Gatwick bids hit by credit agency
26.04.09
S&P has told one of the bidders for Gatwick Airport that it will refuse to give an appropriate credit rating to any bid structure that contains debt of more than half the airport's £1.6bn regulated asset base – the regulator's proxy for the airport's value, the Telegraph reports. The news, which limits debt finance to £800m, could force bidders to cut their offers before tomorrow's deadline for second-round bids, the newspaper suggests.
Global Infrastructure Partners (GIP), a joint venture between GE and Credit Suisse and the owner of London City Airport, asked S&P to formally rate its bid, aware that the agency had recently downgraded Brussels, Rome and Copenhagen airports. GIP also wanted to assess S&P's reaction to a decision last week by a second Gatwick bidder - a consortium including Citigroup's infrastructure fund and Vancouver airport - to back out of a $2.5bn (£1.7bn) deal to buy Chicago Midway Airport. The consortium blamed ‘current global market conditions that have materially deteriorated since the bid award’.
The Telegraph reports that S&P told GIP it would rate its Gatwick bid structure at only BBB-, the lowest investment grade and one thought too low to be acceptable to the capital markets, the Commission or industry regulator the Civil Aviation Authority. S&P said the rating reflected ‘an aggressive financial risk profile characterised by relatively high debt leverage as demonstrated by an opening debt / RAB ratio of 54 percent’.
S&P's letter has forced GIP to restructure its bid and other suitors may face a similar challenge, the newspaper reports. Lower bids for Gatwick could determine whether BAA launches a challenge to the Competition Appeals Tribunal over the Commission's decision to force it to sell Gatwick, Stansted and either Glasgow or Edinburgh airports. It has until May 19 to appeal.
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