SBA Communications is marketing $4.5 billion of bonds backed by cellular tower leases, according to Fitch Ratings.  

Secured Tower Revenue Securities Series 2015-1 will issue seven tranches of senior notes totaling $4.2 billion that Fitch expect to rate ‘A’ and a single, $330 million tranche of subordinated notes to be rated ‘BBB.’

Midland Loan Services is the servicer. Barclays Capital is the structuring agent and underwriter.

Founded in 1989 and headquartered in Boca Raton, SBA owns and operates wireless communications infrastructure across North America and Central America. The pool of 10,590 towers ultimately securing this transaction represents approximately 43% of SBA’s total portfolio, according to Fitch.

The deal is backed by a mortgage that is secured by the borrowers’ mortgage liens in tower sites representing approximately 96% of the aggregate allocated loan amount, and guaranteed by the parent of the borrowers. Those guarantees are secured by a pledge and first-priority-perfected security interest in 100% of the equity interest of the borrowers.  Added as collateral for the mortgage loan are 1,179 new sites held by the 2015 borrowers, all of which were previously unencumbered.

At closing, loan proceeds will be used to repay the SBA corporate revolver and for general corporate purposes

Among the strengths of the deal, according to Fitch, is the diversified pool: the 10,590 tower sites and 22,642 tenant leases span 50 states, Puerto Rico, District of Columbia and the U.S. Virgin Islands. The largest state (Texas) represents only 8.4% of annualized run rate net cash flow.

SBA’s tenants are also strong: Telephony tenants represent approximately 97.0% of the leases on the cellular sites, and 55.3% of the annualized run rate revenue (ARRR) is from investment-grade tenants. The tenant leases have weighted average annual escalators of approximately 3.6% and a weighted average final remaining term (including renewals) of 18.2 years. The largest tenant, representing 36.5% of ARRR, i, AT&T, which Fitch rates an ‘A-‘.

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