BAA sounding banks out on refinancing

LONDON (Reuters) - Airports operator BAA is sounding banks out on its refinancing, which the company expects to initiate in the second quarter this year and wrap up early in the third quarter, banking sources said on Wednesday.

BAA said this week that the final size of the refinancing facility and the margins have not yet been agreed, but banking sources said the bank financing component could be in the 10 billion euro range.

In order to ensure a successful refinancing in the current market environment, BAA said it is initially considering a mix of bank and bond financing for its designated assets such as the airports at Heathrow, Gatwick and Stansted, as well as the Heathrow Express train.

Under BAA's plans, the company is considering migrating existing euro and sterling bondholders into an investment grade, ring-fenced securitisation structure backed by the designated assets.

BAA said it will begin a consultation process with leading bondholders under the auspices of the Association of British Insurers in due time.

A group of 11 banks have been contacted by the company to arrange the bank debt of this part of the refinancing, including incumbent leads Citigroup and Royal Bank of Scotland, bankers said.

The size of this facility is said to be of around 9.6 billion euros, according to bankers, although nothing has yet been formalised. BAA said it hopes to swap this financing into bonds over time.

In addition, BAA is arranging a separate bank debt financing for its other non-regulated UK airports, which is said to be around 1.2 billion euros in size, according to banking sources.

Further details about the overall refinancing transaction are expected to emerge over the next two to three weeks, one banker said.