BAA loan package from 8 banks gives credit fillip

21.8..2010 (FT)

By Pilita Clark in London

The market view of BAA’s credit standing improved on Friday after the UK’s largest
airport operator announced that it had put together a loan package that would
help it refinance £1.57bn ($2.4bn) in debt.

BAA, which runs London’s Heathrow and Stansted airports and is owned by the Spanish
Ferrovial, said it had arranged a £625m loan from eight banks – well above the £500m it
had originally said it was seeking.

The amount had been increased to meet "significant excess demand from new and
existing relationship banks", BAA said.

The group said it would repay up to £1.1bn of the £1.57bn debt next month from
a combination of proceeds from the new loans as well as other credit facilities,
and proceeds from the sale of its stake in the airport property partnership APP
in June.

News of the deal caused credit default swaps on BAA – a form of insurance against
default on the group’s debt – to fall nearly 13 per cent, or 26.5 basis points,
to 179, the lowest level since May 19, according to data provider CMA.

Analysts said the deal showed BAA appeared to be on track to refinance its debt,
which it has been doing since the group was bought by a consortium headed by
Ferrovial at the height of the credit boom in mid-2006 for close to £16bn, including debt.

BAA reported a pre-tax loss of £279m for the six months to the end of June in
results released last month, down from the £545m loss it reported for the same
period last year.

The group said that the volcanic ash disruption in April, which closed Heathrow
and Stansted for nearly a week, and British Airways cabin crew strikes, had led
to a drop in passenger numbers.

This had an estimated £30m impact on its income, the group said.

BAA itself faced the prospect of strike action this month after staff rejected a 1 per cent pay offer and changes to working

The dispute ended after the Unite union, which represents nearly two-thirds of
BAA staff, agreed to accept an improved pay offer.

A strike in the busy school holiday summer months would have caused considerable
disruption to millions of passengers since BAA also runs airports at Edinburgh,
Aberdeen, Glasgow and Southampton.

BAA owned London’s second-largest airport, Gatwick, until selling it last year to Global Infrastructure Partners, owners of London City Airport, for just over

The sale followed pressure from UK competition authorities, which had ordered
BAA to sell Stansted as well.

BAA has appealed against that ruling and the situation remains unresolved.

Shares in Ferrovial closed down 1.3 per cent to €6.34.
see also
the BAA press release>

Significant progress in subordinated debt refinancing

20 August 2010

BAA has completed a £625 million, four-year ‘Class B’ bank junior debt facility,
marking significant progress towards a refinancing of the group’s subordinated
debt of £1.57 billion.

BAA intends to prepay up to £1.1bn of the £1.57bn subordinated debt facility
in September from a combination of proceeds from the new Class B facility, drawings
under revolving credit facilities and proceeds from the sale of its stake in the
airport property partnership APP in June.

This will enable BAA to rebalance its blend of debt at senior, junior and subordinated
levels whilst leaving financial ratios comfortably within required levels.

BAA had initially targeted a loan of only £500m but increased the size to meet
significant excess demand from new and existing relationship banks.   The lenders
under the facility are a group of eight major international banks. The new facility
has a margin of 3.25% for the first three years, rising to 3.75% in the final

BAA has received consent from its banks to use the proceeds of the new Class
B loan, together with up to £375m of drawings from its revolving credit facilities,
to prepay the subordinated debt facility.

BAA intends to refinance the remainder of the subordinated facility from a variety
of sources. These may include proceeds of further non-core asset disposals, bank
and/or institutional loans and capital markets issuance. Further details will
be provided in due course.
link to BAA press release