BAA seeks consents to carry out bondholder migration via exchange

By Angela McDaniels

Tacoma, Wash., July 14 - BAA Ltd. said it is seeking consents from bondholders of its proposal to migrate its existing bondholders into an investment-grade, ring-fenced securitization structure backed by its designated assets.

BAA's designated airport assets group includes Heathrow, Gatwick and Stansted airports and Heathrow Express, according to a company news release.

Consents are being sought from holders of BAA's £300 million 11¾% bonds due 2016, £250 million 8½% bonds due 2021, £200 million 6 3/8% bonds due 2028 and £900 million 5¾% notes due 2031 (the "pre-2002 securities").

The company is also seeking consents from holders of its €1 billion 3 7/8% notes due 2012, £400 million 5¾% notes due 2013, €750 million 4½% notes due 2014, €750 million 4½% notes due 2018 and £750 million 5 1/8% notes due 2023 (the "post-2002 securities").

The migration into the new securitization structure will be carried out via an exchange of existing bonds for new bonds to be issued by BAA Funding Ltd.

Each new bond will have the same nominal amount as the bond it was exchanged for and will have the same expected maturity, but its legal final maturity will be two years longer, according to the release.

The new bonds will carry higher coupons. Each new coupon will be 70 basis points higher in the case of pre-2002 securities and 10 bps higher for post-2002 securities.

The company will pay cash in lieu of bonds to holders not eligible to receive new bonds.

Holders of the pre-2002 and post-2002 securities will consider the proposal at separate meetings on Aug. 5.

Holders may submit consents until 11 a.m. ET on Aug. 1. Those who submit consents by 11 a.m. ET on July 29 will receive an early incentive fee equal to 0.25% of par if the proposal is passed at the meetings.

If the proposal is passed, the new bonds will price on Aug. 12 and all will be exchanged for the old bonds on Aug. 14.

The company noted that if the proposal passes at the pre-2002 securities meeting but not at the post-2002 securities meeting, all holders of post-2002 securities who voted in favor of the proposal will still have their bonds exchanged.

BAA said bondholders who exchange will benefit from a comprehensive security package, operational covenants, financial protections and a higher level of transparency through investor disclosure and forecasting.

In addition to passing at the bondholder meetings, successful completion of the proposal is subject to the total amount in cash payable by BAA not exceeding a certain amount, confirmation of expected A- ratings of the new bonds, confirmation by the United Kingdom Financial Services Authority that the new bonds will be admitted to listing on the UKLA and to trading on the London Stock Exchange and confirmation by BAA that it will proceed with the exchange.

In turn, the exchange will be dependent on the completion of new and amended financing.

The company announced plans for the new securitization structure in April in connection with the refinancing of its acquisition facilities with the proceeds of new bonds and a bank financing in the second quarter. The company was acquired by Grupo Ferrovial in the summer of 2006.

In May, BAA asked the Association of British Insurers to begin a holder inquiry to identify which of its members hold BAA bonds.

On Monday, BAA said a special committee of the association considered the proposal and found it to be acceptable. The six members of the committee hold 38% of the sterling-denominated bonds and will vote all of their holdings in favor of the proposal.

The joint dealer managers are Citigroup Global Markets Ltd. (+44 20 7986 8969) and Royal Bank of Scotland plc (+44 20 7085 8056). The tabulation agent is Citibank, NA (+44 20 7508 3867).

BAA is a London-based airport operator.

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