08/10/2012

Large Cell-Tower Securitization on Horizon

The eventual buyer of 7,000 cell-phone towers from T-Mobile will likely fund its purchase by issuing asset-backed securities.

The company’s parent, Deutsche Telekom, is reviewing bids submitted last month by cell-tower operators including American Tower, Crown Castle and Global Tower — all of which have tapped securitization to fund similar purchases in the past. Deutsche Telekom is being advised by Deutsche Bank, which has agreed to provide up to $2 billion of short-term financing to the buyer. But the winning bidder is expected to ultimately issue asset-backed securities to fund the bulk of the acquisition.

The reason? Demand for asset-backed securities is higher now than at any time since the onset of the credit crisis in 2007. “Issuing asset-backed bonds could be the quickest way to shore up acquisition financing for these guys,” a banker said of the bidders for T-Mobile’s towers. “They’re not going to see that kind of demand for their unsecured debt.”

Cell-tower securitizations are backed by payments from mobile carriers that lease space on the towers for their equipment. Tower operators typically use the proceeds from the bond offerings to acquire more assets. So far this year, $892 million of cell-tower bonds have been sold, according to Asset-Backed Alert’s ABS Database.

Crown Castle has emerged as the lead bidder for the T-Mobile towers, The Wall Street Journal reported July 31. Over the years, the Houston company has been the most prolific issuer of bonds backed by cell-tower leases, selling $7.1 billion of the paper since 2005. Its last deal was a $1.5 billion offering in July 2010 with Morgan Stanley running the books.

But Global Tower, of Boca Raton, Fla., has been the most active issuer of late, pricing four transactions totaling $1 billion since March 2011. Its latest offering priced Feb. 22 via Deutsche.

Deutsche would likely run the books on any securitization tied to the T-Mobile towers, given its pledge to provide short-term financing to the buyer. The bank has been among the most active underwriters of such offerings.

American Tower hasn’t been in the asset-backed bond market since 2007, when it issued $1.7 billion of cell-tower bonds via Morgan Stanley. It was the Boston company’s only deal to date.

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