American Tower Corporation (AMT - Analyst Report) - a leading independent operator of wireless communications towers in the world issued senior notes worth $1 billion, bearing interest of 3.5% and is due to mature in January 31, 2023. The net proceeds, which will be nearly $983.4 million, will be utilized to repay debts that the company incurred while acquiring towers.
American Tower to date has issued nearly $5 billion senior notes. The new offering will be the second largest issue after the $999 million 4.5% senior notes due in 2018. Moreover, a $600 million senior notes to get matured in next two years time. So a further issue of $983 million senior notes will continue to put pressure on the company’s cash flow.
In the recently concluded quarter, American Tower had $382.3 million in cash and marketable securities and around $7,489.6 million in outstanding debt on its balance sheet along with a debt-to-capitalization ratio of 0.67. Therefore, a reduction of debt by nearly $1billion will also slash the debt-to-capitalization ratio by few basis points.
At present, American Tower operates 21,668 wireless towers and 274 broadcast towers in the U.S. along with 29,031 wireless towers and 199 broadcast towers outside the U.S. Rapid expansion in emerging markets like Brazil and India will further expand the company’s requirement for tower, thereby increasing the need for more cash. So, such weaker cash position will force the company to issue more senior notes in the near future.
American Tower continues deliver strong results driven by substantial demand for tower space to facilitate high-speed wireless data and on demand video services, along with super-fast 3G/4G technologies. Massive demand for wireless data and video throughout the world will boost American Tower’s long-term growth.
However, stiff competition from Crown Castle International Corp. (CCI - Analyst Report) coupled with higher operating expenses and huge debt may act as headwinds for the stock going forward. As the company continues to expand its network in the emerging nations like India, China and Latin American region, it will remain highly vulnerable to the exchange rate risks. We, thus, maintain our long-term Neutral recommendation on American Tower Corporation.
Currently, the company has a Zacks #3 Rank, implying a short-term (Hold) rating.