Heathrow Finance starts consent solicitations for four note series

By Sarah Lizee

Olympia, Wash., July 19 – Heathrow Finance plc began consent solicitations to amend its £300 million 4¾% senior secured notes due 2024 (ISIN: XS1904681944), its £250 million 5¾% senior secured notes due 2025 (ISIN: XS1120937617), its £275 million 3 7/8% notes due 2027 (ISIN: XS1622694617) and its £300 million 4 1/8% senior secured notes due 2029 (ISIN: XS2081020872), according to a London Stock Exchange announcement.

For the financial year ending Dec. 31, the group's total interest paid is expected to be £187 million while under the base case scenario its cash flow is expected to be £253 million resulting in a group interest coverage ratio (ICR) of 1.35.

“Although this would not constitute a breach of the group ICR covenant, it results in only £66 million of headroom in relation to such covenant,” the company said in the announcement.

As a result, the company is seeking a waiver of any event of default that would arise from a breach of the group ICR covenant for the financial year ending Dec. 31.

In consideration of noteholders agreeing to the waiver, the company is proposing to increase the minimum liquidity covenant to £250 million from £200 million for each of the remaining quarterly testing dates during the waiver period, and to amend the waiver period end date to remove the right of the company to bring the waiver period to an end prior to July 1, 2022.

The amendment has been considered by a special noteholder committee, which holds in aggregate 58.78% of the 2024 notes, 32.52% of the 2025 notes, 33.03% of the 2027 notes and 46.76% of the 2029 notes. They have informed the company that they intend to vote in favor of the amendment.

The company said it has also engaged with lenders and investors of its permitted borrower debt to discuss implementing a waiver of the ICR, an increase in the minimum liquidity covenant and the removal of the right to bring the waiver period to an end prior to July 1, 2022 on the same terms as the proposed amendments to the notes. Lenders and investors representing 95.76% of its permitted borrower debt, excluding the notes, have informed the company that they intend to approve the proposals in relation to their facilities.

The company said that overall, at least 70.87% of the aggregate principal amount of all of the issuer's permitted borrower debt, including the notes, have indicated that subject to client, credit or investment committee or other approvals, they intend to approve the proposals.

Consent fee

Each noteholder from whom a valid consent instruction is received, irrespective of whether they vote in favor or against the amendment, will be eligible to receive payment of an amount equal to 0.125%.

The consent fee deadline is 11 a.m. ET on July 30.

Noteholders may continue to submit consent instructions after the consent fee deadline and up to 5 a.m. ET on Aug. 6, but they will not receive the consent fee.

Payment of the consent fee is conditional on the satisfaction of the consent conditions relating to each class.

The implementation of each of the proposals for each class will be conditioned on the passing of the relevant extraordinary resolution in relation to that class and the execution of the relevant supplemental trust deed in respect to that class by the relevant parties.

If the conditions are satisfied, payment of the consent fee is expected to take place on Aug. 17.

Meetings

Meetings will be held via teleconference. The initial meeting for the 2024 notes will take place on Aug. 10, starting at 5 a.m. ET, with subsequent meetings in respect of each other class of notes being held at 10 minute intervals thereafter.

Agents

HSBC Bank plc (+44 20 7992 6237, LM_EMEA@hsbc.com) and J.P. Morgan Securities plc (+44 20 7134 4353, liability_management_EMEA@jpmorgan.com) are acting as solicitation agents and Lucid Issuer Services Ltd. (+44 20 7704 0880, heathrow@lucid-is.com) is acting as tabulation agent.

The issuer is the Hounslow, England, owner and operator of the Heathrow airport and the Heathrow Express.

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