Ferrovial nearer to BAA refinancing

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The Independent Online

BAA moved a step closer to concluding its long-delayed refinancing after the troubled airports operator said a consortium of nine banks agreed to supply it with a £7.65bn backstop facility.

A source close to the situation called the deal a "major step forward" for the £10bn refinancing that Ferrovial, BAA's Spanish owner, and its partners have been working on since they bought the company in 2006. Under the agreement, the bank syndicate agreed to put up the funds that will pave the way for the formation of a permanent ring-fenced vehicle that is collateralised by the BAA's three regulated London airports – Heathrow, Stansted and Gatwick – plus Heathrow Express. Royal Bank of Scotland and Citigroup led the deal.

The milestone comes less than a month after Ferrovial and its partners agreed to inject £400m in new equity into the company. The credit rating agencies Moody's and Standard & Poor's have both warned that if the process slips beyond the current timetable – BAA hopes to complete the process early in the third quarter – they could slash its bonds to junk.

The ultimate plan is for BAA's new investment-grade vehicle to issue bonds with lower yields than what BAA is currently paying.

BAA will begin talks "when appropriate" with junior bondholders, who have recently hired the advisory firm Houlihan Lokey Howard & Zukin amid fears they may be forced to transfer most of their bonds to the new structure at currently depressed market prices.

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