Crown Castle Marketing $750M of Notes Backed by Tower Leases

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Crown Castle is marketing $750 million of notes backed by cell tower leases, according to Fitch Ratings.

Morgan Stanley is the structuring agent and underwriter.

Crown Castle Towers LLC Series 2015-1 and 2015-2 will each issue approximately $375 million of notes; the allocation between the two series has yet to be determined. Fitch expects to assign an ‘A’ rating to both. The Series 2015-1 notes have an anticipated repayment date of May 2022 and the Series 2015-2 notes have an anticipated repayment date of May 2025.

At closing, the issuers will use proceeds of the note issuance to retire the issuers’ existing $250 million senior secured tower revenue notes, series 2010-4, and for general corporate purposes.

The notes are backed by the equity interest in entities that own, lease, sublease and operate 11,000 wireless communication sites representing over a quarter of Crown Castle’s towers. In its presale report, Fitch stated that its rating reflects a structured finance analysis of cash flows from the ownership interest in cellular sites, not an assessment of the corporate default risk of the ultimate parent or guarantor.

Among the key ratings drivers cited in the report are the strength of Crown Castle’s tenants. There are 30,471 leases, the vast majority, or 96.3%, with telephony tenants (wireless, voice and data). Just over half, or 57.8%, of the annualized run rate revenue (ARRR) is from investment-grade tenants.

The tenant leases have weighted average annual escalators of approximately 3%-4% and a weighted average final remaining term (including renewals) of 27.2 years. Fitch rates the largest tenant, AT&T (representing 31.5% of ARRR) at ‘A’ with a stable outlook.

Crown Castle hasn’t tapped the securitization market in nearly five years; the most recent cell tower company to do so was SBI Communications. In October 2014, SBA priced a $1.54 billion deal. Fitch assigned its top rating, ‘AAA’ to the securities, which were priced to pay a blended interest rate of 3.289% and have a weighted average life of 7.0 years

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