Following protracted bondholder negotiations throughout the spring, Ferrovial made more concessions. In a conference call in July, Leo announced that BAA would guarantee any bonds with an expected maturity of 2018. Beyond that, the protection package included a range of strict financial and operational covenants. And addressing the trickle of information from BAA that had been irritating bondholders, Leo pledged improved reporting, with disclosures every six months, including “information on both historic and forward-looking ratios.” As for financial incentives, in return for a yes vote, BAA offered pre-2002 issues coupons with an increase of 70 basis points and post-2002 issues a ten basis points increase.
The bondholders’ vote in August, with 99% in favour of the group’s proposal, was a “critical milestone” that left BAA and Ferrovial executives sighing with relief, says Leo, a former CFO of construction company Amey, Ferrovial’s first major acquisition in the UK in 2003. Ferrovial and its two minority deal partners — Quebec’s pension fund and GIC, Singapore’s private equity arm — now had what they wanted: a £50 billion multicurrency programme giving BAA access to both bank debt and bond markets. Critically, Villén stresses, the package not only covers the £9 billion of debt Ferrovial piled up to beat out rival BAA bidder Goldman Sachs, but also gives it access to much-needed funding for improving its airports. “If you look at the next 15 years, BAA needs to invest a minimum of £1 billion annually, so it was essential for us to set up a framework that would allow us to do that,” says Villén. “If we say that was our main objective, we have accomplished that.”
Ferrovial has reason to boast. “Transactions of this nature have been done before, but not providing everything — the migration of the bonds, a backstop facility [arranged in early 2008], a co-ordinated facility with a clear structure between regulated and non-regulated assets,” says Villén. “What you see here is probably the most complex transaction in the history of refinancing an acquisition. I think that is something that should be celebrated.”
However, few in the corporate world — engrossed in the turmoil of financial markets — are in the mood for celebrations, leaving little doubt that Ferrovial is not in the clear just yet. The refinancing may be finalised, but the continued deterioration of the financial markets means Ferrovial’s executives can’t rest easy. In that sense, it’s business as usual.
Some observers say that it was no coincidence that the refinancing was completed a week before the UK’s Competition Commission announced in August that BAA needed to sell at least one of its airports for the deal to win its approval. Had the refinancing taken place after that, investors could have forced Ferrovial to go through another major rebuilding exercise.
A few days after the announcement, Ferrovial volunteered to put Gatwick up for sale. Hardly an ideal time to be selling such an important asset, Ferrovial is expected to struggle to get the £3 billion that observers say it will seek, and which, in accordance with the securitisation’s rules, will go towards paying down debt.