Crown Castle Inc (CCI) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Crown Castle's conference call.

At this time all participants are in a listen-only mode. Following today's presentation, instructions will be given for the question and answer session. If anyone needs assistance at any time during the conference, please press star followed by the zero.

I would now like to turn the conference over to Mr. Jay Brown, Crown Castle's Treasurer. Please go ahead, sir.

Good day, everyone, and thank you for joining us as we review our fourth quarter and full year 2004 results. With me on the call is John Kelly, Crown Castle's Chief Executive Officer and Ben Moreland, Chief Financial Officer.

This conference call will contain forward-looking statements and information based on managements current expectations. Although the Company believes that the expectation reflected in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove to have been correct. Such forward-looking statements are subject to certain risks and uncertainties and assumptions. Information about the potential risk factors that could affect the company's financial results are available in the press release and in the risk factor section of the Company's filings with the SEC. Should one or more of these or other risks and uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary significantly from those expected.

In addition, today's call includes discussions of certain non GAAP financial measures, including adjusted EBITDA and recurring cash flow. Tables reconciling such non GAAP financial measures are available under the investor section of the company's website at crowncastle.com.

With that I will turn the call over to Ben.

Thanks, Jay, and good morning, everyone.

First, I am going to review the results for the fourth quarter and the full year and then update you on our thinking around some of the balance sheet work that we are pursuing.

During the fourth quarter we generated revenues of $157.8 million. Of that, site rental revenues were up $12.3 million to $139.5 million or approximately 10% when compared to the fourth quarter of 2003. Service revenues were $18.2 million. Gross profit from site rental revenue, defined as tower revenues less cost of operations, was $91.6 million, up $11 million or 14% from $80.6 million for the fourth quarter of 2003, an incremental margin of approximately 90%. Capital expenditures during the quarter totaled $14.1 million which were spent predominantly around our existing assets. Sustaining capital expenditures totaled approximate the $3.8 million. These capital expenditures include items that extend the useful life of our assets, including items such as capitalized maintenance costs, field vehicles and IT. Revenue generating capital expenditures were approximately $10.3 million for the quarter.

For the fourth quarter, recurring cash flow, defined as adjusted EBITDA less interest expense and less sustaining capital expenditures, was $28.5 million. During the quarter we built three sites in the U.S.

Turning to some of the changes in the income statement, site rental revenue growth for the full year 2004 was $54.7 million, or up approximately 11% over 2003. Site rental gross margin for 2004 grew $50.7 million, or approximately 17% over 2003. These site rental revenue and gross margin results approximate same tower sales and gross margin growth as nearly all of our sites were in operation at the end of 2003.

We are very pleased with our consolidated tower revenue growth as it exceeds our long-term expectations. During the last two years, across the same tower base, we have grown site rental revenue $91.3 million, site rental gross margin $84 million, which is an incremental margin of approximately 92%. Over the same last two years, total G&A, including corporate development, has remained virtually unchanged from 2002 levels.

Turning to the balance sheet, senior bank debt at the end of the fourth quarter totaled $180 million in our Crown Atlantic subsidiary. High yield debt totaled $1.7 billion for total debt at the end of the quarter of $1.9 billion. In addition, we had approximately $508 million of convertible preferred stock outstanding.

At December 31, pro forma for the purchases of our 4% convertible notes which we announced in January, we had approximately $391.7 million of cash and cash equivalents. As noted in January, we have purchased approximately 60% of the 4% note issue and eliminated the potential dilution from conversion by about 13.1 million shares. We continue to focus on opportunistically reducing our fully diluted shares outstanding. Recently, as mentioned, we have used cash from our restricted group to purchase our 4% convertible notes. We have the capacity to purchase common shares with our unrestricted group funds which totaled $150 million at February 28, 2005. We view this investment in our shares as an attractive use of our cash that is consistent with our goal to maximize recurring cash flow per share.

Moving to our first quarter of 2005 outlook, we expect site rental revenue for the first quarter to be between $138 and $140 million. We expect site rental gross margin for the first quarter to be between $91 and $93 million. And we are expecting adjusted EBITDA for the first quarter to be between $74 and $76 million, and interest expense to be between $36 and $37 million.

