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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 percent 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 free cash flows and high EBITDA margin, which was 68 percent for the last twelve months (LTM) ending June 30. The significant operational scale provided by its tower portfolio, combined with favorable demand characteristics for wireless voice and data services, translate into 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).
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 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.
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. International revenue, currently about 15 percent of the total, is expected to reach no more than 25 percent to 30 percent of revenues. Fitch also notes that AMT manages its financial flexibility through its share repurchase activity, scaling repurchases back when opportunities arise to invest in the core business through acquisitions.
Additional information is available at fitchratings.com.
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