Setback for Ferrovial as Gatwick bidder quits

20.5.2009 (Financial Times)

By Kevin Done in London

Ferrovial’s   hopes of securing a higher price for Gatwick, the second-largest
UK airport, have been hit by the withdrawal of one of its two remaining bidders.

The departure of Global Infrastructure Partners from the current sale process
leaves the Spanish infrastructure group with only one remaining offer, from a
consortium led by Manchester Airports Group and Borealis, the Canadian infrastructure

Ferrovial and BAA, its majority-owned subsidiary and the world’s biggest airports
group, have been forced to rein in their price ambitions, as the Gatwick sell-off
has been hit by the credit crunch, increasing bidders’ difficulties in raising
bank debt, and by the recession, which has hit BAA airports’ operating performance.

GIP, an infrastructure fund started by Credit Suisse and General Electric which already owns a 75% stake in London City airport, refused to comment on
Tuesday on the Gatwick sale process.

BAA said: "We are still having conversations with multiple parties. There are
discussions going on with more than one bidder."

When BAA launched the sale process last September it had been hoping to attract
bids of up to £1.8bn ($2.8bn), and in recent days it had still been aiming to
secure a bid close to £1.6bn, the estimated value of the regulated asset base
of Gatwick.

The latest revised bids from GIP and MAG have fallen more than £200m short of
the target, however, in the range of £1.36- £1.4bn.

Both GIP and a third bidder, the Lysander consortium led by Citi Infrastructure Investors, which dropped out last week,
remain interested in Gatwick but have pulled out of the current sale process.
Lysander was ejected when its £1.18bn offer fell behind the rival bids.

Both Lysander and GIP had presented fully funded bids, while the MAG consortium
is yet to finalise agreement with all the banks in its debt consortium.

MAG, which is owned by the 10 local authorities of Greater Manchester, has teamed
up with Borealis, the Canadian infrastructure fund which will be lead equity investor,
and the Greater Manchester Pension Fund.  
 It is being advised by Dresdner Kleinwort with Barclays Capital leading its
banking consortium.

BAA must repay £1bn of its existing bank debt in March next year.

The group launched an appeal earlier this week to try to halt the break-up of
the group – it controls seven UK airports including Heathrow, Gatwick and Stansted
airports – which has been ordered by the UK competition watchdog.

BAA said the Competition Commission had failed to take into account "the adverse
financial impact of introducing competition", in particular by requiring it to
sell three airports within two years "in the current financial and economic circumstances".