BAA in bondholder clash over Heathrow deal
24.02.08
The Spanish owner of Gatwick and Heathrow Airport is heading for a major showdown with City investors over its plans to force the holders of £4.7bn of bonds into a new funding structure, the Telegraph reports.
According to the newspaper, Grupo Ferrovial, the controlling shareholder in the company that owns BAA, wants to ‘migrate’ the holders of the bonds into a new securitised vehicle as part of the airport operator's heavily delayed £10bn refinancing. The securitised vehicle would be backed by the assets of BAA's 3 regulated London airports - Heathrow, Gatwick and Stansted.
The bondholders are reported to have mounting concerns, however, over the terms of any transfer and whether, amid the current credit crunch, the debt-laden Ferrovial can even pull off the refinancing. One bondholder told the Telegraph: ‘If Ferrovial tries to force us to migrate without giving something back, then they are heading for an almighty battle.’
The bondholders are believed to include M&G, Legal & General, Standard Life, Norwich Union, Scottish Equitable, Axa and Clerical Medical. None would comment publicly. They invested in A-rated bonds prior to the 2006 £16bn takeover of BAA by Airport Development and Investment (ADI), in which Ferrovial has a 61 percent stake.
As delays to the proposed refinancing have lengthened, the rating on the bonds has been cut to BBB+ by credit agency Standard & Poor's and placed on ‘credit watch negative’. In November when S&P downgraded BAA's credit rating to junk status and said the bonds would follow suit unless the refinancing was successful.
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