Heathrow seeks to amend numerous class A bonds for new regulations

By Susanna Moon

Chicago, Jan. 28 – Heathrow Funding Ltd., formerly BAA Funding Ltd., is soliciting consents to amend its class A bonds until 11 a.m. ET on Feb. 27.

The consent fee deadline will be 11 a.m. ET on Feb. 20.

The consents are being sought because LHR Airports Ltd., the security group agent, is requesting that the Deutsche Trustee Co. Ltd. as trustee seek voting instructions for the amendments, which are needed for a new accounting standard, effective Jan. 1, according to an announcement.

The new standard changes the balance sheet treatment of leases and removes the distinction made under the previous accounting standard between finance leases and operating leases, the release explained.

As a result, Heathrow will be required to capitalize its operating leases, grossing up its balance sheet for both lease assets and liabilities.

The company added that it would be able to comply with its covenants regardless of whether the proposed amendments are implemented.

“The proposed amendments seek to neutralize the impact of the introduction of IFRS 16 in so far as it applies to Heathrow’s existing lease portfolio,” the company said.

“Operating leases are not referenced in the drafting relating to the calculations of the RAR ratios which refer only to finance leases so, until Dec. 31, 2018, operating leases were not taken into account for these calculations.

“The proposed amendments therefore seek to expressly exclude existing operating leases from the relevant calculations going forwards (but not operating leases entered into from Jan. 1 onwards) and preserve the distinction between finance leases and operating leases in certain limited other circumstances.”

The consent fee will be 0.05%.

Settlement is expected to occur on March 8.

The class A bonds consist of the issuer’s £249.81 million 9.2% class A unwrapped bonds due 2023, £199,909,000 7.075% class A unwrapped bonds due 2030, £899,967,000 6.45% class A unwrapped bonds due 2033, £749.6 million 5.225% class A unwrapped bonds due 2025, £700 million 6¾% fixed-rate bonds due 2028, £460 million 3.334% indexed bonds due 2041, £750 million 5 7/8% fixed-rate bonds due 2043, $1 billion 4 7/8% fixed-rate bonds due 2023, €50 million zero coupon bonds due 2034, €50 million zero coupon bonds due 2034, £180 million 1.65% indexed bonds due 2024, C$400 million 4% fixed-rate bonds due 2021, £750 million 4 5/8% bonds due 2048, £75 million 1.366% indexed bonds due 2034, £50 million 1.382% indexed bonds due 2041, £75 million 1.372% indexed bonds due 2051, €600 million 1 7/8% bonds due 2024, £50 million 4.171% bonds due 2036, C$450 million 3% fixed-rate bonds due 2023, €50 million zero-coupon bonds due 2036, £100 million 1.238% indexed bonds due 2042, €750 million 1½% bonds due 2032, NOK 1 billion 2.65% bonds due 2029, C$500 million 3¼% fixed-rate bonds due 2027, CHF 400 million ½% fixed-rate bonds due 2026, NOK 1 billion 2½% bonds due 2031, £400 million 2¾% fixed-rate bonds due 2051, €500 million 1 7/8% fixed-rate bonds due 2034, C$400 million 3.4% fixed-rate bonds due 2030, £160 million 0.147% indexed instalment bonds due 2060, £55 million 2.926% fixed-rate bonds due 2045, C$400 million 3.782% fixed-rate bonds due 2032 and A$175 million 4.15% fixed-rate bonds due 2030.

Barclays Bank plc (+44 20 3134 8515 or eu.lm@barclays.com), HSBC Bank plc (+44 20 7992 6237 or LM_EMEA@hsbc.com) and Lloyds Bank Corporate Markets plc (+44 20 7158 1719/1726 or liability.management@lloydsbanking.com) are the solicitation agents. Lucid Issuer Services Ltd. (+44 20 7704 0880 or heathrow@lucid-is.com) is the tabulation agent, and TSX Trust Co. (866 600-5869, 416 342-1091, fax 416 361-0470 or TMXEInvestorServices@tmx.com) is the Canadian tabulation agent.

Heathrow raises fund from external sources and provides it to SP Group. The company is based in St Helier, Jersey. The issuer is a subsidiary of Heathrow (SP) Ltd., which owns and operates Heathrow airport in the United Kingdom.

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