Fitch Ratings has assigned a 'BBB-' rating to Crown Castle International Corp.'s (Crown) new senior unsecured credit facilities. Net proceeds, along with cash on hand, will be used to repay all senior secured debt outstanding under the credit facilities at Crown Castle Operating Company (CCOC). Upon the close of the new agreement (anticipated prior to the release of Crown's fourth quarter 2015 earnings release on Jan. 27, 2016), Fitch will withdraw the ratings on the credit facilities at CCOC.

The Rating Outlook is Stable.

The ratings assigned are as follows:

--$2 billion senior unsecured term loan A facility;

--$3.5 billion senior unsecured revolving credit facilities (RCF).

KEY RATING DRIVERS

Crown's ratings reflect the strong recurring cash flows generated from its leasing operations, the robust EBITDA margins, and the scale of its tower portfolio. In addition, a focus on the U.S. market reduces operating risk. These factors provide considerable stability to cash flows and lead to a lower business risk profile than most typical corporate credits.

Delevering Progress: Crown made progress on delevering following two major acquisitions of towers, or rights to towers, since the end of 2012. These transactions include the $2.5 billion T-Mobile transaction in 2012, which was largely debt-financed, and the $4.8 billion AT&T Inc. transaction in 2013, which was primarily financed with equity. Fitch expects Crown's 2016 gross leverage to reach 5.2x on a run-rate basis at the end of the year, which is within our expectations for leverage for a 'BBB-' rated tower company with Crown's business and financial risk profile.

Wireless Broadband Growth: A key factor in future revenue and cash flow growth for Crown and its industry peers is the growth in wireless network capacity needed to meet demand for mobile broadband services. Growth in 4G data services will drive amendment activity and new lease-up revenues from the major operators, leading to at least mid-single-digit growth prospects for the next couple of years. Crown has also deployed distributed antenna systems, which should allow it to capture additional share in the small-cell infrastructure required for scaling 4G networks.

Sunesys Acquisition: Crown acquired Sunesys (a wholly owned subsidiary of Quanta Services, Inc.), a fiber services provider that owns or has rights to nearly 10,000 miles of fiber in major metropolitan areas, for $1 billion. Strategically, the acquisition complements Crown's rapidly growing small-cell network business, which Fitch believes is a positive. Crown funded the transaction in a leverage-neutral manner through the sale of its Australian subsidiary.

Australian Subsidiary Sale: Crown Castle sold its 77.6% interest in its Australian subsidiary (CCAL) in May 2015 to a consortium of investors led by Macquarie Infrastructure and Real Assets for approximately $1.6 billion.

Higher Distributions: In December 2014, Crown began paying out a higher proportion of cash flow to its shareholders as it increased its distribution to $3.28 per share, or approximately $1.1 billion annually, from $1.40 per share (approximately $470 million annually). The payout represents an acceleration relative to previous expectations, but should slow future distribution growth. In addition, the change reduces the rate at which net operating loss carryforwards are used to manage required real estate investment trust (REIT) distributions.

KEY ASSUMPTIONS

--Fitch assumes revenue growth will be in the low- to mid-single digits (on a GAAP basis) in 2016, with potential improvements resulting from lower churn in the future. Over the next two to three years, EBITDA margins will remain relatively stable in the mid-to-high-50% range.

--Fitch anticipates moderate deleveraging will produce gross debt/EBITDA (last 12 months [LTM] EBITDA) in the range of 5.2x to 5.4x at the end of 2016.

RATING SENSITIVITIES

Positive Rating Action: An upgrade is not likely within a rating horizon extending to the end of 2016.

Negative Rating Action: Developments potentially leading to a negative rating action include an increase in leverage above 5.5x for a protracted period of time due to an acquisition funded mostly by debt, or a change in financial policy targeting higher leverage.

LIQUIDITY

Strong Liquidity: Crown has meaningful cash generation, balance sheet cash, revolving credit facility availability, and a favorable maturity schedule relative to available liquidity. Cash, excluding restricted cash, was $184 million as of Sept. 30, 2015. For the LTM ended Sept. 20, 2015, free cash flow was negative at approximately $294 million. Capital expenditures were $925 million during this period, of which approximately $117 million was to sustaining capital expenditures, with the balance discretionary in nature.

CCOC had drawn $1.015 billion on its $2.23 billion senior secured revolving credit facility as of Sept. 30, 2015. The financial covenants within the new unsecured credit agreement include a total net leverage ratio of 6.5x (not to exceed 7.0x for up to three quarters following a qualified acquisition), a senior secured leverage ratio of 3.5x (on a gross basis) and, if rated below investment grade by two of three rating agencies, consolidated interest coverage of 2.5x.

Maturity Profile: Crown's maturity profile over 2016 to 2019, pro forma for the offering, only has significant maturities in 2017. As of Sept. 30, 2015, approximately $1.2 billion matures in 2017, including anticipated repayment dates associated with securitizations (contractual maturities are $602 million). In May 2015, the company issued $1 billion of securitized tower revenue notes and used part of the proceeds for anticipated repayments of previously issued $250 million of tower revenue notes. The remainder was used for the repayment of other debt.

Date of relevant rating committee: July 1, 2015.

Additional information is available on www.fitchratings.com.

Applicable Criteria
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362
Additional Disclosures
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997720
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https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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