Wireless operators have few alternatives to using SpectraSite's towers, according to Standard & Poor's, which has raised the company's bank loan rating one notch to BB-. "The fact that they have long term agreements with wireless carries and those tower leases are an important part of the wireless companies operations to provide them the coverage," explained Catherine Cosentino, an analyst with S&P. The company also benefits from escalators in the contract revenues, she added.
Since emerging from bankruptcy in February 2003 the company has constantly increased operating cash flows, S&P says. SpectraSite lowered its total leverage for the three months ended June 30 to around four times from five times for the same period a year earlier. "I think more than anything it is an indication of the operating and the financial strategy of the company continuing to play out and S&P recognizing the positive trends that have been occurring the for the last 18-24 months," noted Steven Lilly, SpectraSite's co-cfo, treasurer and v.p. finance.
The outlook remains positive. "It had a positive outlook prior to this being raised," Cosentino noted. "We said that the business itself has very positive characteristics that support a higher rating--that's why we still have a positive outlook on this and it could be raised again." A further upgrade could result if the company continues to improve operations over the next 12 months, S&P says.
The bank loan rating was raised in tandem with the corporate credit rating being raised from B to B+, Cosentino noted. In addition to the upgrade, S&P assigned a recovery rating of 1 to the bank loan, indicating a 100% return of principal in the even of default. There is no bank amortization until 2006 when around $81 million is due, but in 2007 about $359 million is due. SpectraSite has access to its $200 million revolver until the third quarter of 2005 when it will be reduced to $175 million. The credit also includes a $187.4 million "A" loan and $251.8 million "B" loan. In February, CIBC World Markets led a repricing for the company's "B" loan that took pricing from LIBOR plus 3% to LIBOR plus 2 1/4% (LMW, 2/2).
* Moody's Investors Service has placed Allied Waste North America's ratings on review for downgrade as a result of the company's weaker earnings and cash generation and higher leverage than anticipated. The company's bank debt is rated Ba2 and consists of a $1.5 billion revolver, $1.185 billion "B" loan, $250 million "C" loan and $150 million "D" loan. The revolver is due in 2008, while the term loans mature in 2010.
| Other Ratings Actions* | |||
| Borrower | Rating | Action | Agency |
| Northern California Presbyterian | A- | Downgraded to BBB+ | S&P |
| UIL Holdinds Corp. | Baa2 | Baa3 | Moody’s |
| * Thurs, Oct. 3 through Wed, Oct. 9 |