In its latest acquisition in South America, Phoenix Tower International has executed a sale and leaseback transaction for 600 wireless towers from Nuevatel, a carrier in Bolivia. Terms of the transaction remained confidential between the parties.
“We are pleased to transact with Nuevatel to purchase these assets and bring the independent tower model to Bolivia,” PTI CEO, Dagan Kasavana, said in prepared text. “We believe our presence in the market will provide carriers with a strong neutral host solution for their growing infrastructure needs. Furthermore, the management team of Trilogy are long term wireless veterans that we are excited to partner with and support in the coming years.”
Choate Hall & Stewart LLP and Harrison & Harrison acted as legal advisors to PTI. Nuevatel was represented in the transaction by Lape Mansfield Nakasian and Gibson, LLC.
PTI also reached an agreement this week with Uniti Group to acquire the ownership rights relating to more than 500 wireless tower sites in Mexico, Colombia and Nicaragua. Terms of the transaction remain confidential between the parties. (see related story)
On the heels of a major court judgement against its key customer Windstream, Uniti Group has sold its Latin American towers to Phoenix Tower International for $100 million in cash. The sale comprised 500 towers located across Mexico, Colombia and Nicaragua. Uniti’s stock, which went down 37 percent yesterday, rose 5.2 percent in early trading but closed down nearly 2 percent today.
Kenny Gunderman, president and CEO of Uniti, said, “This transaction realizes substantial value for our stockholders and allows us to focus on the vast communications infrastructure growth opportunities in the United States. Uniti Towers will continue to be a significant component of our ongoing strategy to provide a full suite of solutions to wireless carriers and other customers.”
The transaction with PTI is subject to customary closing conditions and is expected to close by March 31, 2019. Citi served as exclusive financial advisor to Uniti in connection with this transaction.
The tower sale comes on the heels of a $310 million judgement against Windstream Holdings, one of Uniti Group’s largest customers.
U.S. District Court of the Southern District of New York ruled in favor or Aurelius Capital Management, a hedge fund that had accused Windstream of violating the covenants of its bonds when it sold and leased back its assets to CS&L (now Uniti).
As a result of the judgement, which will be appealed, Aurelius will be awarded $310.5 million.
“This move has not only thrown serious doubt into whether or not Windstream can survive, but has also created real worries for Uniti even as the company continues to diversify away from its former parent,” wrote Daniel Jones, Crude Value Insights.
Wells Fargo Securities focused on the impact of the judgement on Uniti Group, because Windstream’s lease payment represents 69 percent of Uniti’s revenue.
“In our view, [Windstream’s lease payment] clearly will not happen given Friday’s ruling. As of Sept. 30, 2018, [Uniti] had ~$330 million in total liquidity,” wrote Jennifer Fritzsche, Wells Fargo senior analyst. “Recall from our downgrade of the shares in mid-January, based on our math, we did not see a simple path for Uniti to fund its ~$430 million annual dividend from its own internally generated cash flow. This task gets a lot more complicated in the wake of Friday’s ruling.”
Aurelius, which owns a majority of Windstream’s 6.375 percent 2023 Senior Notes, said in a prepared statement, “We take no pleasure in Windstream’s resulting financial predicament. Windstream could easily have averted it – first by not playing fast and loose with its noteholders in 2015, hoping nobody would hold the company to account, and second by settling.”
Uniti Group owns about 600 to 1,000 towers, but it is not a large percentage of its business. Nevertheless, the number of towers would make it a mid-sized tower company if it were purely a tower company.
As part of the sale/lease back, which was completed in 2015, a wholly-owned subsidiary of Windstream contributed telecom assets in exchange for stock in CS&L (now Uniti), $1.035 billion, and $2.5 billion in debt. The deal brought Uniti onto the market as a REIT.
“The objective of this move was to create a tax-advantaged vehicle known as a REIT through which investors could receive preferential tax treatment on earnings so long as those earnings are passed on to shareholders in the form of distributions,” wrote Jones.
Phoenix Tower International (PTI) has expanded its reach into small cells in the United States with the purchase of Syscom Telecom, which manages and markets more than 80,000 sites
for small cell and macro cell deployments with various small cell master agreements in place with wireless operators.
“PTI has been evaluating opportunities to back a small cell focused team in the United States as a way to help our customers with their next generation deployments” stated Dagan Kasavana, CEO of Phoenix Tower International.
PTI is mostly known as a multi-national tower owner, owning or managing more than 5,500 sites in South America, Caribbean, Central America and Mexico. But, recently, PTI has diversified with investments across the Americas, including the acquisition of fiber in Mexico, the DAS investment in Fast Site Solutions in Central America, and the small cell investment in Syscom LatAm in South America.
