When Spanish infrastructure group Ferrovial bought UK airport operator BAA in 2006 it could not have foreseen the problems that refinancing the acquisition debt for its purchase would create. The securitization deal was already delayed when the credit crisis developed in 2007, and since then monoline capacity has evaporated as debt spreads move steadily wider. But although the turmoil in the credit markets since mid-2007 has made the refinancing of BAA’s acquisition debt immeasurably more difficult, the deal was unlikely to have been completed anyway – as Euromoney pointed out as early as April 2007.
The problem was a lack of regulatory clarity, as the UK regulator, the Civil Aviation Authority, was not due to finalize price caps on BAA’s airports until April this year. Trying to complete a refinancing of this magnitude in the absence of a clear CAA pricing regime has turned out to be a big mistake. It was always clear that the CAA’s price control review would not be completed until April 2008, and by attempting to secure existing bondholder approval for its plans before this, Ferrovial has created prolonged uncertainty and confusion about the feasibility of BAA’s securitization.
The CAA finally released its decisions for the period 2006 to 2013 in mid-March, creating a furore among the airlines because of their perceived generosity to BAA.