Further, we expect sustaining capital expenditures to be between $2 and $3 million, and revenue generating capital expenditures to be between $9 and $13 million. Recurring cash flow has been expected to be between $35 and $37 million for the quarter.

We expect site rental revenue for the full year 2005 of between $575 and $585 million; which is about $43 million of revenue growth at the midpoint compared to last year. We expect 2005 site rental gross margin to be between $385 and $400 million. We expect 2005 adjusted EBITDA to be between $310 and $320 million, and interest expense of between $108, and $118 million.

Further, for 2005 capital expenditures are expected to be between $50 and $74 million, and of that is comprised between $10 and $14 million of sustaining capital expenditures and $40 to $60 million of revenue generating capital expenditures. And we expect, as a result of this, the recurring cash flow for the full year 2005 of between $185 and $200 million.

Our 2005 outlook includes our expected interest expense savings that may be achieved through refinancing and further debt reductions using cash balances. As we have previously discussed, we expect recurring cash flow plus our ability to leverage our internal growth during 2005 to produce approximately $400 million, some of which will be spent on revenue generating capital expenditures contemplated in our outlook, leaving the balance to be spent on investments that we believe will maximize our recurring cash flow per share.

Turning to our refinancing initiative, I would like to take a couple of minutes to update you on the status of the potential refinancing and the asset backed financing market that we are currently pursuing. As we have previously discussed, we are optimistic about this refinancing and hope that it will be completed if the terms proof attractive in the second quarter. As we have said before, we believe there are many advantages to raising debt in this market, most notably senior debt capacity will be raised all at investment grade levels as contemplated. The lower cost of financing moves us towards our goal of 6% or less at an all in fixed interest rate. And most importantly, probably, is the flexibility gained around our ability to invest internally generated capital, again, that is the recurring cash flow coming out of the business and the ability to borrow our growth, leverage the growth in EBITDA on a go forward basis, the flexibility gained to buy our securities or possibly even pay a dividend in the future if that looks attractive. In the event we are unsuccessfully in this financing, we believe we have the option to refinance a number of our existing notes in the bank or high yield market at attractive refinancing rates.

With that I am pleased to turn the call over to John. John?

Thanks, Ben.

First, as I indicated in the press release, I am very pleased with our 2004 results. Though I know it seems like a distant memory at this point, I think it is important to reflect on some of our 2004 accomplishments. As we previously reported, our U.S. leasing activity was approximately 40% higher in 2004 as compared to 2003. And Australia continues to grow at double-digit rates as well. This is consistent with the macro trends evident in the wireless industry at large as our customers continue to invest in their networks to meet the growing demand from consumers for wireless minutes of use. There has been a lot of talk recently about the impact of wireless carrier consolidation. I offer the following -- based on our discussions to date with our customers while we believe our carrier customers may decommission some sites as a result of consolidation, we do not believe it will be a meaningful amount relative to our existing tenancy and the demand for our Tower portfolio over the coming years due to the previously mentioned trends.

When you look at 2004, the results we produced exceeded our target ranges, ranges that we previously expressed to you, for site rental revenue and adjusted EBITDA growth. For the full year 2004 we achieved site rental revenue growth of 11.3%, exceeding our target of 8% to 10% growth in that category. Adjusted EBITDA growth of 19% exceeding our target of 10% to 12% growth in that category; our targets for these items, while we exceeded them in 2004, are consistent with our outlook for 2005 and are sufficient in our view to grow recurring cash flow per share 20% to 25% per over a considerable period of time when combined with the appropriate investment of our internally generated capital.

These positive financial results brings me to our investment philosophy. This company endeavors to be very disciplined in our allocation of capital. We concentrate on those investment opportunities which we believe exhibit the potential to generate the highest return in order to maximize recurring cash flow per share. I say that rather deliberately because it is absolutely the focus of this organization, maximizing recurring cash flow per share. Over the last ten quarters this allocation of capital has taken the form almost entirely of purchases of our common shares and convertible notes, resulting in a little over $350 million in purchases which has reduced our fully diluted share count by approximately 8%. These purchases of our common shares and our convertible notes are more than any other company in our industry and reinforce the value we see in our own assets.

