First time issuer SBA Communications Corp. has a $405 million securitization in the market, led by Lehman Brothers, which is expected to close by the end of the week. The deal, though backed by leases on wireless communications towers, has a CMBS-like structure and is issued out of the SBA CMBS-1 Depositor LLC trust.

The senior/subordinated deal is structured into five tranches, the largest being the $238 million A class, which Moody's Investors Service plans to rate Aaa'. The remaining subordinated tranches, each $48 million in size, will likely be rated Aa2', A2' and Baa2', respectively. Additionally a $21 million tranche will likely be rated Baa3'. The deal is expected to settle Friday.

The transaction is only the fourth wireless communications tower deal in the sector, with two previous issues by Global Signal Inc., and a $1.89 billion deal by Crown Castle International Corp., which priced in May. Those deals each used a CMBS-like structure, one which the current SBA deal shares.

The deal, with a legal final maturity of 2035, will pay interest only for the first five years, until December 2010. At that time, the deal can either be refinanced or begin amortizing. If the deal is refinanced in 2010, it will pay full principal to investors, similar to a bullet structure. If the deal begins amortization, the longest it could possibly take to amortize is another 25 years, until 2035, according to Moody's Assistant Vice President Taimur Jamil.

SBA's deal is backed by leases on 1,714 towers, a little over one-half of its tower and tower site portfolio. The towers are leased by companies such as Cingular Wireless, Sprint Nextel Corp., T-Mobile USA, Inc. and Verizon Communications Inc. One of the advantages of SBA's business, over others in the sector, is that the company builds its own tower sites, as opposed to merely acquiring them from other holders, said Jamil.

Building sites enables the company to chose the most sought after, and therefore profitable locations, whereas companies that acquire sites from other holders must generally buy what is available. Also, Jamir noted the fact that SBA is securitizing only half its portfolio sets it apart from other deals in the sector, in which issuers have typically securitized their entire portfolios.

Of the total, $321 million of the deal's proceeds will be used to refinance the outstanding balance of the company's $400 million senior credit facility, according to records filed with the Securities & Exchange Commission.

Since the issuers that have tapped the market in this sector each carry non-investment grade corporate ratings, Jamil said securitization market offers the lowest available cost of funds. "I wouldn't be surprised if [Crown Castle, Global Signal and SBA] continue to tap the structured finance market," he said. A source familiar with SBA also said it was likely this deal would be the first of several securitizations from the company.

SBA officials declined to comment until after the deal closed, and officials with Lehman Brothers could not be reached for comment.

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

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