Pricing will delay BAA refinancing

BAA has issued a statement claiming that the pricing shake-up by competition watchdogs is likely to delay its refinancing until next March.The statement reads:

“Further to BAA’s announcement on 3 October in relation to its refinancing plans in light of the Competition Commission’s proposals, BAA wishes to clarify certain matters arising from its announcement.

As BAA stated in its 3 October announcement, the Competition Commission’s proposals, if adopted by the CAA without amendment, means that BAA might not be able to implement its refinancing plans as currently envisaged. BAA will continue to present its strong arguments to the CAA as to the amendments that it believes need to be made to those proposals in order to ensure the CAA recognises the needs of the business in its final regulatory settlement.

BAA’s intention remains to effect a refinancing consistent with other established regulated financing platforms which involves a migration of existing bondholders into an investment grade, ring-fenced structure backed by the designated assets of the group and is working hard to enable a refinancing to be completed.

To that end, BAA will, over the coming months, be working with its advisers and other key transaction parties including the rating agencies to continue to design a refinancing plan, although it may well not be able to finalise any such plan until the regulatory settlement is published by the CAA next March. BAA confirms its intention to consult with leading bondholders under the auspices of the Association of British Insurers (“ABI”) in due course and that no such ABI consultations have been undertaken to date.


As part of the completion of the acquisition of the BAA group, ADIL was required to ensure that BAA and other material companies within the BAA group gave guarantees and security in support of the acquisition facilities entered into by ADIL.

In addition, BAA has incurred debt under a termfacility, which was used to refinance a bond that matured in February 2007, and a capex facility which also have the benefit of such guarantees/security.

Bondholders will be aware that certain series of the existing BAA bonds (namely the £300M Bonds due 2016, the £250M Bonds due 2021, the £200M Bonds due 2028 and the £900M Bonds due 2031) contain various financial and other covenants including among other things, a “Restrictions on Borrowings” covenant. This restricts Net Borrowings to no more than 1.75 times Adjusted Capital and Reserves and all Borrowings to no more that 0.5 times Adjusted Capital and Reserves, as such terms are defined in the relevant bond conditions.

BAA wishes to reassure creditors that it is in compliance with the financial and other covenants in its bonds. Whilst the lenders of the acquisition facilities do have guarantees/security and therefore rank senior to existing bondholders (who are unsecured) to the extent of such guarantees/security, such lenders only have a claim under them to the extent that such claim does not result in a breach of such covenants. In this way, the financial and other covenants in the existing bonds continue to provide the protection to bondholders that existed prior to the acquisition of BAA by ADIL. BAA estimates (based upon unaudited information) that the amount of the guarantees/security provided by the BAA group in support of its own secured debt and that incurred by ADIL under the acquisition facilities as at 30 June 2007 was approximately £3 billion.”