Moody’s rates Crown Castle International SGL-3
Moody’s Investors Service, a New York debt rating service, has assigned a speculative grade liquidity rating of SGL-3 to Crown Castle International, Houston.
“With the rise in bond defaults over the last two years, market participants have expressed a need for an in-depth examination of liquidity in isolation from other factors that are a part of our traditional bond ratings,” said Mike Rowan, managing director and co-head of Moody’s Corporate Finance Group.
Moody’s said that SGL is a short-term rating system for speculative grade issuers that are, by definition, “not prime,” and are assigned on a scale from SGL-1 (very good) to SGL-4 (weak).
The SGL-3 rating takes into consideration what Moody’s described as Crown Castle’s “ample” cash position and “comfortable” covenant cushion on its two U.S. credit facilities. But Moody’s pointed out that the liquidity rating is constrained by the cash-consuming state of the company’s operations, as well as the continuing technical default under the company’s United Kingdom credit facility.
For the first six months of 2002, Crown Castle generated $70 million of cash from operations and spent $220 million in capital expenditures and investments in affiliates.
“At the end of the second quarter this year and after that spending, Crown Castle still had a cash and liquid investment balance of $845 million, and there were no outstandings under the $500 million revolving credit portion of its main $1.2 billion secured credit facility. In that credit facility, the leverage covenant is the most constraining, and this test steps down to 4.5x in 2003, a level that company already is below,” a statement from Moody’s reads.
Moody’s said that although Crown Castle has higher leverage at its other U.S. credit facility, the Crown Atlantic joint venture, that entity is also already meeting the most restrictive financial covenant levels contained in its $345 million credit facility.
In the United Kingdom, the loss of a significant customer, ITV Digital, triggered a termination event in the British subsidiary’s GBP150 million credit facility, a defined event of default.
“Should the company not be able to cure this default, the GBP125 million 9% Guaranteed Bonds issued by the UK subsidiary would also default, however such a default would not trigger cross default provisions in the two U.S. credit facilities or in the parent company’s senior notes,” Moody’s said.
Although the debt rating service expects this default to be cured soon, it described the effect on Crown Castle’s is as “uncertain.” Moody’s expects Crown Castle to maintain a good cushion to the covenants in its U.S. credit facilities as the company funds its operations from its cash balance without any further drawings.
Amortization of the term loans in Crown Castle’s main $1.2 billion facility begins in the second quarter next year, and is, in Moody’s words, “a modest $14.3 million in 2003, which the company should comfortably meet.”
Crown Castle will not have to make any repayments under its $345 million Crown Atlantic credit facility in 2003.
Crown Castle is an independent owner and operator of wireless communication towers, with LTM revenues of $903 million.
Among other speculative grade liquidity ratings issued by Moody’s today, American Tower was rated SGL-4, and Nextel Communications was rated SGL-1.
