BAA's bondholders have hired investment banking advisers Reynolds Partners amid growing fears that the Government's proposed changes to regulation could cause the airport operator's finances to unravel.

The Department for Transport is consulting on plans to introduce a "special administration" regime for the debt-laden owner of Heathrow, Gatwick and Stansted airports, giving ministers special step-in rights should the business fail. The move has partly been prompted by growing nervousness within Whitehall over BAA's highly leveraged finances, given the frozen credit markets and falling passenger traffic. BAA, which is controlled by Spanish construction group Ferrovial, is backed by £13.1bn of debt, including £9.6bn that is ring-fenced against the three London airports.

The regulatory threat is the latest problem for BAA, which earlier this week launched an appeal over the Competition Commission's ruling that it must sell Gatwick, Stansted and Glasgow or Edinburgh airports. BAA is struggling to sell Gatwick – which it put up for sale before the Commission forced its hand – for anything close to the airport's £1.58bn regulated asset base. The two remaining bidders have only offered £1.3bn-£1.4bn

Introducing a "special administration" regime would bring BAA's London airports in line with other regulated utilities, such as energy and water companies, giving ministers the powers to ensure vital industries continue trading.

However, the regime would also prevent bondholders and lenders from exerting their usual rights to appoint an administrator and sell off assets to recover their money. The holders of £4.85bn of BAA bonds claim any such regime would constitute an event of default, giving them the powers to demand their money back – a move that would prompt a crisis at Ferrovial.

Read the full article in The Telegraph.


And the government still insists on a third runway for Heathrow. Financed by whom?