Finally , as I indicated in the call for the third quarter, now that we have reached our target leverage ratio of five to seven times debt to EBITDA, every dollar of cash flow won't be spent to pay down debt. Because this business is optimized in our opinion with the appropriate amount of leverage. Many of you who follow our company do not incorporate in our models the impact of investing the cash flow and borrowing capacity that this business generates. Either your models have a deleveraging of business to very low levels or the cash piles up on the balance sheet. That's not the way we are running this company. With anticipate putting that capital to work consistent with our investment strategy as we previously discussed and as I just mentioned to you. Then previously indicated to you that our internally generated capital is expected to be approximately $400 million this year.

Going forward, we expect to have a significant amount of capital to invest and we expect to invest this capital in ways we believe will maximize recurring cash flow per share.

I think that will conclude my comments and I will turn the call back to the operator for questions.

Thank you, sir.

[OPERATOR INSTRUCTIONS]

Our first question comes from Jonathan Atkin. Please go ahead with your question.

Yes. Good morning. Quick question perhaps for Ben. If you could elaborate a little bit on some of the gating factors that you see that would determine whether you in fact would become an issuer of asset backed debt? And you talked about a few fall back options to refinance your existing notes at an attractive rates. Could you go into a little bit more detail on that as well?

Yeah, John. thanks. The biggest gating factor was filing the 10(K) which we got done. So we are pleased that we are complete with that process. We now expect to resume literally on sort of a full time basis this process around the financing. I want to be very careful. This is a large financing. It will have some unique features if we are successful and has not been done before in this market in the format that we are looking for. I am cautious when I express our optimism but we are still working on it diligently.

We are in conversation with rating agencies. We have done a substantial amount of the due diligence, completed a substantial amount of the due diligence required, things like ground leave estoppels, environmental reviews, title work, financial audit. Things like that are largely complete. And so it's a matter of getting through the documentation, getting the final valuation and traunching sign off from the agencies through the documentation process and moving forward. Again we could get derailed at any point in time. So I want to be careful about that with everyone on the call. But we remain optimistic and are committed to pursuing that to the, to it's logical conclusion in the second quarter which starts obviously the ends of this week.

In the event that we are not able to get where we want to get in the securitization market, we do believe we still have attractive refinancing opportunities in the high yield and bank markets. Yes, rates have moved up some, but compared to the high coupon that we have on two large issues, the 9 and 3/8s and 10 and 3/4s that are out there today -- substantial savings. Those issues are callable here in the near term. So very NPD positive even in a refinancing just in the high yield mark. Again that's not our preference, but pretty nice fall back option should we choose to exercise it.

Thanks very much.

Okay.

Our next question comes from Richard Prentiss. Please go ahead with your question.

Yes, good morning, guys. I think given John's brevity in his comments, the message is pretty clear on recurring cash flow per share. A couple of questions for you, Ben. First, as you look at using that internally generated cash to do buybacks versus buying new towers versus building new towers, can you talk a little bit about what your target, your hurdle rates, just kind of your thought process that you will go through as you get that flexibility to be able to put a bigger wad of cash to work?

Yeah, Rick. We can and it's obviously something we are spending a lot of time on internally now. When we talk about buying shares, that's probably the easiest thing for people to model, but shouldn't be misconstrued as the only thing we will do with that capital. In all likelihood, we will be active in the acquisition front, potentially even on the build front.

