American Tower Corp.'s bank debt was one to two points stronger this week as the company announced that it would pursue some $420 million in new financing. Proceeds will be used to pay down $200 million of the company's term loans and possibly to deal with roughly $210 million of convertible notes that are puttable Oct. 22. Dealers and buysiders quoted the market for the company's "B" loan in the 94 3/4 to 95 3/4 range and a small piece is believed to have changed hands in the 95 context. The funds will be raised through an issue of 123/ 4% senior subordinated discount notes due 2008 and warrants to purchase Class A common shares of American Tower.
American Tower is currently seeking an amendment so that the company can repurchase the convertible notes with the new funds. In addition to repaying part of the term loans, the company expects to reduce the capacity of its revolver by $200 million. The terms of agreement under the new financing require lender approval within 60 days from completion, explained a company spokeswoman. The company anticipates that the new financing will be completed this week, she added. The financing was set up through a new wholly owned subsidiary of American Tower, American Tower Escrow Corp., for the purposes of securing the financing prior to receiving lender approval. Once approval is obtained, the new notes will become an obligation at the American Tower operating company level.
Initially, some investors in the company's bank debt were concerned that the new notes would be held at the operational company level and therefore be pari passu to American Tower's bank debt. However, the company announced the new senior discount notes will be structurally superior to the debt issues at the parent holding company level, but subordinate to the $2 billion secured credit facility, which provides a line to the company's main operating subsidiaries.