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SBA Communications - Highly Indebted And Oi S.A. Accounts For 16% Of Total Revenue

|Includes: SBA Communications Corporation (SBAC)

Yesterday's bankruptcy filing by Oi S.A. can potentially have a negative impact on SBA Communications (NASDAQ:SBAC) revenues. The company is highly indebted compared to it's peer group (115% long term debt to assets) and 48% of it's international leasing revenues come from Oi S.A. According to Citi analysts,

"While financial struggles are nothing new for Oi, we view the filing for bankruptcy protection as an incremental risk to the continuity and magnitude of site leasing revenues from Oi to SBAC. … SBA doesn't expect its leases to be cancelled under a judicial remedy that resembles a chapter-11 event in the U.S. … [but] could be a risk if Oi were to pursue a process similar to a Chapter 7 liquidation in the U.S. In the absence of more details, we are assigning a 25% risk of full lease cancellation, which represents downside risk of roughly $2 per share or 2%. We estimate that Oi contributes … around $8 per share, or roughly 8% of the current share price … Oi is only roughly 1% of total site leasing revenue for American Tower REIT (AMT), which represents limited risk for AMT. We remain buyers of SBAC and AMT." (source)

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.