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Does American Tower Have Another Acquisition in Store?

By Steve Symington - Sep 24, 2013 at 4:55PM

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American Tower just announced a new revolving credit facility. Does this mean its recent acquisition spree isn't done?

Well, that didn't take long.

Less than three weeks after announcing its mammoth $4.8 billion acquisition of MIP Tower Holdings, American Tower (AMT -0.36%) is already grabbing more money. A recent SEC filing shows the wireless communication real estate specialist entered into a new $1 billion revolving credit facility on Friday, with JP Morgan, The Royal Bank of Scotland subsidiary RBS Securities, and Toronto-Dominion Bank subsidiary TD Securities all acting as joint lead arrangers and bookrunners.

What's more, after outlining the usual terms and conditions for the new credit facility, the filing described a few other interesting nuggets for investors.

First, American Tower amended three of its existing debt vehicles -- including a $1.5 billion credit facility from this June (the 2013 credit facility), a $750 million term loan entered into on June 2012, and a $1 billion credit facility opened in January 2012 -- to increase its allowable total debt to adjusted EBITDA from 6 to 1 to 6.5 to 1.

In addition, American Tower amended its 2013 credit facility to allow it to request an increase of up to $750 million, possibly in the form of another term loan.

Finally, last Friday the company said it partially exercised that option, increasing its 2013 credit facility by another $500 million and bringing the aggregate amount to $2.0 billion.

Here's what it means
For those of you keeping track, remember that just a few weeks prior to its huge MIP Tower Holdings purchase, my eyebrows were raised when the company hit up the market ATM by offering new senior unsecured notes, which netted it just under $1.24 billion.

And that was only a few days after American Tower had announced an $811 million agreement to buy 4456 towers in Mexico and Brazil from NII Holdings (NASDAQ: NIHD), which immediately signed a minimum 12-year lease with plans to use the new cash to build out next-generation network deployments for its Nextel cell networks in both countries.

Of course, American Tower didn't really need the money at the time, especially since it had recently bragged about around $2.6 billion in total liquidity as of the end of its second quarter -- and that's when it became evident an even bigger buy was coming.

This time, I'm not so sure that's the case.

Remember, American Tower's MIP Tower Holdings acquisition consisted of approximately $3.3 billion cash and the assumption of roughly $1.5 billion of MIP's existing debt.

Furthermore, American Tower's press release stated that the company expects "to use cash on hand and borrowing capacity under its existing revolving credit facilities, as supplemented by additional anticipated sources of debt financing, to satisfy the cash consideration for this acquisition and other previously announced acquisitions." (emphasis mine)

In short, and much to the disappointment of investors hoping their favorite real estate investment trust was setting up another big buy, it looks like most of this new debt is already pegged to finance American Tower's two previous acquisitions.

Foolish takeaway
But don't get me wrong; I certainly don't think this is a bad thing, and it definitely doesn't guarantee American Tower won't make more acquisitions down the road. What's more, American Tower has also made it clear that it plans to use the added cash flow and operating margin from the new acquisitions to de-leverage back down to more normal debt levels over time.

When that happens, American Tower will have emerged a bigger, stronger, and more dominant industry player than ever. And that, my fellow patient long-term Fools, should be music to your ears.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends and owns shares of American Tower . It owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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