SBA brings first cell tower ABS in 2021

3 min read
Americas
Richard Leong

SBA Communications Corporation is preparing to sell this week the first cell tower securitization of the year, with demand for these telecom assets expected to grow as wireless service providers look to advance their 5G networks.

Investors are showing eagerness to get their hands on the US$1.165bn single-class issue, SBA Tower Trust 2021-1 after the cell tower company on Tuesday hired Barclays, Citigroup, Deutsche Bank and Mizuho as the lead underwriters, market participants said.

The note with a weighted average life of 5.5 years is expected to be rated A2 by Moody's and A by Fitch.

"The deal is going well so far. We just announced it this morning and momentum is building nicely," a source close to the deal said, adding the transaction could price on Thursday.

Most of the money raised will be used to repay two notes totaling US$800m that were issued in 2017, while the rest of the proceeds will be earmarked for transaction expenses and general corporate purposes, Fitch analysts said in a pre-sale report.

SBA's latest deal is backed by 9,939 towers, which represents about 30.3% of its total portfolio, the rating agency said.

The Boca Raton, Florida-based company was previously in the ABS market last July when it issued two deals totaling US$1.35bn. They accounted for about half of the US$2.5bn cell tower ABS issuance in 2020, IFR data show. The SBATOW 2020-1 note with a 5.5-year WAL priced at a spread of 160bp over five-year Treasuries for a 1.884% coupon.

SBA's latest offering comes after Verizon, AT&T, T-Mobile were the top bidders at the record-shattering US$81.1bn C-band spectrum auction that completed in February. These wireless providers were scrambling for spectrum licenses so they can capture the best and fastest 5G network.

"With WSPs (wireless services providers) continuing to densify 4G networks and roll out 5G networks to handle increased demands for data capacity, there is a need for additional towers," Fitch analysts said.

The 5G push adds to existing demand for cell towers from increased data usage from people working at home since the pandemic.

This ABS sector's rosy prospect is fueling investor enthusiasm for the SBA transaction.

"Towers are a great asset and crucial to Verizon, AT&T and T-Mobile. We have invested in this space historically a number of times and we will probably get involved with this transaction," a senior portfolio manager said.

On April 12, Verizon signed deals with SBA and rival Crown Castle to accelerate the deployment of C-band equipment in preparation for its launch of 5G network.

US cell tower operators