NEW YORK-Just in time for the holidays, glad tidings have arrived from the Windy City in the form of worldwide telecommunications infrastructure construction and deployment financing.
Chicago-based U.S. RealTel Inc., which describes itself as “the nation’s largest landlord of pre-leased antenna sites and telecommunications access rights,” recently formed a wholly owned subsidiary, RealTel Finance L.L.C.
“We are in the process of closing our first transaction and have requests in process of about $3 billion,” Jordan E. Glazov, president of U.S. RealTel, said last week.
“Our minimum loan is about $50 million, and our ideal target is about $400 million.”
The new company plans to offer loans for up to 100 percent of the financing carriers need for infrastructure construction and for cash-flow during network buildout and revenue ramp-up periods of deployment.
“We offer better pricing because we’re financing on a long-term basis, typically seven to 10 years, and we offer fixed-rate financing so we’re not subject to short-term swings in market rates,” Glazov said.
RealTel Finance, established in the fourth quarter, gets its capital from “alliances with investment bankers and other strategic investors,” he said.
The loans it makes to telecommunications carriers will be pooled and sold to institutional investors as is common with credit card receivables and home mortgages.
“The benefits we bring to telecommunications companies are that we can give a forward commitment for a complete infrastructure program [so they don’t have to] go forward (raising capital) on a piecemeal basis,” Glazov said.
“We can provide financing on an operating lease basis so it’s not a debt item that skews the balance sheet (toward higher leverage).”
Borrowing to buy ownership of a network, the alternative to an operating lease structure, works better for carriers in later stages of their business evolution when owning the physical plant allows them to take tax credits against earnings, said Michael P. Mikesic, senior vice president of RealTel Finance.
“In their early years, companies lose money so they can’t take advantage of the tax credits of ownership,” he said.
The mission of the new company is to play a complementary role to that of venture capitalists by providing carriers with an alternative to raising capital in the high-yield private and public debt markets, Glazov said. The difference between operating lease loans and debt issues is akin to the distinction between home equity loans and home mortgages.
“Venture capitalists won’t put up all the money needed to build and operate a system,” Mikesic said.
“We provide what would otherwise be the debt side … The operating lease structure gives you more control over debt because you don’t have to borrow the money before you need it.”
Repayment collateral for RealTel Finance’s loans will be the telecommunications carriers’ hard and soft infrastructure equipment, Mikesic said. “If they have negative [earnings before interest, taxes, depreciation and amortization], we can tailor a repayment program to their needs,” Glazov said.
“Where a telco doesn’t meet our credit criteria, we will help with obtaining credit enhancement.”
One means to achieve this would be for RealTel Finance to tap its “good relationships with vendors, which might provide some form of guarantee,” Mikesic said.
