Crown Castle International is prepping a $1.9 billion private placement backed by cellular tower lease receivables via Morgan Stanley, the proceeds for which will be used to fund a tender offer for $1.4 billion in outstanding high-yield debt, the company announced last week. Should the transaction go as planned, Crown Castle will be the second issuer to securitize its tower lease revenues, following the pair of offerings Global Signal priced last year.

"There are so many transactions like this that can go down," said a buysider who predicts massive growth for securitization as a funding source for telecoms going forward. "This is going to be a huge market, or, it should be!"

In its release announcing the new securitization, Crown Castle said it "expects that the notes will be rated investment grade." Crown Castle, rated B3' by Moody's Investors Service and CCC+' by Standard & Poor's, will offer $1.19 billion or triple-A rated A paper, with $700 million of subordinated notes rated double-A through triple-B. All tranches will have a 5.02-year average life.

Crown Castle is offering bondholders 50 basis points over Treasurys in the tender offer, plus a consent payment of $40 per $1,000 principal amount of notes tendered. Holders who tender their notes after the consent date will not receive the additional consent payment.

The consent date for the high-yield bond tender is next Tuesday, with the offer expiring June 14. News of the tender offer sent Crown Castle's junk bonds soaring last week, with the company's 7.5% senior notes due August 2011 tightening 400 basis points on the news, which broke after Tuesday's market close. "We calculate a take-out price of 113.72 for the 7.5% senior notes," said high-yield analysts at JPMorgan Securities in an email blast sent out Wednesday morning. "Our overweight' rating initiated on March 23, 2005 was based on this event."

The relatively new asset class, which has seen only two transactions to date - both from Global Signal - totaling just over $700 million, is coming out of Morgan Stanley's CMBS group, due to the commercial aspects of the cashflows and the fact that the towers are located on what is considered commercial real estate.

Crown Castle engineers, deploys, owns and operates shared wireless infrastructure, including tower networks, as well as offering wireless communications to 68 of the top 100 U.S. markets and to substantially all of Australia. Crown Castle owns, operates and manages more than 10,600 wireless communication sites in the U.S. and over 1,300 in Australia.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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