BAA improves risk profile with £625m refinancing

The UK-airports operator, owned by Ferrovial, successfully refinanced £625m of junior debt with eight banks, an increase on the original £500m it was seeking. BAA said it plans to repay £1.1bn of a £1.57bn debt facility in September, prompting credit default swaps on the group’s debt to fall.

UK airports operator BAA, owned by Spanish infrastructure group Ferrovial, took an important step last week towards refinancing a £1.57 billion (€1.9 billion; $2.4 billion) debt pile by securing a loan package from eight banks.

The loan package amounts to a four-year, £625 million debt facility and was significantly above the £500 million BAA was originally seeking due to “excess demand from new and existing relationship banks,” BAA said in a statement. Margins on the new facility were set at 3.25 percent for the first three years, rising to 3.75 percent in the final year, the airports operator said.

BAA, which operates several airports including London’s Heathrow and Stansted airports, did not disclose the identity of the eight banks but industry sources are saying the bank club comprises Barclays, Bank of America, Deutsche Bank, HSBC, ING, Mediobanca, Natixis and RBC.

The airports operator said it will repay up to £1.1 billion of an existing £1.57 billion subordinated debt facility in September using proceeds from the recent refinancing together with £375 million from revolving credit facilities and proceeds from the June sale of its holding in airport property partnership APP.

Following news of the refinancing, credit default swaps on BAA’s debt fell by nearly 13 percent to 179 basis points, the lowest level since May 19, several media sources reported.

Ferrovial acquired BAA in 2006 for an enterprise value of £16 billion. BAA reported a pre-tax loss of £279 million during the first half of 2010, down from a £545 million loss posted in the previous comparable period.