BAA, the airports operator, is bracing itself for bad news on Tuesday when the Civil Aviation Authority (CAA) fixes its returns on investments for the next five years. Ferrovial, BAA's Spanish owner, had hoped it would be allowed a 7.75 per cent return at Gatwick and Heathrow, similar to the deal struck at the end of the last review in 2002.
However, the regulator said last year that it was considering cutting returns at Gatwick to 6.5 per cent and at Heathrow to 6.2 per cent. Sources said BAA anticipates "a tough settlement", with little improvement on those figures. This will hurt Ferrovial's attempts to refinance the debt it used to buy BAA for £10.3bn in 2006; Harry Bush, CAA group director for economic regulation, is said to see this as a separate issue.
BAA is likely to announce its refinancing programme this week. Ferrovial hopes to complete this by mid-summer, but the cut in returns and market turmoil mean it may have to weaken debt terms.