And as we look at hurdle rates, we target around 15% all in IRRs. And going in yields that's going to have to be sort of in the mid single digits, sort of 6% to 7% range going in. When you model that, if you use our internal tool around lease forecasting, as you know, what we call our project stopping point tool, what you can model around an acquisition or build program is a very attractive case for buying or building assets with some of this capital, potentially even more attractive than buying our own securities. The challenge is to be and that we are very committed to, is to remain discipline in that approach because you do have the ability potential as we have discussed to buy the shares and that's sort of a known quantity, i.e. we know what the value, we believe strongly what the value of our assets are and the future lease up prospects of the current portfolio. So again, when we think about this a little bit differently than some, many use the term return capital to shareholders and to us that's a little bit strange. I know that's a very common term. We really view acquiring shares in the market as investments in tower infrastructure. It just happens to be towers that we already own. And we will evaluate those against the build or acquisition program. A well executed acquisition program at accretive multiples with assets that are going to grow in value and leasing can actually return more to the shareholders on a recurring cash flow per share than buying stock.

The challenge is, the numbers we talked you through in the prepared remarks, we've got $400 million this year and if that were to continue sort of $400 million a year for awhile. Obviously, we will take $40, $50 million of that capital and spend it on the guidance on the CapEx around the existing site as we got in our outlook today in buying some land and doing some things. But it still leaves about $350 million a year that you need to be very disciplined around how you invest. And to echo John's point, we do a lot of work around evaluation of the company and the investment of that capital over a long period of time. It makes a significant difference in the valuation of the company if you put that money to work properly. So we would encourage those out there with there, if they are so inclined to take a crack at that kind of modeling as opposed to just let it sort of pay down debt.

What I would add real quick, Rick, the items that you mention ready not mutually exclusive. I would suggest that as we have demonstrated in the past, we will continue to be opportunistic buyers of our own securities. But there are these other elements as well, as Ben alludes to, billed or some level of acquisition, all of that I think will be part of the mix.

Second question for you is just this past week and into this week a lot of buzz in the marketplace about the wireless consolidations. You touched on it briefly. A lot of the questions we were getting this week had to with Sprint, Nextel pending merger and what they may or may not do. Do you have a similar number that some other tower guys have as far as how many competing structures are within say a half mile of your asset base? I think American Tower said 80% or so of their towers have no competing asset within a half mile. Just to kind of frame how many competing assets are there, how likely or unlikely is it that somebody maybe, quote, moves across the street to a different tower, and what your thoughts are as far as how Sprint and Nextel merger will play out from a tower perspective.

Sure. The statistic in our case is interestingly enough similar. It's about 82% do not have something that is a tower competing with it and some 18% within a half a mile do have a competing structure. So it is still the vast minority of our sites that have a competing structure within a half a mile.

What it comes down to, and I know that there are continuing reactions to the comments that are made by the various different companies that are involved in this consolidation activity. And on the wireless carrier front, there are some -- there are some sites that could be decommissioned. I think what has to be recognized is these carriers focus on improving network quality and the fact that there are a number of different moving pieces when they otherwise look at the combination of these various different networks. We talked about it in the past. It includes technology, frequency, equipment manufacturers, how the -- what switches are being back hauled. There are a number of different moving pieces and they have to fundamentally do this in a very careful fashion, which we know they are focused on doing, so that they don't disrupt their goal of increasing quality in their network as opposed to the converse.

And so in the end when we spend time talking with these companies it's clearly ensuring in their view that they have optimized the combination of these two networks. But then there's also focus on what they are going to need going forward and into the future and that's why I make the comment that I did which is that, will there be some decommissioning? There will be some. But do we believe based on everything that we see and hear and our discussions about future leasing from these two companies that are involved in this particular activity? That decommissioning is going to be greater than what their overall needs are for our sites on a new lease basis? The answer is "no". We don't think decommissioning is going to have that kind of an impact.

So we continue to work with these companies, Rick , to ensure that we are helping them every which way we can to ensure that they are meeting their goals, improving network quality as their users continue to demand and use more minutes of use on their networks.

My final question has to do with your media joint venture. What impact in your '05 guidance is reflected from creating that joint venture? Is it still being booked at the Crown Castle level? Has it been moved off? And also as Qualcomm rolls out its similar service, are you actually seeing any leasing activity from them? I can't quite remember how many broadcast towers you have.

