ATW Daily News

BAA completes refinancing as potential breakup looms

Tuesday August 19, 2008

BAA completed the long-awaited £13.3 billion ($24.81 billion) refinancing of its seven UK airports, which it said will provide "a stable, long-term, investment grade financing platform for investment in [London] Heathrow, Gatwick and Stansted airports over the coming decades."

Included is £3 billion of committed facilities to fund immediate investment projects across the seven airports: LHR, STN, LGW, Edinburgh, Glasgow International, Aberdeen and Southampton. The refinancing agreement comprises three main elements, including a corporate reorganization to separate financing of the three London airports and the four others into ring-fenced groups.

The deal comes just days before the UK Competition Commission is expected to announce the findings of its investigation into domestic airport ownership. In its interim report published in April, the Commission said the operator's ownership of the seven airports "may not be serving the interests of either airlines or passengers" (ATWOnline, April 23). Later, UK CAA stated that common ownership of the three London airports "is likely to prevent, restrict and/or distort competition."

The anticipated report has led to a stream of speculation that BAA might be forced to sell one or more of its facilities. Chairman Nigel Rudd conceded to the BBC over the weekend that he expected the watchdog to recommend a breakup of the company, yet he discounted claims that such a move would increase competition due to LHR's prime location. "Heathrow does not compete with Gatwick and does not compete with Stansted or Luton or Manchester," he said.

Rudd also claimed that there had been "huge expressions of interest" in LGW and STN but insisted neither was for sale at present (ATWOnline, Aug. 15). Manchester Airport Group reportedly is interested in LGW, while other probable bidders include Hochtief, Macquarie and Dubai International Capital.

by Cathy Buyck

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