When American Tower Corp.'s senior unsecured debt was upgraded to investment-grade last year, Chief Financial Officer Thomas A. Bartlett saw an opportunity to refinance some debt and slash debt-service costs. The Boston company, which leases telecommunications towers for periods of up to 20 years, also wanted to extend the maturity of its debt to better match that of its assets.
Bartlett had some experience raising money in the investment grade market from his previous role as treasurer at Verizon Communications, but he had never been involved in a transaction where investment grade debt was issued with the express purpose of paying off high-yield debt.
Rather than relying solely on advice from American Tower's lenders, Bartlett turned to EA Markets, a New York firm that advises on various sorts of capital markets transactions. When Bartlett was at Verizon, Reuben Daniels (who later co-founded EA and is now its chief client officer) worked with the telecommunications firm as relationship manager at Barclays Capital, where he was managing director and co-head of the U.S. investment banking department.
"When banks come in, while they're very helpful, many times they are pushing their own products and capabilities," Bartlett said. "Sometimes it's hard to get a truly independent view."
With EA Markets' guidance, American Tower raised nearly $600 million through a private placement of seven-year senior unsecured notes with an interest rate of 4.625%. It then used the proceeds, in part, to redeem senior notes paying 7.125% interest that were not set to mature until 2012.
Bartlett said EA Markets helped American Tower decide which bank to use to underwrite the new debt, the types of covenants it should seek and what the pricing should be. Similarly, when American Tower was ready to pay off its existing debt, EA advised it on calling that debt.
EA Markets handled "everything from soup to nuts," Bartlett said.
The work did not end with the refinancing. Bartlett said that EA Markets has an ongoing relationship with American Tower and that he uses Daniels as a "sounding board" for almost all its cash-related transactions. "While I rely heavily on bankers, it's nice to have another set of eyes."
Daniels said the premise of EA Markets' business is that "by being independent, by not taking a principal position in a transaction, we can provide a perspective that's unique, help clients save money, maximize their capacity, and manage risk more effectively than someone who perhaps has a conflicting objective."
"Banks need to optimize their returns to their efforts. When they're focused on that, they may not necessarily attempt to find value for each client. That's the service gap we're filling."
In some cases, EA Markets earns a flat fee, perhaps with the potential for some upside if it meets or exceeds certain goals; in many cases, it participates in the savings generated for clients.
"There's a lot of concentration of power in the bank market," said Craig Orchant, EA Markets' other co-founder and its chief advisory officer. If you are the agent bank for a company, "you feel you have an entrenched position. You can therefore have a lot of influence on the outcome of refinancing events." At the same time, "companies are typically wary of alienating agent banks that have been their closest partners."
Orchant, formerly a managing director and head of corporate finance and risk management at Barclays Capital, said EA Markets doesn't try to tell clients what they must do. He said that, for example, the company would ask clients if they want to negotiate better terms with their lead bank, retain it as a lead bank or are prepared to bring in other lenders. "We're not telling them what to do, but we're helping their understanding of opportunities in the financing markets."
