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American Tower Corporation Message Board

  • poatathome poatathome Jan 22, 2003 6:15 PM Flag

    The Deal

    This is what I understand of the deal. To raise $400 million they are agreeing to an effective interest charge of about 12.6%. (they receive $519 per unit today and repay $1000 in 5.5 years). Through the warrants they will increase the number of shares outstanding by about 5%.

    They use the money to rid themselves of a little more than $200 million of 2.5% converts and pay down other debts which have a lower effective interest charge but unlike their offering today require interest payments between now and when the new issue is due sometime in late 2008.

    Am I understanding this transaction correctly?

    If so, why is AMT raising $400 million? Why didn't it just raise $200 million to take care of this short term issue?

    I am having trouble understanding the motivations of the company. Any help here would be appreciated.

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    • They raised more because the bank debt is senior to all else and the banks would only agree to this if 200 million were paid down on the credit line at the same time they retire the converts.

    • poena_peccatus_mortum_est poena_peccatus_mortum_est Jan 22, 2003 7:52 PM Flag


      This appears to be a great financing for AMT:

      - cash interest expense is reduced
      - the overhang of the Put has disappeared
      - new finance junior to the bank has been raised at a yield far lower than the existing AMT public debt trading levels
      - $200 million extra has been raised which can be used to soften up the amortization requirements of the bank deal-- ie the '04 requirements
      - hopefully the resolution of the '03 Put will result in a reduction in the hedge activity (shorting the stock against a long Convert position) and allow the stock to move more naturally
      - the dilution associated with the warrant (11,389,002 shares) is FAR lower than the Convert threatened to be (maybe 40,000,000 shares)

      So, lower current cash cost, lower short term amortizarion requirements, lower dilution and hopefully an increase in short positions which will need closing out. I can see no negatives here from the equity perspective.

      I hope I answered your question-- the extra dough probably goes to the banks for a break in the terms. I suppose it would be too much to ask that they allow the $200 to be used to take out other notes at discounts?

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