Summary
Crown Castle International Corp. (CCI) filed an 8-K on August 18, 2006, reporting on significant financial hedging activities. The company entered into forward-starting interest rate swap agreements with a total notional amount of $750 million, effective on or before January 31, 2007, for a five-year term. These swaps are designed to hedge against potential increases in interest rates in anticipation of issuing $750 million of additional Tower Revenue Notes by a subsidiary. The company has also entered into a separate $250 million in swaps in June 2006, bringing the total notional amount of forward-starting interest rate swaps to $1 billion.
Key Highlights
- 1Crown Castle International Corp. entered into $750 million in new five-year forward-starting interest rate swap agreements on August 17, 2006.
- 2These swaps are intended to hedge against variable interest rates related to an anticipated $750 million issuance of Tower Revenue Notes.
- 3The company will pay a fixed rate of approximately 5.2% while receiving floating payments based on three-month LIBOR under these new swaps.
- 4The new swaps are cash-settled on or before January 31, 2007, and will commence on or before that date.
- 5Combined with prior June 2006 agreements, CCI now has $1 billion in forward-starting interest rate swaps.
- 6The overall $1 billion in swaps is in contemplation of issuing $1 billion of additional Tower Revenue Notes.
- 7The proceeds from the contemplated Tower Revenue Notes issuance are expected to be used to repay a $1 billion term loan under the company's 2006 Credit Facility.
Frequently Asked Questions
The primary purpose of these agreements is to hedge against the risk of rising interest rates. Crown Castle International Corp. is entering into these swaps in anticipation of issuing $750 million of additional Tower Revenue Notes by a subsidiary, ensuring a predictable fixed interest rate on a significant portion of its future debt.
Crown Castle has entered into $750 million in new forward-starting interest rate swaps, which, when combined with $250 million in similar swaps executed in June 2006, brings the total notional amount of hedging agreements to $1 billion. This $1 billion is in anticipation of issuing $1 billion of additional Tower Revenue Notes.
The new $750 million swap agreements are forward-starting and will become effective on or before January 31, 2007. They are for a five-year term, ending on January 31, 2012. The company will pay a fixed rate of approximately 5.2% and receive floating payments based on three-month LIBOR during this period.
The proceeds from the anticipated $1 billion issuance of Tower Revenue Notes are expected to be used to repay the $1 billion term loan under Crown Castle's 2006 Credit Facility.