Bloomberg News

American Tower Sells $500 Million of Debt as Acquisitions Rise

October 03, 2011

Oct. 3 (Bloomberg) -- American Tower Corp., the company that leases wireless communications tower space to customers including AT&T Inc. and Sprint Nextel Corp., sold $500 million of debt to finance acquisitions from South America to Africa.

The company issued 5.9 percent, 10-year debt to yield 412.5 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. Proceeds may finance property interests in 1,800 U.S. communications sites, towers under an agreement with Colombia Movil SA and takeovers in the U.S., Latin America and Africa, Boston-based American Tower said today in a regulatory filing.

American Tower, which spent about $893 million on acquisitions in the first half of the year after $900 million in 2010, is planning to convert into a real estate investment trust in 2012 to cut taxes and initiate dividends to investors. The company’s ratio of debt to earnings before interest, taxes, depreciation and amortization will remain between 3 times and 5 times, Chief Executive Officer Jim Taiclet said on Sept. 20.

“We’re using the REIT conversion to establish American Tower as a growth-plus-yield company,” Taiclet said at a Goldman Sachs Group Inc. conference. It’s “an opportunity to introduce the dividend as well as get the tax benefits of doing this.”

The company’s borrowing costs have increased since it last sold debt in December, Bloomberg data show. In that transaction, American Tower issued $1 billion of 4.5 percent notes maturing in January 2018, Bloomberg data show. The debt, which priced to yield 215 basis points more than similar-maturity Treasuries, traded at 99 cents on the dollar on Sept. 30 with a yield of 4.68 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Debt Grades

REITs must pass on at least 90 percent of their annual taxable profit to shareholders through dividends. American Tower doesn’t currently pay a dividend, according to today’s filing.

Proceeds from the bond may also be used to pay down borrowings under American Tower’s revolving credit line, the filing shows. As of June 30, the company had $275 million outstanding under the bank line, which matures in June. The company borrowed an additional $100 million under the agreement in July, according to today’s filing.

American Tower is graded Baa3 by Moody’s Investors Service and BB+ by Standard & Poor’s, Bloomberg data show. Its “aggressive financial policy” is keeping it from investment- grade, S&P analysts said in August, citing acquisitions, stock repurchases and the REIT-related dividend payments.

--Editors: Mitchell Martin

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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