American Tower Corporation AMT recently announced the pricing of a public offering of senior unsecured notes due in 2027 and 2049. Through the offering, the company anticipates to raise nearly $1,334.2 million in net proceeds. This is the amount after the deduction of underwriting discounts and projected offering expenses.
Specifically, the 2027 notes, with aggregate principal amount of $750 million, have been priced at 99.838% of the face value. Interest rate of 2.750% will be paid on these securities on Jan 15 and Jul 15 of each year, beginning Jan 15, 2020. The notes will mature on Jan 15, 2027.
Additionally, notes maturing on Oct 15, 2049, have an aggregate principal amount of $600 million and have been priced at 99.711% of face value. Interest rate of 3.7% will be paid semiannually on these borrowings on Apr 15 and Oct 15, beginning April 15, 2020.
American Tower plans to channelize net proceeds to repay outstanding indebtedness. This includes a multi-currency senior-unsecured revolving credit facility that the company entered into in June 2013 and its unsecured term loan borrowed in February 2019.
Hence, the note offering will provide financial flexibility to the company and help meet its financial obligations efficiently. Also, since unsecured notes can be borrowed at lower rates, the new debt will result in lower cost of capital for this real estate investment trust (REIT).
This will likely boost the company’s substantially leveraged balance sheet. At the end of the second quarter, the company had total outstanding indebtedness of around $21.2 billion. Further, at the end of the quarter, its net leverage ratio was 4.2x.
American Tower’s senior unsecured debt rating was recently reiterated at Baa3 by Moody’s Investors Service, the rating division of Moody’s Corporation MCO. The rating affirmation was primarily driven by the company’s robust cash flows, decent liquidity, wide geographic footprint and predictable future earnings, backed by long-term non-cancellable lease agreements that carry embedded contractual rent escalators.
Furthermore, amid growing demand for data volume and deployment of 5G network, wireless carriers are expanding and enhancing their networks. These positive trends have been spurring demand for communications infrastructure assets as well as driving performance of REITs like American Tower, Crown Castle International Corp CCI and SBA Communications Corporation SBAC.
This is also anticipated to help American Tower witness splendid leasing activity and organic tenant billings growth in the upcoming period.
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