BAA refinancing plans at risk again over Competition Commission report
23.04.08
BAA may be at risk of default within a year, as the Competition Commission review hinders plans to cut borrowing costs, JP Morgan Chase credit analyst Olek Keenan said in a report.
BAA is under pressure to refinance £10 billion of debt used for its takeover. It has delayed refinancing twice because of a regulatory review of the amount it charges airlines and ‘challenging’ conditions in debt markets. The Commission said yesterday that BAA's ownership of seven UK airports ‘may not be serving well the interests of either airlines or passengers,’ and raised the prospect that it may be forced to sell one of its London hubs.
However, Spanish owner Grupo Ferrovial SA, which proposed pledging Heathrow, Stansted and Gatwick assets as collateral for new bonds and loans, needs to come up with an alternative after the Competition Commission assesses whether to force BAA to sell one of the airports, Mr Keenan said.
Mr Keenan said: ‘It is possible that it has a 'silver bullet' plan which can deal with all of the uncertainties. If there is no such plan, then we think that a default at BAA is a possibility in the next 12 months.’
A Ferrovial official in Madrid said the company is sticking to its refinancing plan. He said: ‘To say that the emerging thinking of the Competition Commission affects the refinancing is completely wrong. The financial structure to refinance BAA takes into account possible asset sales of both regulated and unregulated assets, so it's flexible and can adapt to future regulatory decisions.’
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