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BAA Gatwick sale under threat

Debt drought means BAA may not come close to £2 billion price for forced Gatwick airport disposal.

Bidders for London’s Gatwick Airport, which current owner BAA is being forced to sell, may struggle to get financing in place.

When Irish entrepreneur Dermot Desmond decided to sell London City Airport in 2006 he was inundated with roughly 80 expressions of interest. He sold the airport to Global Infrastructure Partners and AIG for £750 million in a deal voted one of the most overpriced sponsor acquisitions of the year by a subsequent industry poll. The unregulated airport was financed using leverage of 14 times ebitda.

Fast forward to 2009 and BAA’s forced sale of Gatwick Airport and the picture could hardly be more different. Gatwick is a trophy asset, and if it had been put up for sale prior to mid-2007 would likely have sparked a bidding frenzy. Equity investors like airports, and they particularly like well-established transport hubs like Gatwick. “Airports offer a value opportunity,” says the chief executive officer at a large, global infrastructure fund. “Demand risk needs to be looked at in the long term.” But while Gatwick has attracted a number of bids, BAA may yet struggle to close the deal.

Not only has liquidity in the bank markets all but disappeared but traffic numbers are down and – perhaps most importantly – BAA parent Ferrovial has only put the airport up for sale because it has been forced to by the regulator.

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