As previously stated, BAAs intention is to effect a refinancing through which it will establish a long term, stable financial structure consistent with those successfully implemented by other UK regulated businesses. Whilst over time, it is expected that its funding for its designated assets (Heathrow, Gatwick and Stansted airports and Heathrow Express) will be raised primarily through bonds issued in the capital markets, BAA is initially considering a combination of bank and bond financing to maximise the chances of a successful and timely completion of the refinancing in the current challenging debt capital markets.
As part of the refinancing, BAA intends to migrate existing bondholders into an investment grade, ring-fenced securitisation structure backed by BAAs designated assets. BAA re-confirms its intention to commence - in due course - a formal consultation with leading bondholders under the auspices of the Association of British Insurers (ABI) to migrate BAAs existing euro and sterling bonds into the proposed structure and will provide a further update to bondholders at that time.
A separate bank debt refinancing of the groups other UK airports outside of the designated airport group is also proposed. The proceeds of both the designated and non-designated financings will allow the group to make the requisite repayments of its acquisition facilities. Both processes will conclude simultaneously.
The development of the proposed financing structure and discussions with key transaction parties, including rating agencies and the banks providing facilities for both financings, are well advanced. Final quantums and pricing for both facilities have not yet been agreed. Subject to credit market conditions BAA is targeting implementation of both financings as soon as possible, and currently expects to initiate the financings in the second quarter of 2008 with completion intended to occur early in the third quarter of 2008.
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