Moody’s assigns provisional rating to ATC’s wireless tower-backed securities

Moody’s Investors Service (Moody’s) has assigned a provisional rating of (P)Aaa (sf) to series 2023-1 secured tower revenue securities, subclass 2023-1A (the 2023 securities) to be issued by American Tower Trust I, a New York Common Law Trust (the issuer). The collateral backing the securitization is a mortgage loan made by the issuer to the borrowers. The 2023 securities correspond to a component of that mortgage loan. The borrowers are indirect wholly owned subsidiaries of the sponsor, American Tower Corporation (AMT, Baa3 stable). The borrowers own and operate 5,036 tower sites located in the US. The tower sites are leased to a variety of users, primarily major wireless telephony/data carriers. The cash flows from the tenant leases will be used to repay the mortgage loan and therefore the 2023 securities. As of 31 October 2022, the tower pool had an annualized run rate net cash flow (ARRNCF) of approximately $600 million.

AMT is one of the largest non-carrier operators of wireless tower assets in the US and around the world. SpectraSite Communications, LLC (SpectraSite), a Delaware limited liability company and an indirect subsidiary of AMT, is the manager of the tower sites.

The anticipated repayment date (ARD) for the series 2023-1, will be in March 2028 and the legal final maturity date will be in March 2053.
The complete rating action is as follows:

Issuer: American Tower Trust I, Series 2023-1

Series 2023-1 Secured Tower Revenue Securities, Subclass 2023-1A, Assigned (P)Aaa (sf)
The 2023 securities are issued out of an existing master trust, and to date, the issuer has issued three series of securities, one of which will remain outstanding after the series 2023 closing date, the $500 million series 2018-1A securities with and ARD of March 2028. The issuer expects to use the proceeds to repay a portion of the $1.3 billion 2013-2A component of the mortgage loan, including accrued and unpaid interest, to make a cash distribution to the transaction’s guarantor, American Tower Holding Sub, LLC, for general corporate purposes and to pay transaction’s fees and expenses. Following the issuance of the 2023 securities, around $1.0 billion of sub-class A term securities of the issuer rated by Moody’s will be outstanding.

RATINGS RATIONALE
The rating of the 2023 securities is based on (1) Moody’s assessed cumulative loan-to-value (CLTV) ratio of the 2023 securities, (2) the high quality of the underlying wireless tower pool and associated leases, of which around 95% of the annualized-run-rate-revenue (ARRR) comes from leases to wireless telephony/data tenants, (3) the strength of the transaction’s legal structure, including the benefit of mortgages on the tower sites accounting to 88% of the ARRR securing the mortgage loans (4) the long track record, ability, experience and expertise of AMT’s management team and SpectraSite as the manager of the wireless towers in the securitization pool, and (5) the role of Midland Loan Services, a Division of PNC Bank, National Association (Aa3/A2 stable, a2), as the servicer of the mortgage loan.

Moody’s determined the CLTV ratio of the 2023 securities from an assessment of the present value of the net cash flow the tower pool will likely generate from leases on the towers, which Moody’s then used to calculate the CLTV ratio for each rated tranche. In deriving the value, Moody’s considered the strong and stable historical net revenue growth of the assets in the trust for more than 15 years, including during the pandemic. Moody’s modeled value was around $7.9 billion, resulting in a CLTV ratio of around 12.7%. The assumptions Moody’s applied to arrive at the value are listed below. The CLTV ratio reflects the loan-to-value ratio of the combined amounts of the class A securities.

The provisional ratings of the 2023 securities also reflects the expiration of the existing title insurance policies upon closing and the sponsor’s expectation that new title insurance policies will be obtained by the issuer after closing. The issuer’s current lender’s title insurance policies will terminate upon the repayment of the 2013-2A component of the mortgage loan in connection with the issuance of the series 2023-1. As a result, as of the closing date, the issuer will not have the benefit of any lender’s title insurance policies on the mortgaged sites as well as any updated title searches that are associated with new title insurance policies. However, the transaction documents will require the borrowers to obtain new title insurance policies with respect to the mortgaged sites within 365 days after the closing date. The lack of title insurance policies for the short period could result in a potential risk of intervening liens or encumbrances on the mortgaged sites because the last title search was conducted in 2013. If this risk were to materialize, the amount secured by the sites’ mortgages could be reduced. However, this risk is mitigated because AMT, currently an investment grade rated company, has covenanted not to put new liens on the sites and will provide a representation that there are no current intervening liens on the sites. As a result, prior to the execution of the new title insurance policies, the ratings of the 2023 securities will be partially linked to the ratings of AMT. In addition, potential title defects associated with tower sites will have a negligible effect on the credit quality of the 2023 securities owing to the granularity of the underlying pool and the low probability of such tower defects given the sites have been part of the trust for more than 10 years, the very low initial CLTV on the 2023 securities and a structural feature that allocates excess cash flows to pay down a portion of the 2023 securities upon the occurrence of cash flow disruption due to a title defect.

CT Bureau