First part of the question, Rick, is, no, the Crown Castle mobile media is still a consolidated subsidiary. And will be most likely for some period of time. We don't have really any -- obviously -- any revenue or really expense, material amounts in our guidance for 2005. It's just not going to be significant.

What could occur later in the year is that as a, an outside party were to come in and make an investment in the joint venture as we described in the press release, their funds would essentially funds a substantial cone meant of the CapEx requirement on sort of the initial build there. Now because of the accounting requirement that will be an investment we took in a subsidiary and we will book the CapEx. But, again, that's not in the guidance. The CapEx nor the investment of a third party because it's just not contemplated yet. It's not to the point where it's tangible enough to have it in the guidance.

Okay. And then as far as broadcast towers go?

In essence define towers that are called broadcast. We as a company from a U.S. perspective have a limited number, Rick, but we have a number of traditional tower sites. Broadcast typically is defined as something that's over 1,000 feet in height, but that's typically ascribed to a tower that's on a relatively flat area of geography and is extended up 1,000 feet. We have towers that are on significant geographic locations, mountains and so forth, that act as effectively a broadcast tower. And so I can tell you that relative to our own subsidiary, the mobile media group, we certainly are looking at our own towers first and foremost and are finding that there is a significant number that are quite capable of supporting this type of activity; relative to your specific question about Qualcomm I prefer to not talk about what we are or are not seeing from Qualcomm and leave that to you to talk to Qualcomm directly.

But I would like to point out one last thing, Rick. We've talked about it on prior calls and certainly have talked about it in conferences and whatnot. As Ben, indicates this is really nothing from a leasing perspective or otherwise in our guidance for 2005. I would also venture to say that it's a good reminder --

On mobile media?

On mobile media. Exactly. I would also venture to say that there is a reminder relative to this license. We pay just a little over $12 million for this license nationwide, 5 MHz spectrum, unencumbered, available to use tomorrow for this particular venture. And there's a recently concluded auction of licenses, the old next wave licenses that were reauctioned, that would suggest that what we paid for our license was at an unbelievably low historical low. And nothing in that next wave reauction that was sold went for the kind of value that we otherwise paid for that license. That of course is not in any way shape or form reflected anywhere either and it's something that I remind the listeners about in terms of the assets this company holds.

Spectrum from nothing, the chicks are free? Good luck, guys.

Our next question comes from Jim Ballan. Please go ahead with your question.

Thanks a lot. A couple things. One, I wanted to ask about, with this securitization structure, as you grow your EBITDA, in order to maintain the net leverages you know you have to spend more than your free cash flow. If you were going to borrow to do that, what form would that borrowing be? Would you be able to do something along -- would you be able to do a bank deal or more securitizations?

And the other question I had was regarding your 1Q '05 site rental revenue guidance. Since did you $139.5 million of revenue in the fourth quarter, I'm trying to reconcile that with $138 to $140 for the first quarter. If you could just address that?

First of all, Jim, on the schedule actual debt, it's sequential debt, it's contemplated in the structure that we would be issuing subsequent traunchs of the financing as we go along through the years to essentially monetize the growth in the EBITDA that you would see on a trailing basis. So just to use the simple example we've used many times with people, if EBITDA were to grow $35 million which is the guidance for 2005, then you are able to borrow, let's just say if it were 6%, that's a little over $200 million. So that's what we contemplate. And whether would you do that annually or semi-annually or potentially even put a small revolver in at the holding company to sort of warehouse that in between offerings remains to be seen, but that's clearly what's contemplated in the financing. Again, in the event we were not successful in that market with that financing, then I think we clearly would have that opportunity in the bank market. And so either way we feel like we will have the capacity to monetize the growth we deliver in EBITDA lines and use that for further investment alongside the recurring cash flow.

Great.

On the Q1 guidance, I would suggest to you there that we had some moving items in Q4. We've probably worn out our welcome with people talking about one time items over the course of the last few quarters. And so we are going to try to turnover a new leaf here going forward and really dispense with that conversation and sort of let it flow as it flows, because I think we focus a lot more than just quarter to quarter. We sort of give you the full year guidance and we give you that full year well in advance. So as we talk about year over year results that's what we really focus on and we look back and see how we've done.

