OREANDA-NEWS. Fitch Ratings has assigned a 'BBB-' rating to Crown Castle International Corp.'s (Crown) new senior unsecured note offering. Net proceeds, along with cash on hand, will be used to repay a portion of the borrowings under its new credit facilities (announced January 2016) including the 364-day senior unsecured revolving credit facility (RCF).

The Rating Outlook is Stable.

KEY RATING DRIVERS

Crown's ratings reflect the strong recurring cash flows generated from its leasing operations, robust EBITDA margins, and the scale of its tower portfolio. In addition, a focus on the U.S. market reduces operating risk. These factors provide considerable stability to cash flows and have led to a lower business risk profile than most typical corporate credits.

Delevering Progress: Crown has made progress on delevering following two major acquisitions of towers, or rights to towers, since the end of 2012. These transactions include the $2.5 billion T-Mobile transaction in 2012, which was largely debt-financed, and the $4.8 billion AT&T Inc. transaction in 2013, which was primarily financed with equity. Fitch expects Crown's 2016 gross leverage to reach 5.2x on a run-rate basis at the end of the year, which is within our expectations for leverage for a 'BBB-' rated tower company with Crown's business and financial risk profile.

Wireless Broadband Growth: A key factor in future revenue and cash flow growth for Crown and its industry peers is the growth in wireless network capacity needed to meet demand for mobile broadband services. Growth in 4G data services will drive amendment activity and new lease-up revenues from the major operators, leading to at least mid-single-digit growth prospects for the next couple of years. Crown has also deployed distributed antenna systems, which should allow it to capture additional share in the small-cell infrastructure required for scaling 4G networks.

Sunesys Acquisition: Crown acquired Sunesys (a wholly owned subsidiary of Quanta Services, Inc.), a fiber services provider that owns or has rights to nearly 10,000 miles of fiber in major metropolitan areas, for $1 billion. Strategically, the acquisition complements Crown's rapidly growing small-cell network business, which Fitch believes is a positive. Crown funded the transaction in a leverage-neutral manner through the sale of its Australian subsidiary.

Australian Subsidiary Sale: Crown Castle sold its 77.6% interest in its Australian subsidiary (CCAL) in May 2015 to a consortium of investors led by Macquarie Infrastructure and Real Assets for approximately $1.6 billion.

KEY ASSUMPTIONS

--Fitch assumes revenue growth will be in the mid-single digits (on a GAAP basis) in 2016, with potential improvements resulting from lower churn in the future. Over the next two to three years, EBITDA margins will remain relatively stable in the mid-to-high-50% range.

--Fitch anticipates moderate delevering will produce gross debt/EBITDA (last 12 months [LTM] EBITDA) in the range of 5.2x to 5.4x at the end of 2016.

RATING SENSITIVITIES

Positive Rating Action: An upgrade is not likely within a rating horizon extending to the end of 2016.

Negative Rating Action: Developments potentially leading to a negative rating action include an increase in leverage above 5.5x for a protracted period of time due to an acquisition funded mostly by debt, or a change in financial policy that targets higher leverage.

LIQUIDITY

Strong Liquidity: Crown has meaningful cash generation, balance sheet cash, RCF availability, and a favorable maturity schedule relative to available liquidity. Cash, excluding restricted cash, was $179 million as of Dec. 31, 2015. For the full year ending Dec. 31, 2015, free cash flow was negative at approximately $275 million. Capital expenditures were $909 million during this period, of which approximately $105 million was to sustaining capital expenditures, with the balance discretionary in nature.

Pro forma year-end availability on Crown's senior unsecured RCF was $1.645 billion as of Dec. 31, 2015. The total is pro forma for the credit facility Crown put in place in January 2016 and the repayment of the facility at Crown Castle Operating Company. The financial covenants within the new unsecured credit agreement include a total net leverage ratio of 6.5x (not to exceed 7x for up to three quarters following a qualified acquisition), a senior secured leverage ratio of 3.5x (on a gross basis) and, if rated below investment grade by two of three rating agencies, consolidated interest coverage of 2.5x.

Maturity Profile: Crown's maturity profile over 2016 to 2019 has significant maturities only in 2017. As of Dec. 31, 2015, pro forma for the repayment of the 364-day facility with the current offering, approximately $1.222 billion matures in 2017, including anticipated repayment dates associated with securitizations (contractual maturities are $570 million).