RLPC-BAA's loan refinancing to test market

LONDON (Reuters) - The 7.15 billion pound loan to partly refinance debt assumed by Spanish construction firm Ferrovial FER.MC and its consortium partners in their takeover of UK airport operator BAA is set to test the loan market.

The loan refinances the debt of BAA's designated London airports and assets -- Heathrow, Gatwick, Stansted and the Heathrow Express rail link -- and will also be used to finance improvements and modernisation.

Ferrovial and consortium partners Canadian fund manager CDPQ and GIC SI, the private equity investment arm of the government of Singapore, bought BAA in September 2006 backed by loans totalling 8.97 billion pounds.

The loans included 6.97 billion pounds of senior debt and two billion pounds of junior debt.

The consortium has tried to renegotiate the debt package for more than a year after original plans to refinance it via a securitisation were foiled by the credit crunch.

It continues to face challenging loan market conditions for large European leveraged loans.

"The consortium is making progress on getting a permanent refinancing in place and is committed to making that happen. The initial response from the loan market has been positive," a banker close to the deal said.

The 7.15 billion pounds loan consists of loans totalling 4.4 billion pounds to refinance existing debt, and 2.75 billion pounds to finance working capital and capital expenditure.

BAA's other 'non designated' assets - Glasgow, Edinburgh Aberdeen, Southampton and Naples airports are not included in the current loan.