BAA bondholders demand protection from Spanish bid

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The Independent Online

Bondholders in BAA demanded protection yesterday in the event that the airports operator is taken over by Ferrovial of Spain, leading to a cut in its credit rating.

Investors who subscribed to a £2bn bond issue last week to finance BAA's takeover of Budapest airport are facing potential losses running into tens of millions of pounds after the value of the bonds plunged yesterday.

About 50 of them are co-ordinating a plan of action through the Association of British Insurers demanding that BAA insert a "change of control" clause in the bond issue guaranteeing that they will be bought back at par if the company is taken over.

BAA said yesterday that the bond issue did not technically close until next week and that it was "carefully considering its options". The bond could either be withdrawn or amended to give protection to those investors who have signed up for the issue.

As bondholders fretted, BAA shareholders warmed to the prospect of a bid for the owner of Heathrow, Gatwick and Stansted airports from a financial consortium led by the Spanish toll roads and infrastructure giant. Scottish Widows has already said it looks forward "to engaging in constructive dialogue with interested parties" and yesterday there was heavy buying of BAA shares by some of its big investors.

Schroders, Morley Fund Management and Threadneedle Asset Management all added to their stakes but there was little evidence of hedge funds piling into the stock.

A bid for BAA could cost Ferrovial up to £15bn. The company has £5bn of debt and to succeed, the Spanish company may need to offer 900p a share, valuing BAA's equity at nearly £10bn. BAA shares rose a further 4 per cent to 779.5p last night, valuing the company at £8.4bn, having risen 14 per cent on Wednesday after Ferrovial's disclosure that it was considering a bid.

Senior BAA directors, led by its chief executive Mike Clasper, were locked in a war council for much of yesterday, drawing up a defence plan in the event that Ferrovial does make a cash offer for the business.

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