Last Updated Dec 4, 2008 2:41 PM EST
- In order to extend the maturity dates of our indebtedness, lower our cost of debt and improve our financial flexibility, we use our available liquidity and seek new sources of liquidity to refinance and repurchase our outstanding indebtedness.
During the nine-months ended September 30, the company raised an additional $325 million of term loan commitments, with the proceeds used to repay -- and extend the maturity dates -- of a similar amount of indebtedness.
As of September 30, American ended the quarter with substantial room under its covenant restrictions: (i) leverage equal to 3.9 times annualized adjusted EBITDA, below debt maintenance covenants of six times adjusted EBITDA; (ii) debt service coverage of approximately 4.3 times, above the required EBITDA/Interest coverage of 2.5 times.
American Tower's financial position remains solid relative to its publicly traded peers, with Crown Castle Int'l and SBA Communications sporting total debt 1.8 times equity and 7.0 times equity. In addition, the comparable, weighted average term of debt for American Towers, Crown Castle, and SBA was 5.2 years, 2.6 years, and 3.1 years, respectively, at September 30.
American Tower has approximately $600 million of liquidity and no material maturities until 2012. In the unlikely event that credit markets were to remain dislocated over the time period until these maturities occur in 2012, management believes that its operations would generate sufficient internal cash from operations to pay off the approximate $2 billion in 2012 maturities.
The company's tower leasing business, however, depends on a handful of wireless carriers, with 65 percent of revenue derived from the top five U.S. Carriers, including AT&T (21 percent), Sprint Nextel (20 percent), and Verizon Wireless (11 percent).
Taiclet remains optimistic about growth prospects for 2009, telling analysts on the third-quarter 2008 earnings call that AT&T and Verizon continue to experience substantial revenue growth from bandwidth hungry customers. "Wireless services has become a necessity rather than a luxury," said Taiclet. "Even in difficult economic times wireless subscribers and usage should continue to grow."
In spite of the turbulence in the broader economy and credit markets, Taiclet opined that that wireless end-users -- the consumers -- typically do not need financing to pay their monthly bill or even to purchase handsets. Therefore, unlike buyers of automobiles, housing or other big-ticket items the wireless industry's customer base should be able for the most part to continue to afford wireless service. As rates for data services continue to come down, more and more people should find 3-G an affordable option, too.
Long-term non-cancelable revenue contracts totaled $9.2 billion at September 30. And, about 65 percent of tower revenue contracts are not up for renewal until 2013.
American Tower, supported by stable and growing operations, expects to generate cash flow from operations in 2009 on the order of $865 million -- leaving excess cash to fund international tower expansion plans in India.