5.2x to 5.4x (as calculated by Fitch) at the end of 2016.

RATING SENSITIVITIES

The Negative Outlook could be revised to Stable 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.