Fitch Affirms Crown Castle's IDR at 'BB'; Outlook Stable

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CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the Issuer Default Ratings (IDR) of Crown Castle International Corp. (CCIC) and its subsidiaries at 'BB'. In addition, long-term debt ratings at CCIC and its subsidiaries have been affirmed.

Fitch has affirmed the following ratings:

CCIC

--IDR at 'BB';

--Senior Unsecured Debt at 'BB-'.

Crown Castle Operating Company (CCOC)

--IDR at 'BB';

--Senior Secured Credit Facility at 'BB+'.

CC Holdings GS V LLC (GS V)

--IDR at 'BB';

--Senior Secured Notes at 'BBB-'.

The Rating Outlook for CCIC and its subsidiaries is Stable.

Crown's ratings are supported by the strong recurring cash flows generated from its leasing operations, the robust EBITDA margin that should continue to increase through new lease-up opportunities, and the scale of its tower portfolio. Crown's long-term growth strategy of primarily focusing on the U.S. market versus seeking growth internationally in emerging markets also reduces operating risk. These factors lend considerable stability to cash flows and lead to a lower business risk profile than most typical corporate credits.

A key factor in future revenue and cash flow growth for Crown, as well as the rest of the tower industry, is the growth within mobile broadband services. Growth in 4G services will drive amendment activity and new lease-up revenues from the major operators leading to mid-single digit growth prospects for the next couple of years.

This growth along with lease escalator adjustments will more than offset the increase in churn pressure from the consolidation of networks (Alltel, Sprint, potentially T-Mobile) during the next several years. Fitch expects the increased churn pressure will be distributed over a multiyear period. Sprint related churn from iDEN decommissioning should be spread primarily over a four year period which is the average length for remaining leases. Crown has indicated iDEN related revenue loss could be approximately 2-3% of site rental revenue.

Annualized leverage (debt to EBITDA) as of the third quarter of 2011 was 5.2 times (x). This is consistent with Crown's net leverage target of 5x. Fitch expects Crown will increase absolute debt levels consistent with growth in cash flows to keep leverage in the 5x range for the next couple of years.

Longer-term in the 2015 - 2016 timeframe, Crown has indicated a potential for a REIT conversion. As such, Crown may consider lowering its future leverage target range similar to that of American Tower. Fitch expects American Tower will maintain net leverage in the 3.5 to 4.0x range. Consequently, any further rating upgrades would require Crown to lower its leverage target.

Crown maintains significant flexibility with prioritizing the use of its liquidity and discretionary cash flow. For 2011, Crown should exceed initial recurring cash flow (EBITDA less interest less sustaining capital spend) estimates by approximately $45 million to approximately $775 million. In 2012, Crown has indicated recurring cash flow will be in the range of $830 million to $845 million, which Fitch believes Crown should at least meet or exceed this target. Crown estimates discretionary spending capacity of approximately $1.2 billion when factoring in additional debt capacity due to cash flow growth.

Crown expects to spend approximately $300 million in capital expenditures in 2012 including approximately $150 million for land purchases. The focus on buying or extending its land leases benefits the longer-term credit profile by increasing margin certainty and decreasing its leasing obligation. Fitch accounts for operating leases within its adjusted debt metrics. The remaining $900 million of discretionary spending could be available for acquisitions or share repurchases. Fitch believes this is consistent with current rating expectations. Common stock and preferred stock repurchases totaled $316 million for the first three quarters of 2011.

As of the third quarter 2011, cash was $76 million. Crown had drawn down $305 million of its $450 million revolving facility that matures in 2013. The company has significant flexibility under its covenants. Fitch expects that Crown could seek to term out the debt on its facility to free up additional liquidity. Crown does not have any significant maturities until early 2014 when the $622 million term loan matures.

The 'BBB-' rating for the secured debt at GS V reflects the superior recovery and over-collateralization of the debt at the operating company level. The ratings for the secured credit facility at CCOC reflect the lower collateral support from its pledged assets as well as expected benefits from the over-collateralization of the secured assets at Towers LLC, GS V and Global Signal Holdings III LLC. The ratings of the unsecured debt at the holding company level reflect the structural subordination. The distinction in rating differences between Fitch's existing structured and corporate debt ratings reflects the structural enhancements with the CMBS issuances including the protection of interest payments during a bankruptcy process.

Longer-term, Fitch believes Crown's ratings have upward potential from further operational and credit profile improvements. Key rating drivers for Crown include (1) The stability and operating leverage within its leasing operations; (2) Growth in broadband data leading to increased lease-up opportunities; and (3) Maintaining less aggressive financial policies than in the past.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 12, 2011);

--'Rating Global Telecom Companies: Sector Credit Factors' (Sept. 16, 2010).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Rating Global Telecoms Companies - Sector Credit Factors

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=550205

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