Crown Castle International Corp. (CCI, Financial) filed Quarterly Report for the period ended 2009-09-30.
Crown Castle International is a leading owner and operator of towers and transmission networks for wireless communications and broadcast transmission companies. The company owns leases or operates towers in the United States Puerto Rico and the United Kingdom. The company's customers currently include many of the world's major wireless communications and broadcast companies including Bell Atlantic MobileBellSouth AT&T Wireless Nextel Metricom and the British BroadcastingCorporation. Crown Castle International Corp. has a market cap of $9.57 billion; its shares were traded at around $32.88 with and P/S ratio of 6.3. Crown Castle International Corp. had an annual average earning growth of 15% over the past 10 years.
During 2009, we have refinanced $2.9 billion face value of debt and thereby extended the maturity of our debt portfolio and eliminated our need to refinance debt until 2014. In 2010 and 2011, we expect to refinance our tower revenue notes; and we have entered into interest rate swaps for a combined notional amount of $3.5 billion to hedge the variability in cash flows from changes in LIBOR on these anticipated refinancing between now and the end of 2011. We do not hedge our exposure to changes in credit spreads on these anticipated refinancings, as the rates fixed by our interest rate swaps are exclusive of any credit spread. Although the credit markets have improved somewhat, the current credit environment has resulted in a widening of credit spreads in the market since the original issuance of our tower revenue notes. Unless the credit markets improve, our prospective debt refinancings may result in an increase in our weighted-average cost of debt.
We have managed our exposure to market interest rates on our existing debt by (1) controlling the mix of fixed and floating rate debt and (2) utilizing interest rate swaps to hedge variability in cash flows from changes in LIBOR on our outstanding floating rate debt. As of September 30, 2009, we had $633.8 million of floating rate debt, of which $625.0 million is effectively converted to a fixed rate through an interest rate swap until December 2009. As a result, a hypothetical unfavorable fluctuation in market interest rates on our existing debt of two percentage points over a twelve-month period would increase our interest expense by approximately $9.6 million.
Although the 2006 mortgage loan was refinanced, the issuance of the 7.75% secured notes in April 2009 did not qualify for hedge accounting as the actual refinancing was not consistent with that anticipated as part of hedge accounting. Since it was determined in April 2009 that the hedged transaction did not and will not occur, we discontinued hedge accounting and reclassified the entire loss ($133 million) from AOCI to earnings in the second quarter of 2009 for these specific interest rate swaps. We refinanced the 2004 mortgage loan via the issuance of the 2009 securitized notes in July 2009, which did qualify as the hedged forecasted transaction and resulted in $3.9 million of ineffectiveness.
Currently, we have elected to not early settle the forward-starting interest rate swaps that hedged the refinancing of the 2004 mortgage loan and the 2006 mortgage loan although these mortgage loans have been refinanced at a fixed rate during 2009. As a result, these swaps are no longer economic hedges of our exposure to LIBOR on anticipated refinancing of our existing debt, and changes in the fair value of the swaps following the related refinancing are recorded in earnings until settlement. These non-economic hedges have a combined notional value of $1.8 billion, and the combined settlement value is a liability of approximately $152.1 million as of September 30, 2009.
A hypothetical decrease of 100 basis points in the prevailing LIBOR yield curve as of September 30, 2009 would increase the liability for our swaps on a settlement value basis by nearly $280 million, and an opposite hypothetical increase in rates would reduce the liability by a similar amount. We immediately mark to market in earnings interest rate swaps that are not designated as hedges. As a result, we estimate that the impact of the hypothetical unfavorable movement of 100 basis points would decrease earnings by approximately $123 million, and a similar amount would positively impact earnings from an opposite hypothetical increase in LIBOR.
Read the The complete ReportCCI is in the portfolios of John Griffin of Blue Ridge Capital, Bill Gates of Bill & Melinda Gates Foundation Trust, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
Crown Castle International is a leading owner and operator of towers and transmission networks for wireless communications and broadcast transmission companies. The company owns leases or operates towers in the United States Puerto Rico and the United Kingdom. The company's customers currently include many of the world's major wireless communications and broadcast companies including Bell Atlantic MobileBellSouth AT&T Wireless Nextel Metricom and the British BroadcastingCorporation. Crown Castle International Corp. has a market cap of $9.57 billion; its shares were traded at around $32.88 with and P/S ratio of 6.3. Crown Castle International Corp. had an annual average earning growth of 15% over the past 10 years.
