Tower Company Prices $500M in Tower Revenue Securities

October 14, 2015

By J. Sharpe Smith

SBA Communications has priced $500 million of Secured Tower Revenue Securities Series 2015-1. The move, which will pay 3.156 percent interest annually, provides the tower company with low cost capital and fulfills investors’ needs for reliability.

“Over the last few years, the institutional yield investors have come to understand the quality of tower cash flow; therefore, the market has developed for transactions like the one SBA has priced,” Howard Mandel, president, Peppertree Capital Management.

Net proceeds from the offering will be used to repay drawn amounts on the revolving credit facility of SBA Senior Finance II and for general corporate purposes.

“It’s all about cost of capital for the tower company,” Mandel said. “SBA is refinancing existing debt with a long term, debt-like instrument.”

With interest rates remaining low, investors are having difficulty finding securities that will generate a predictable, acceptable return, which makes the SBA securities especially appealing, according to Mandel.

“For the investors, it’s about their need for yield,” Mandel said. “These investors are willing to take a relatively low return because tower rent fits the desired parameters (i.e., predictable, high credit) – and there are not a lot of good alternatives in the market.”