NEW YORK-American Tower Corp. announced it will receive $420 million following the sale of 12.25 percent senior subordinated discount notes due 2008 of newly formed and wholly owned subsidiary American Tower Escrow Corp. and warrants to purchase 11.4 million shares of Class A American Tower common stock.
American Tower said it will use proceeds from this deal to repay at least $200 million of the term loans outstanding under its credit facilities and to replace at least $200 million of availability under its revolving credit facility. In addition, pursuant to an amendment to its credit facility, the company will use up to $217 million to repurchase its outstanding 2.25 percent convertible notes.
Following the announcement, analysts from Bear, Stearns & Co. said completion of the transaction would satisfy issues that led to their previously negative outlook on the company and said, “We believe this announcement is a positive for the stock.” Analysts warned investors, however, that American Tower still remains highly leveraged and subject to lease-up rate risks and the bank amendment still needs to be approved. Shares of American Tower were trading as high as $4.98 early Thursday.
Analysts from Raymond James & Associates said they are maintaining their “Strong Buy 1” rating on American Tower and $6 per share target price for 2003.
Conversely, on Wednesday, before the deal went through, Moody’s Investors Service downgraded the ratings on American Tower’s debt securities and credit facilities to negative from stable.
“The revised rating outlook reflects Moody’s concern that the company is issuing an expensive, and accreting piece of debt that ultimately increases the total amount of debt outstanding and puts additional pressure on the company to increase cash generation over the intermediate term,” said Moody’s in a statement.
Moody’s noted that American Tower “has taken aggressive action to improve the stability of its business profile” by exiting certain businesses, including the pending sale of its Verestar satellite services business, and it acknowledges the company’s EBITDA “has been growing smartly.” However, Moody’s warned that substantial cash flow growth is also necessary.