As we mentioned in my comments over the last two years, we're quite proud of those results. And so quarter to quarter you can see a flat quarter. You've seen it before. It's, it could certainly be a result of a couple of one time items we had in Q4. It could be a result of Australia, for example, of a currency estimate that proves to be not actual. Obviously it's an estimate until it ultimately proves at the end. So a long way of saying I wouldn't focus too much on the quarterly revenue focus. At this time it looks a little light, but normally should go up give or take 2 million or so a quarter.

Okay. Thanks, Ben.

That's not actually, it's reported numbers not necessarily true in terms of what we are seeing in the leasing pipeline.

Understood. Thanks.

Our next question comes from Michael Rollins. Please go ahead with your question.

Thanks. Good morning. Just a quick question on your capital spending guidance, you've broken out the CapEx from some of the revenue generating items. If you can just look at what you describe as revenue enhancing on existing sites, can you talk about how much of that CapEx is spent for current revenue generation in 2005, for example, versus how much of that spending would give benefit beyond that period or is that at least tied to benefit beyond that period? Thanks.

Yeah, Mike, the vast majority of that amount, first of all it's not done on a speculative basis. So it's completely success based and it's spent as we get an additional tenant on the tower. It's capital required to accommodate additional leasing on the tower is the way we categorized it and account for it. As we look at we look at our business going forward as we talk about with people it's generally less than a one year pay back. So, for example, if you were to get new license that was going to pay you somewhere in the $18 to $20,000 a year range we are spending on average about $15,000. So less than a one year pay back on that capital. So we continue to split it out from sustaining CapEx because it is a discretionary success based expenditure. Obviously, we are going to spend it on every potential we see in our portfolio. So we've given you that break out here. And we've been, as you heard in my other remarks, carve it out of what we think as our investable capital, because clearly this comes sort of as the first priority and with a 9 month pay back or so, probably the highest returning activity we are seeing in the near term. That's really how that works.

Thanks.

Our next question comes from [Anthony Carmen]. Please go ahead with your question.

Thanks. A couple of questions. First, when you provided your outlook in the press release, you noted that the 2005 outlook was based on a lower level of new leasing activity than you saw in '04 and I was wondering if you could provide -- although do you hedge it after that saying you that you do see some positive signs. And I'm wondering if you can provide some anecdotal details as to what's driving that? Were there some, as Ben says, one time positive event in 2004 that just make the comparison more difficult? Or is there something else behind that?

No, Anthony. What it really comes down to is the earlier question around consolidation, decommissioning. We don't know exactly how the year is going to unfold. As the statement I made is a more macro statement in terms of our belief that there will be more new active than there will be in these two particular carrier cases, than there will be decommissioning.

The reality in the first part of this year is that they are looking at their respective networks and attempting to fine tune what they want to add this year and moving into next year versus what they believe they can lever from one or the other portfolio that has come together, A. W. E. , Cingular of course and Nextel-Sprint. So given that we are not 100% sure what the pace of adds are going to be in either of those two companies, we have some sense and are seeing some positive signs as we sit here now three months into the year. But as we had put together our outlook, we can't absolutely indicate for certain that there won't be a slow down on the part of these two companies to some degree and that's why you see an outlook that's based on roughly 80% of the leasing '05 versus '04.

What we will do is update you, certainly the first quarter call will be coming up fairly soon. We will update you as we've gone into this year a little bit more on what we are seeing at that point.

Anthony, we sort of take the view that the upside takes care of itself. Obviously, 2004 was a terrific year in terms of revenue growth and margin growth. What we've got in this guidance -- first quarter is always the slowest. What we've got in this guidance is certainly respectable and definitely within the ranges as John mentioned in his remarks, within the ranges that we expect to deliver over the long term, sort of $30, $35 or more of EBITDA growth and $43 or more in revenue growth. That to us is what we model and, frankly, more than sufficient to drive the long-term value creation that we talk about and we assess when we make our own decisions how attorney invest the capital. If it's higher than that, obviously, we will update you across the balance of the year.