Highlight of Business Operations:
As of September 30, 2009, our largest asset was our telecommunications towers (representing approximately $4.2 billion, or 85%, of our $4.9 billion in net book value of property and equipment), followed by intangible assets and goodwill (approximately $2.4 billion and $2.0 billion in net book value, respectively, resulting predominately from the Global Signal Merger in 2007 and other acquisitions of large tower portfolios). The vast majority (approximately $2.3 billion net book value at September 30, 2009) of our identifiable intangibles relate to the site rental contracts and customer relationships intangible assets. See note 2 to our consolidated financial statements for further information regarding the nature and composition of the site rental contracts and customer relationships intangible assets.During 2009, we have refinanced $2.9 billion face value of debt and thereby extended the maturity of our debt portfolio and eliminated our need to refinance debt until 2014. In 2010 and 2011, we expect to refinance our tower revenue notes; and we have entered into interest rate swaps for a combined notional amount of $3.5 billion to hedge the variability in cash flows from changes in LIBOR on these anticipated refinancing between now and the end of 2011. We do not hedge our exposure to changes in credit spreads on these anticipated refinancings, as the rates fixed by our interest rate swaps are exclusive of any credit spread. Although the credit markets have improved somewhat, the current credit environment has resulted in a widening of credit spreads in the market since the original issuance of our tower revenue notes. Unless the credit markets improve, our prospective debt refinancings may result in an increase in our weighted-average cost of debt.
We have managed our exposure to market interest rates on our existing debt by (1) controlling the mix of fixed and floating rate debt and (2) utilizing interest rate swaps to hedge variability in cash flows from changes in LIBOR on our outstanding floating rate debt. As of September 30, 2009, we had $633.8 million of floating rate debt, of which $625.0 million is effectively converted to a fixed rate through an interest rate swap until December 2009. As a result, a hypothetical unfavorable fluctuation in market interest rates on our existing debt of two percentage points over a twelve-month period would increase our interest expense by approximately $9.6 million.
Although the 2006 mortgage loan was refinanced, the issuance of the 7.75% secured notes in April 2009 did not qualify for hedge accounting as the actual refinancing was not consistent with that anticipated as part of hedge accounting. Since it was determined in April 2009 that the hedged transaction did not and will not occur, we discontinued hedge accounting and reclassified the entire loss ($133 million) from AOCI to earnings in the second quarter of 2009 for these specific interest rate swaps. We refinanced the 2004 mortgage loan via the issuance of the 2009 securitized notes in July 2009, which did qualify as the hedged forecasted transaction and resulted in $3.9 million of ineffectiveness.
Currently, we have elected to not early settle the forward-starting interest rate swaps that hedged the refinancing of the 2004 mortgage loan and the 2006 mortgage loan although these mortgage loans have been refinanced at a fixed rate during 2009. As a result, these swaps are no longer economic hedges of our exposure to LIBOR on anticipated refinancing of our existing debt, and changes in the fair value of the swaps following the related refinancing are recorded in earnings until settlement. These non-economic hedges have a combined notional value of $1.8 billion, and the combined settlement value is a liability of approximately $152.1 million as of September 30, 2009.
A hypothetical decrease of 100 basis points in the prevailing LIBOR yield curve as of September 30, 2009 would increase the liability for our swaps on a settlement value basis by nearly $280 million, and an opposite hypothetical increase in rates would reduce the liability by a similar amount. We immediately mark to market in earnings interest rate swaps that are not designated as hedges. As a result, we estimate that the impact of the hypothetical unfavorable movement of 100 basis points would decrease earnings by approximately $123 million, and a similar amount would positively impact earnings from an opposite hypothetical increase in LIBOR.
Read the The complete ReportCCI is in the portfolios of John Griffin of Blue Ridge Capital, Bill Gates of Bill & Melinda Gates Foundation Trust, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
