Fiber network operator Ting, a unit of Tucows, has obtained $63 million for network investment by using asset-backed securities (ABS). This is the second ABS deal that Ting has made. Previously, the company obtained $239 million through a similar deal.
ABS financing enables companies to obtain lower interest rates by securing their debt with some of their most valuable assets. The rationale is that those assets generate stable, or even growing, revenue streams, minimizing investment risk. For a company like Ting, those assets are fiber broadband connections.
Although cell tower owners and data center operators have used ABS for years, it’s relatively new for broadband network operators. Several privately held network operators, including Ting, made ABS deals over the last couple of years. Interest in ABS accelerated when publicly held Frontier obtained $2.1 billion, followed by an additional $750 million, in ABS financing.
The Ting and Frontier deals have a lot in common. Both companies put certain fiber network assets into “bankruptcy remote special purpose vehicles” to secure their debt. Ting’s new deal leverages the same special purpose vehicle set up last year when the company made its first ABS deal.
At that time, the special purpose vehicle included approximately 96,000 serviceable addresses and 35,000 customers in six states. Additional assets — 29,000 serviceable addresses and 9,500 customers —were added to secure the additional $63 million.
The notes sold to investors and secured by the assets in Ting’s special purpose vehicle mature in 2053 for the initial $239 million and in 2054 for the additional $63 million.
According to a press release issued late yesterday, “the cumulative outstanding balance of the two ABS notes amounts to 8.1 x the annualized run rate collections, net of management fees at the time of the notes underwriting.”
Goldman Sachs was the placement agent on both Ting ABS deals. The same company also served as the lead structuring advisor for both Frontier deals.
Ting entered the fiber broadband business just 10 years ago and has grown considerably since then.
