OREANDA-NEWS. Fitch Ratings has assigned a 'BBB' rating to American Tower Corporation's (AMT) offering of benchmark-sized senior unsecured debt due in 2021 and 2026. Proceeds from the offering will be used to repay existing debt, including outstanding revolver borrowings on its 2013 credit facility, and for general corporate purposes. As of Sept. 30, 2015, as adjusted for subsequent net borrowings of $145 million, outstanding borrowings on its $2.75 billion credit facility (2013 revolver) totalled approximately $1.225 billion. AMT has a Fitch Issuer Default Rating (IDR) of 'BBB' with a Negative Rating Outlook.

KEY RATING DRIVERS
Acquisitions in 2015 have elevated leverage and the current Negative Outlook reflects the increase in leverage. The rise in leverage was moderated by the nearly $3.8 billion in equity raised in early 2015 as part of the financing of the transactions. Fitch anticipates moderate deleveraging will produce gross debt/EBITDA (last 12 months [LTM] EBITDA) in the range of 5.2x to 5.4x (as calculated by Fitch) at the end of 2016.

AMT's ratings are supported by the financial flexibility provided by its strong free cash flow (FCF) and its high EBITDA margin, which has been consistently above 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).

AMT is expected to continue to post strong FCF, generate mid- to high single-digit organic growth and maintain 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 heavily investing in fourth generation (4G) networks to meet rapidly growing demand for mobile broadband services.

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 potential consolidation.

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 (LTM 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 reach Fitch expected metrics by the end of 2016, or if a subsequent, significant transaction delays anticipated deleveraging.

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 the LTM ending Sept. 30, 2015, FCF (cash provided by operating activities less capital spending and dividends) was approximately $606 million. As of Sept. 30, 2015, cash on hand approximated $287 million and unused revolver capacity was approximately $1.5 billion on an adjusted basis. Of the cash balance, approximately $203 million was held by foreign subsidiaries.

AMT has two revolving credit facilities: a $2 billion, multi-currency facility due in January 2021 and the 2013 revolver due in June 2019. The maturity dates for both credit facilities were extended by one additional year in October 2015. The principal financial covenants previously were amended, and for the first and second quarter of 2015, total debt/adjusted EBITDA (as defined in the agreements) was limited to no more than 7.25x. The ratio declined 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 during 2016 and 2017 are nominal.