Recession, swine flu, financing keep Gatwick bids low

After failing to find funding for its £2.5 billion bid for Midway airport in Chicago, a Citi-led consortium has still to file a bid for the UK’s second biggest airport, Gatwick.

Gatwick Airport: attracting lower bids

Gatwick’s owner, the Ferrovial subsidiary BAA, had received only two bids for the airport by the end of the bidding period yesterday, from Global Infrastructure Group (GIP) and a consortium led by Manchester Airport Group (MAG).

Analysts said the bids were in the range of £1.3 billion (€1.7 billion; $1.9 billion) to £1.5 billion, well down on the £1.8 billion to £2 billion Ferrovial expected when it announced the Gatwick sale last September.

Gatwick’s traffic volumes have declined steeply since then, thanks to recession and now the swine flu. That, and problems raising finance, kept the bids low.

The UK’s Competition Commission demanded last month that BAA should sell three of its seven British airports, including London’s Gatwick and Stansted.

The bids came from GIP, which already owns 75% of London City Airport. Its founding investors are Credit Suisse and General Electric, and its banking consortium is led by Credit Suisse, JP Morgan and Royal Bank of Canada.

MAG is owned by ten local authorities in Greater Manchester. It teamed up with the Canadian infrastructure fund Borealis, which is the lead equity investor, and the Greater Manchester Pension Fund.

Both GIP and MAG had to restructure their bids to contain more equity and less debt, after they had been reviewed by ratings agencies. Reduced leveraging allowed them to shoot for a BBB+ rating.

The third possible bidder is Lysander Gatwick Investment, consisting of Citi Infrastructure Investors, Canada’s Vancouver Airport Services and America’s John Hancock Life Insurance.

This is the consortium that failed to raise the funding to support its September bid of $2.5 billion for Midway.