SBA Communications Corp. this week priced an offering of $1.54 billion securitization of wireless tower lease payments.
The deal, SBA Tower Trust, will issue $920 million of series 2014-1C securities with an anticipated repayment date of October 2019 that pay interest of 2.898% a year and $620 million of series 2014-2C securities with an anticipated repayment date of October 2024 that pay 3.869% a year. Both tranches have a preliminary AAA’ rating from Fitch Ratings.
The securities pay a blended interest rate of 3.289% and a weighted average life through the anticipated repayment date of 7.0 years.
Net proceeds will be used to prepay $680 million outstanding of series 2010-1C securities and pay down $300 million on the revolving credit facility incurred to repay the issuer’s existing 4% convertible senior notes that were due Oct. 1, and general corporate purposes.
The offering is expected to close on or about Oct. 15.
The securitized pool of 9,545 towers in this securitization represents approximately 43% of SBA’s total portfolio, according to Fitch's presale report. There are 21,418 wireless tenant leases.
AT&T represents the largest tenant comprising 34.2% of the annualized revenue run rate (ARRR). Fitch notes in the presale report that two other tenants, Deutsche Telekom AG and T-Mobile US, which make up 14.6% and 2.8% of the ARRR, recently announced a merger. Fitch applied an additional stress to sites where both tenants are co-located; the ratings agency calculated that in cases where leases are not renewed it could resulting in approximately $3.3 million reduction in its stressed cash flow.
Another risk cited by Fitch is the relatively long-term tenor of the notes, which “increases the risk that an alternative technology — rendering obsolete the current transmission of wireless signals through cellular sites — will be developed.”