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BAA has set a 19 October deadline for senior lenders to approve its waiver request. The company is seeking consent to waive the requirement to obtain ratings for its acquisition facility by 7 October, three sources familiar with the matter said. The UK-based airports operator has asked to postpone the ratings requirement for an additional six months until 30 April 2008, the sources said.
BAA was required to obtain a rating on its incumbent acquisition line by 7 October 2007, the sources explained. The company launched the waiver to avoid an event of default, said one of the sources familiar. The waiver request was submitted on 8 October, the sources said.
As previously reported, BAA originally planned to ring-fence a large portion of senior debt for refinancing via the securitisation market. But credit market conditions and a tougher-than-expected report by the Competition Commission put a dampener on the company’s plans. BAA confirmed in a company announcement and an investor meeting last week it was not in a position to carry out the transaction until after the release of the final Civil Aviation Authority (CAA) report at the end of March 2008.
As a result of BAA’s inability to obtain the debt ratings before the one-year deadline expired, the margin for the first lien debt stepped up to Libor +200bps from Libor +100bps on 7 October, the sources noted. The senior margins will be linked to a ratings grid - when and if the group obtains the debt ratings, they said. In the meantime, the margin on BAA’s senior loans remains at Libor +200bps, the sources noted.
To finance Ferrovial’s GBP 10bn acquisition of the group, BAA issued a GBP 4.72bn five-year senior bullet facility in September 2006, sources said at the time. The debt was split between two five-year term loans totalling GBP 4.25bn and GBP 470m. The issuer was ADI, a BidCo comprising Ferrovial, Caisse de Depot et Placement du Quebec and GIC Special Investments. The senior debt package also included a GBP 2.25bn five-year capex/revolving credit facility. All the five-year senior facilities were priced at Libor+ 100bps, while the GBP 2bn five-year subordinated second lien tranche was priced at Libor+ 400bps.
On the back of last Friday’s investor meeting at Heathrow, Royal Bank of Scotland - agent for the senior debt - modified parts of the waiver request, one of the sources said. The modifications were presented to lenders yesterday, the source added. Lenders, who will receive no fees to approve the waiver, must tender their consent by Friday 19 October, two of the sources said.
BAA’s ratings are expected to be impacted by news that BAA will not be able to refinance via a securitisation until after the Civil Aviation Authority (CAA) review is concluded at the end March 2008, the second source said.
BAA has GBP 550m of bonds outstanding which are currently rated Baa2 by Moody’s and on review for downgrade. The bonds are guaranteed by BAA Plc and carry guarantees from BAA’s UK airports. Moody’s withdrew a Ba1 corporate rating for BAA on 10 September, citing commercial reasons.
The first lien was quoted at 98.5-99.5 today, while the second lien was indicated at 97-98, according to a market participant.
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