The key to expanding into other areas, such as small cells, is to find the right team with a differentiated offering, Kasavana said.
“We felt like these 80,000 nontraditional sites [of Syscom Telecom], which might have been seen as too small to hold a macro installation, are the perfect capacity, size and height for small cell installations. That was a way to differentiate our offering and we saw that the Syscom Telecom team over the last few years has major inroads with the carriers,” he said.
With the deployment of 5G in the offing, carriers are developing dense networks of thousands of small cells. An estimated 80 percent of all new sites will be small cells in the near future. Kasavana said the timing is right to get into the small cell space.
Although the carriers have been self-performing to meet their small cell needs, Don Van Splunteren, global vice president of sales, said, they will need third-party help to meet the estimated small cell needs for 5G.
“The carriers are going to need partners that understand not only their roadmap from 4G to 5G but also the complexity that a small cell network brings with it,” he said. “We need to offer them the infrastructure in a plug-and-play way and take the complexity out of the equation.”
An essential component of small cell deployment is using a centralized RAN architecture with a tower as the hub. We continue to believe that small cells built around a tower can leverage the C-RAN architecture for the network needs. Tower are going to be an essential component of ongoing 4G deployment and most assuredly 5G,” Kasavana said.
Phoenix Tower International (PTI) has closed a $200 million senior secured credit facility with Goldman Sachs Specialty Lending Group to continue its growth in the United States.
“This latest refinancing gives us a well-capitalized business plan to continue our growth in the United States with a strong lender group” stated Dagan Kasavana, Chief Executive Officer of Phoenix Tower International. He continued, “We see various opportunities to expand in the United States through traditional macro tower construction and acquisitions as well as through small cell deployments to further help our customers grow their networks to meet consumer demands. This facility will allow us to accomplish both initiatives with dedicated financing in place”.
The credit facility was led by Goldman Sachs Specialty Lending Group. The facility is a landmark transaction for PTI’s continued focus on being a leading provider of infrastructure assets. The credit facility provides financing on PTI’s existing wireless infrastructure, new tower development, and growth of its small cell business.
PTI was represented by Locke Lord. Goldman Sachs Specialty Lending Group was represented by King & Spalding. Terms of the transaction remain confidential between the parties.
Blackstone Tactical Opportunities have sold a minority stake in Phoenix Tower International to John Hancock.
The stake was acquired by John Hancock Life Insurance Company and the John Hancock Infrastructure Fund, a private equity fund with $2 billion of committed capital, is managed by the power and infrastructure team.
“Providing growth capital to outstanding management teams is a hallmark of Blackstone’s investments in the mobile and internet infrastructure sector,” said Jasvinder Khaira, a senior managing director in Blackstone’s Tactical Opportunities Group. “The exceptional growth of PTI has made it the leading private tower company in the Americas and we are thrilled to have John Hancock join us as partners as we continue to grow the business.”
“We are pleased to expand our telecommunications infrastructure platform with an investment in PTI,” said Recep Kendircioglu, senior managing director of the John Hancock Power and Infrastructure Group and Portfolio Manager of JHIF, an infrastructure Fund on Manulife’s Private Markets platform. “We have confidence in the future of the telecom infrastructure space, PTI’s management team and are pleased to work with Blackstone’s Tactical Opportunities Group to the benefit of our investors.”
Dagan Kasavana, PTI’s CEO, said, “I am incredibly proud to have Blackstone and John Hancock as PTI’s investors. The powerful combination of these two firms provides PTI with the support it needs to continue deploying capital globally.”
Tim Culver, PTI’s Chairman, said: “Both Blackstone and John Hancock are partners that share PTI’s values and vision to position PTI as the leading wireless infrastructure platform to serve our customers, employees and business partners.”
PTI, a wireless tower operator in the Americas, was founded in 2013 by Dagan Kasavana, with a mission to own and operate high quality wireless infrastructure assets in global markets experiencing strong growth. Blackstone Tactical Opportunities invested in PTI in 2014. With 120 employees and headquartered in Boca Raton, FL, PTI manages over 3,500 owned sites (including sites under contract), over 2,500 managed sites under marketing rights agreements and 974 km of fiber in 10 countries.
Blackstone was advised by Guggenheim Securities and Akin Gump Strauss Hauer & Feld. John Hancock was advised by TAP Advisors and Paul, Weiss, Rifkind, Wharton & Garrison.