BAA started talks with holders of £4.7bn of its bonds on implementing a new debt structure yesterday, the airports operator said in a statement. The bondholders are seen as the key group of investors that could frustrate its proposed refinancing.
BAA's majority owner Ferrovial announced on Monday it had won backing from nine banks for a £7.65bn loan to help refinance its purchase of BAA. The refinancing has been in the works for over a year, but has been delayed by the global credit crunch.
BAA said it was talking with a special committee of bondholders set up with the help of the Association of British Insurers. BAA said it had made 'good progress' on plans to implement a permanent financing structure, including the loan deal announced on Monday. 'However, certain aspects of the implementation of the permanent financing structure remain to be finalised.'
The bonds, which pre-date BAA's £10.2bn takeover in 2006 by a consortium led by Spanish infrastructure group Ferrovial, are held by some of the City's biggest institutions. Holders are thought to include M&G, Legal & General, Standard Life, Norwich Union, Scottish Equitable, Axa and Clerical Medical. Some bonds are in the hands of hedge funds.
BAA's access to the new £7.65bn debt facility is dependent on consent from the bond-holders to roll over into the new refinancing structure. This envisages two parcels of investment-grade debt secured against its three regulated London airports - Heathrow, Gatwick and Stansted - plus the Heathrow Express train link, and the non-regulated quartet of Glasgow, Edinburgh, Aberdeen and Southampton.
The bond-holders invested in A-rated paper. But refinancing delays and the credit crisis have seen the rating slip. Standard and Poor's has warned the bonds will be downgraded to junk if BAA's proposed refinancing fails. The bond-holders are reported to want improved terms and a fee for agreeing to the new structure. They also have concerns over how it will be rated, with recent reports suggesting that it will be A-. |
