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American Tower to Raise $1.09B With Senior Notes Offering

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American Tower Corporation (AMT - Free Report) has priced a public offering of two different issues of unsecured senior notes. Specifically, the 2030 notes, with an aggregate principal amount of $800 million, carry an interest rate of 1.875% per annum, and have been priced at 99.554% of the face value.

Another offering of 2050 senior notes, with an aggregate principal amount of $300 million, will be consolidated with the company’s outstanding $750 million 3.100% senior unsecured notes due 2050 issued on Jun 3, 2020, and has been priced at 101.972% of the face value.

Net proceeds from the offering are estimated to be $1,092.1 million, after deducting the estimated offering expenses and underwriting discounts.

American Tower intends to allocate net proceeds from the offering to reduce the outstanding balance under its $2.35-billion senior unsecured revolving credit facility, which was amended and restated in December 2019. Additionally, the company will use the proceeds to repay the balance under its $1.19-billion senior unsecured term loan that it entered in April 2020.

The company’s efforts to tap the debt market amid the low rate environment and in such testing times are a strategic fit. Furthermore, the new debt will result in lower funding costs, since unsecured notes can now be borrowed at lower rates.

Markedly, as of the second-quarter end, American Tower enjoyed investment-grade credit rating of BBB-, BBB+ and Baa3 as well as a stable outlook from Standard & Poor’s, Fitch and Moody’s, respectively. This enables the company to access the debt market at favorable terms.

Further, at the end of the second quarter, the company had $6.5 billion of total liquidity, which comprised $2 billion in cash and cash equivalents, and availability of $4.5 billion under its numerous revolving credit facilities (net of any outstanding letters of credit). This supports its debt servicing ability.

However, customer concentration is high for American Tower, with AT&T, Verizon Wireless and T-Mobile being the company’s top three customers, accounting for 51% of its total property segment revenues as of second-quarter 2020. The loss of any of these customers, consolidation among them or reduction in network spending leads to a material impact on the company’s top line.

Shares of this Zacks Rank #3 (Hold) company have gained 8% over the past year as against the industry's 10.7% decline.

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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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