* Criticises proposed special administration regime
* Government plans will increase financing costs
* Suggests alternative model to keep airports open
(Adds CAA submission, background)
LONDON, June 8 Heathrow owner BAA [FERBF.UL] on
Monday scolded UK plans to introduce a special insolvency regime
for big UK airports, saying the proposed rules would create
extra uncertainties for investors.
The plans to ensure big airports stay open even if their
operator goes bust will mean investors in airport infrastructure
projects will demand higher returns, the company, owned by
Spanish construction firm Ferrovial (FER.MC) said.
"Creditors have indicated that certain of the reforms would
... adversely affect their existing rights and materially shift
the balance of risk and reward from the basis upon which they
invested," BAA said in a statement.
The upcoming sale of BAA-owned airports Gatwick and Stansted
[ID:nLI18201] as well as worries about BAA's 13.2 billion pounds
($20.95 billion) debt mountain have spurred government interest
in the financial condition of airport operators.
BAA took on its massive debt pile when it was acquired by
Ferrovial in 2006 in a leveraged buy-out.
The special administration regime would cover only Heathrow,
Gatwick and Stansted airports, the government said in March.
Standard & Poor's put BAA's credit ratings on negative
outlook in March because of uncertainty over airport regulation.
The agency warned of a possible multi-notch ratings
downgrade if BAA's bondholders did not approve the regulatory
changes and asked for repayment instead.
BAA said its own plan to keep airports open, devised with
the Association of British Insurers, would provide a better
solution if an operator had financial difficulties.
BAA bondholders, owed 4.5 billion pounds ($7.14 billion),
and who recently hired advisers Reynolds Partners, believe the
special regime is unnecessary and risks destabilising the
company's finances, a lender source said.
The Civil Aviation Authority (CAA), which regulates UK
airports, has also criticised the plan in its submission to the
government's consultation process, which closed on Friday.
The CAA said on Friday the proposals would "cloud the
responsibility for bearing the consequences of financial
distress", and would drive up the price of investment, with
these increased costs likely to be borne by airport users.
(Reporting by Tom Freke; editing by Mike Nesbit)