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Microsoft Cloud Authors: Eric Aarrestad, Greg O'Connor, Liz McMillan, Aleksei Gavrilenko, Elizabeth White

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

Fitch Ratings has assigned a 'BBB' rating to American Tower Corporation's (AMT) proposed offering of benchmark-sized senior unsecured debt due in 2021. Proceeds from the offering will be used to repay outstanding revolver borrowings, which on a June 30, 2014 adjusted basis totaled approximately $923 million, and for general corporate purposes. The adjusted basis includes $140 million borrowed in July 2014. AMT has a Fitch Issuer Default Rating (IDR) of 'BBB', with a Stable Rating Outlook.

KEY RATING DRIVERS

The ratings and Outlook reflect Fitch's expectations that AMT remains on the path to delever to levels established upon its October 2013 acquisition of MIP Tower Holdings LLC - the parent of Global Tower Partners (GTP) for $4.8 billion (including assumed debt). Owing to debt level expectations at the end of 2014, combined with recently increased expectations for EBITDA as a result of acquisitions in 2013 and 2014 and the continued strong performance of its legacy tower business, Fitch expects the company to remain on a path to reduce quarterly run-rate net leverage to approximately 5.0x by the end of 2014 or early 2015.

Fitch believes the May 2014 issuance of the mandatory convertible preferred stock (net proceeds of approximately $583 million) signals the company's intent to get back to the high end of its 3x to 5x net leverage target by the end of 2014 or early 2015.

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 will more than 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 LTM ending June 30, 2014, FCF (cash provided by operating activities less capital spending and dividends) was approximately $518 million. As of June 30, 2014, cash on hand approximated $283 million and unused revolver capacity was approximately $3.2 billion. Of the cash balance, approximately $171 million was held by foreign subsidiaries. Adjusted for $140 million of borrowing in July 2014, available borrowing capacity was $3.066 billion.

AMT has three revolving credit facilities: a $1 billion, 364-day RCF due in September 2014, a $1 billion RCF due in January 2017, and a $2 billion RCF due in June 2018. The principal financial covenants limit total debt-to-adjusted EBITDA (as defined in the agreements) to no more than 6.5x until Sept. 30, 2014 and 6.0x thereafter, and senior secured debt-to-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 expense must be no less than 2.5x for as long as the ratings are below the specified level. The next material maturities are in 2015 and total approximately $1.15 billion.

RATING SENSITIVITIES

At the current 'BBB' level, Fitch's sensitivities do not currently anticipate developments with a material likelihood of leading to a rating upgrade.

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;

--2014 acquisitions do not extend the time to reach the target leverage range from Fitch's initial expectations, as a result, a subsequent, significant leveraging transaction that delays anticipated delevering could lead to a downgrade.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (May 28, 2014);

--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012).

Applicable Criteria and Related Research:

Rating Telecom Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749393

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=844455

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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