American Tower Hits Up the Market ATM

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On Wednesday, American Tower (NYSE: AMT  ) issued a press release saying it has "announced the pricing the of its registered public offering of senior unsecured notes due 2019 and 2024," in the amounts of $750 million and $500 million, and with interest rates of 3.4% and 5%, respectively.

Altogether, after deducting underwriting discounts and estimated offering expenses, this should net the company just under $1.24 billion. 

Also according to the release, American Tower plans on using its new cash to "repay existing indebtedness incurred under the 2013 Credit Facility and/or other credit facilities, finance recently announced acquisitions and for general corporate purposes."

But what does all this mean?
If you recall, last week, American Tower expanded its enviable arsenal of tower sites by agreeing to acquire up to 2,790 towers in Brazil, and 1,666 towers in Mexico from NII Holdings (NASDAQOTH: NIHDQ  ) . At the time, American Tower said those purchases in aggregate were expected to cost around $811 million, based on the current foreign currency exchange rates.

NII Holdings, for its part, happens to own Nextel Brazil and Nextel Mexico, which have both already agreed to lease back the towers from American Tower for at least the next 12 years. In the end, NII Holdings gets the liquidity they need to invest in Nextel's next-generation network deployments in the two countries, and American Tower said it expects to get a significant $149 million long-term boost in annual revenue, and $55 million in annual gross margin.

So, everybody wins, right?

But this brings up an interesting question: American Tower didn't really need this new money, did it?

After all, that was the first significant acquisition announcement since the company reported earnings a few weeks ago, and at the time, they had said as of June 30, 2013, they had around $2.6 billion in total liquidity, including around $448.4 million in cash and the ability to borrow around $2.2 billion remaining under its two revolving credit facilities.

What's more, the aforementioned "2013 Credit Facility" was only completed on July 1 and worth $1.5 billion, including a $1 billion sublimit for multicurrency borrowings, a $200 million sublimit for letters of credit, and a $50 million sublimit for swingline loans -- think of that last one as an "overdraft" loan a company can pull on short notice if need be. What's more, that facility also enables American Tower to borrow up to another $500 million from lenders "that elect to make such loans available."

Is something bigger coming?
Even so, they've obviously used some of that facility already, so they're using money from this new offering to clean the revolving credit facilities' slates and to pay for the NII Holdings acquisitions.

As a result of this housecleaning, then, I can't help but wonder whether American Tower has another big acquisition up its sleeve.

Of course, it's hard to say whether the company has a particular acquisition in mind, or is instead simply loading its elephant gun (so to speak) -- but given how busy they've been over the last few years buying up new tower sites, it seems like the folks at American Tower have their hearts set on nothing less than world domination.

With shares of American Tower currently trading within 2% of their 52-week low, that's why I'm convinced patient investors who buy now stand to profit handsomely over the long run.

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Related Tickers

9/26/2016 1:27 PM
AMT $112.62 Down -0.37 -0.33%
American Tower CAPS Rating: ****
NIHDQ $0.00 Down +0.00 +0.00%
NII Holdings, Inc. CAPS Rating: **