Thanks, on the re-fi stuff that you are talking about earlier I want do make sure I understand the mechanics of this. If you were able to complete the contemplated ABS financing, I would imagine that part of that would be a refinancing of the existing high yield debt, given that that would be part what have we give you that increased flexibility. In the absence of being able to do that and still generating significant free cash flow, I guess I'm wondering what your options on refinancing that or reinvesting that free cash are more limited? What are your restricted payment baskets at this point, under your bond indentures and if that you were unable to refinance all of the existing high yield, I imagine that would you really just need 51% of the bonds to be refinanced to give yourself that same flexibility, is that correct?

Yeah, we contemplate first part of your question we contemplate this financing is successful to take out all the high yield notes. So those would be gone in terms of covenant restriction. If that were not successful and we ended up in the high yield market, depending on what was refinanced and then the 7.5s would remain we would require some consents there to essentially reset the baskets, because they are currently negative. We do have the added, it's a little bit complicated, but we do have the flexibility from the crown Atlantic interest that is still head in the unrestricted group and for those -- we will try to make this painless, there's 48% of the equity in Crown Castle still head by the unrestricted group, Crown Atlantic. We have the ability to transfer that equity interest into the bond restricted group and then transfer cash out in consideration for that with a fairness opinion that's required and we've done that once before when we made the acquisition from Verizon. So in addition to the $150 million of cash that is in the unrestricted group today, by the valuation we paid Verizon and assuming that were to remain, that would give us the opportunity to transfer an exchange for the equity value coming into the bond restricted group about another $350 million of capital out to the unrestricted group, under the current bond indentures. I don't think we are going to have to go through that machination, because we were optimistic about the financing, but that's the mechanics of what actually could happen in terms of the capacity we could have to still use capital to invest in our own securities, if we chose that that was what we wanted to do.

Got you. So effectively what that would be would be you would be the restricted group purchasing in the interest and the unrestricted sub that currently lies outside the restricted group and the cash would just move to the unrestricted sub, which would then allow you to reinvest that in a manner that would not be impacted by the high yield indentures.

That's correct. So I think we've got away to get to the flexibility we desire at least for a period of time to invest a significant amount of capital. I guess the other thing I would mention is the spectrum license John mention is there actually an assets of the unrestricted group as well. It was funded out of equities proceeds. So that assets as it would ultimately potentially turn into value for the company is unrestricted and could be used for really any purpose.

I'm sorry, that was the mobile media spectrum?

Correct.

So if someone came to you and said, we will pay you a certain multiple way above what you originally paid for, whatever value you would receive from that would also be unrestricted?

Or however it were to transpire. As that entity were to grow and potentially create value, hopefully, that would become an, is an unrestricted asset of the company. With that let me perhaps take one more question and then we will move along.

Our next question comes from [David Jarred]. Please go ahead with your question.

My question about the high yield was just answered there. I guess one follow up. When you talked about putting in a facility that would have investment grade ratings, any guidance you can give us on discussions you've had with the agencies thus far on what leverage level would be supported as investment grade under this ABS structure?

Again, with the appropriate caveats here, around it's not done until it's done, what's contemplated today is that the financing we are seeking, all of it would be investment grade level and that would be sufficient to take out really all the high yield notes and the banking refinancing in the company that's there today. Again, that's what's contemplated. We will get there when we get there.

So when you talk in your 10(K) 1,000,000,003 to 1,000,000,009, the 1,000,000,009, that 1,000,000,09 or about 6 times could be investment grade.

That's what we believe today.

Okay. Thanks.

With that what I would like to do is thank all of you for joining us today and appreciate your support and interest in our company and we will be back to you here in the not too distant future about four weeks to report to you on our first quarter. With that we will sign off. Thank you.

Ladies and gentlemen, this concludes Crown Castle's conference call. If you would like to listen to a replay of today's conference please dial 1(800)405-2236, or 303-590-3000 and use access code, 11027228. We thank you for your participation. You may now disconnect.