Fitch IBCA Rates Crown Castle Bank Loans.
Fitch IBCA has assigned its 'BB-' rating for the Crown Communications Inc. (CCI) and Crown Castle International Corp. de Puerto Rico (CCI Puerto Rico) $100 million senior secured credit facility, maturing 2004, and its 'BB-' rating for the Crown Castle/Bell Atlantic Mobile joint venture's $250 million senior secured credit facility, maturing 2006.
In addition, Fitch IBCA reaffirms its 'B' rating on Crown Castle International Corp.'s (CCIC) $150 million senior notes offering, maturing 2011, and its 'B' rating on the company's $300 million senior discount notes offering, due 2011. Fitch IBCA also affirms its 'CCC+' rating on CCIC's outstanding 12.75% senior exchangeable preferred stock, due 2010.
The ratings reflect CCIC's strong position within the communications tower industry, the diversified tower portfolio that will be created upon completion of several announced transactions with wireless operators, the quality of the company's customer base, the continued growth in consumer demand for wireless product, and an experienced management team.
Fitch IBCA's ratings also acknowledge concern over growing competition within the tower industry, the continued need for access to capital to finance the expansion of CCIC's footprint, uncertainty over the company's ability to successfully lease-up its towers, and the company's high leverage. In addition to the above, the bank loan ratings also reflect the senior secured nature of each of the bank facilities.
The $100 million facility for CCI and CCI Puerto Rico is secured by substantially all assets of the borrowers including the transmission towers and leases. The security package for the $250 million facility for the Crown Castle/Bell Atlantic Mobile joint venture excludes the transmission towers but retains security interests in the membership interests and leases.
Transactions recently announced by CCIC with Bell Atlantic Mobile, BellSouth, and Powertel will contribute 811 towers to the existing 690 U.S. towers currently owned or managed by the company. These acquisitions will provide the company with a significant footprint in the southeastern portion of the U.S. as well as securing Bell Atlantic Mobile, BellSouth, and Powertel as anchor tenants at attractive lease rates for no less than 10-year terms. With the completion of these transactions, consolidated pro forma leverage (pro forma total debt to EBITDA) will be 7.4 times (x) with interest coverage (EBITDA to interest expense) at approximately 1.4x.
Fitch IBCA will continue to monitor the company's ability to absorb additional towers while implementing appropriate controls. Future focus will be directed toward same-tower sales performance, tower co-location results and lease rate performance versus projections. Fitch IBCA will also focus on the strategy and synergies behind additional acquisitions made by the company.
The senior secured bank loan ratings reflect the security packages associated with each of the facilities. It is the opinion of Fitch IBCA that, due to the factors highlighted above, the company would be a likely candidate for reorganization rather than liquidation should default occur. Fitch IBCA used several valuation models in order to determine the enterprise value of this franchise and examined these values under stressed circumstances. Fitch IBCA believes that, even in a distressed environment, the enterprise value associated with these operations provides significant coverage for the senior secured facilities.
CCIC, headquartered in Houston, TX, is a leading owner and operator of tower sites in the U.S. The company's European subsidiary, Castle Transmission International, is the U.K.'s largest independently owned operator of tower transmission sites that are used in the provision of analog and digital broadcast services to the British Broadcasting Corporation and other commercial broadcasters.