American Tower's "B" paper began to tumble a little last week after hitting a high of 99 1/4 two weeks ago with a $10 million trade. Dealers said bid levels fell to 98 3/4, back to the bank debt's bid two weeks ago. Traders were not surprised by the fall back as tower credits are expected to lag behind a struggling wireless sector. "It's just following wireless. If wireless lags so will the infrastructure companies," said one trader. The company's debt was quoted at 99 in July as dealers stated that tower credits get lumped in with the rest of telecom (LMW, 7/1). In addition, to uncertainty regarding future business coming out of the wireless sector, Moody's Investors Service downgraded the debt and Standard & Poor's revised its outlook from stable to negative earlier in the month. Calls to Anne Alter, spokeswoman for American Tower, were not returned by press time.
Greg Zappin, analyst at Standard & Poor's, explained the credit was upgraded last fall based on cash flow expectations, but is now on negative watch as those projections haven't been met. "The Verestar unit has come in substantially weaker than we thought," he said. "It [Verestar] pushes back the range of debt to cash flow we look at for a double B- corporate rating." Because it's in a high growth and heavy spending mode, Zappin added, its leveraged itself a little too much and now has a fair degree of balance-sheet debt.