March 30, 2017 / 6:17 PM / in 4 months

Fitch Rates American Tower's EUR500MM Debt Offering 'BBB'; Outlook Stable

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(The following statement was released by the rating agency) CHICAGO, March 30 (Fitch) Fitch Ratings has assigned a 'BBB' rating to American Tower Corporation's (AMT) offering of EUR500 million senior unsecured notes due 2025. Net proceeds from the offering will be used to repay existing debt on its 2013 revolving credit facility (RCF). Proceeds may also be used for general corporate purposes. As of Dec. 31, 2016, pro forma outstanding borrowings on AMT's 2013 RCF totaled approximately $1.7 billion. The pro forma amount reflects borrowings to fund a portion of the FPS Towers' acquisition and the repayment of debt, including the repayment in their entirety of the GTP cellular sites and Unison notes, the redemption of the 7.25% senior unsecured notes due 2019, and repayment of a portion of the 2014 RCF. AMT has a Fitch Issuer Default Rating (IDR) of 'BBB' with a Stable Rating Outlook. KEY RATING DRIVERS Strong Free Cash Flow (FCF) and Margins: AMT's ratings are supported by the financial flexibility provided by its strong FCF and its high EBITDA margin, which has been consistently around 60% in recent years. The tower business model translates into strong, sustainable operating performance and FCF growth, aided by the company's significant scale and the favorable demand characteristics for wireless services (particularly data). Stable Growth Model: AMT is expected to continue to post strong FCF, generate mid- to high-single-digit organic growth and maintain relatively stable margins. Tower revenues are predictable, and growth is provided by contractual escalators embodied in long-term lease contracts and there are strong prospects for additional business. The tower industry is benefiting from wireless carriers continued investment in their fourth generation (4G) networks to meet rapidly growing demand for mobile broadband services. Stable Outlook: Fitch expects AMT's net leverage to be under 5.0x at the end of 2017. Leverage is currently elevated primarily as a result of AMT's acquisitions, including the acquisition of the rights to towers and outright purchases of towers from Verizon Communications Inc. in 2015. Consolidation Risk Manageable: Fitch believes U.S. wireless consolidation, if it were to occur, would not have a material effect on AMT's operations. Revenue growth from continued lease activity and contractual escalators in the U.S market would more than offset the relatively modest losses occurring over time due to consolidation. International Exposure: Similar wireless service demand trends are occurring internationally, with wireless data services at an earlier stage of development than in the U.S. Excluding pass-through revenues, the company's international operations generated approximately 35% of total property revenues in the fourth quarter of 2016. KEY ASSUMPTIONS --In 2017, consolidated revenue grows to slightly less than $6.5 billion, based on expectations for property revenue to be near the mid-point of company guidance of $6.4 billion. In 2018 and thereafter, Fitch assumes revenue grows in the 4%-5% range due to contractual escalators and new-business growth. --EBITDA margins decline slightly in 2017 due to the lower margins associated with acquired properties, but increase moderately thereafter as additional tenants are added to towers. --Capital spending of approximately $850 million in 2017. --Moderate stock repurchases as net leverage under 5x is reached, with further deleveraging arising from EBITDA growth (rather than debt repayment). RATING SENSITIVITIES Positive: At the current 'BBB' level, Fitch does not currently anticipate near-term developments that could lead to an upgrade of the rating. Negative: 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, or if a significant transaction, or share repurchases, results in expectations for net leverage sustained above 5x for longer than an 18-24 month period. LIQUIDITY In Fitch's opinion, AMT has a strong liquidity position supported by its FCF, cash on hand and availability on its revolving credit facilities. Operationally, cash flow generation should remain strong. For 2016, FCF (cash provided by operating activities less capital spending and dividends) was approximately $1 billion. As of Dec. 31, 2016, cash approximated $787 million and unused revolver capacity was approximately $2.8 billion. Of the cash balance, approximately $423 million was held by foreign subsidiaries. AMT has two revolving credit facilities: a $2 billion, multi-currency facility due in January 2022 (the 2014 RCF) and a $2.75 billion revolving credit facility due in June 2020 (the 2013 RCF). The principal financial covenants limited total debt/adjusted EBITDA (as defined in the agreements) to no more than 6.0x (up to 7.0x for specified time periods following a qualified acquisition). 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 consist of approximately $238 million and $1.6 billion in 2017 and 2018, respectively. 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 Sharon Bonelli Senior Director +1-212-908-0581 Date of relevant committee: April 13, 2016 Summary of Financial Statement Adjustments - Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below: --Historical and projected mandatory convertible preferred stock is given 100% equity credit. Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com; Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. 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