BAA Toggle Facility

BAA Limited (BAA) is one of the world's leading international airport operators and owner of six UK airports, including two of London's price regulated airports, Heathrow and Stansted.

TIF holds £11.7 million face value in the BAA Toggle Facility arranged to part fund the acquisition of BAA by Airport Development and Investment (Holdings) Limited (ADI). The ADI consortium consists of Spanish construction and infrastructure group, Ferrovial Infrastructures, S.A., Canadian financial institution, Caisse de dépôt et placement du Quebec, and the Singaporean Government's private equity investment arm, GIC Special Investments Pte Ltd.

Performance highlights 2011

BAA released its results for the 12 months to 31 December 2010. Compared to the previous corresponding period, passenger traffic declined 2.8 percent to 103.9 million (2009: 106.9 million). Year on year performance reflects a number of exceptional events including closure of airspace due to volcanic ash, airline industrial action affecting the various Group airports and severe winter weather. Adjusting for these factors, the Group's traffic is estimated to have increased by up to 0.6 percent.

BAA's revenue from continuing operations for the year ended 31 December 2010 increased 4.6 percent to £2,312 million (2009: £2,210 million). This reflects a 1.7 percent increase in aeronautical income, a 7.3 percent increase in gross retail income and a 9.4 percent increase in other income. Adjusted EBITDA for the Group's continuing operations increased 9.1 percent to £1,082 million, driven mainly by increases in aeronautical, retail and other income partially offset by a marginal increase in operating costs. Capital expenditure for continuing operations was £887 million, of which £819 million was spent at Heathrow.

During the first half of the calendar year, significant progress was made in extending BAA's debt maturities. Approximately £2.0 billion was raised through five major financings including a £625 million four-year Class B loan facility, a £400 million eight-year Class B bond issue and a €500 million six-year Class A bond issue. During the second half of the calendar year BAA refinanced its £1.57 billion junior debt facility, which was due to mature in April 2011, with a combination of cash on hand and new bond and loan issuance, thereby reducing refinancing risk.

In October 2010, BAA announced the sale of its 65 percent stake in Naples Airport to F2i SGR SpA, an Italian Infrastructure fund, for €147 million, implying an enterprise value to EBITDA multiple of approximately 13 times. The sale was in line with BAA's strategy of focusing on its core UK airports. The net proceeds from this disposal were largely used to reduce the Group's debt.

In July 2011, the Competition Commission confirmed that BAA will be required to sell Stansted Airport followed by Edinburgh or Glasgow airport. This follows a preliminary decision by the Competition Commission in March 2011 to uphold its original decision to force the divestitures.

Subsequent to the end of TIF's financial year, BAA offered to prepay all investors (each pro rata to its commitments) capitalised interest equivalent to approximately 5.9 percent of the total Toggle Facility principal and interest outstanding (as at 31 December 2010). The prepayment is the result of a deferred payment relating to BAA's 2007 disposal of Budapest Airport. TIF accepted its share of this prepayment. At 31 December 2010, the ratio of total net debt to BAA's adjusted regulatory asset base (RAB) decreased, improving covenant headroom relative to the prior corresponding period.

Performance outlook

The outlook for BAA remains positive given ownership of Heathrow Airport, the largest London regulated airport, the successful refinancing of its debt facilities, improved passenger traffic and robust operating performance. The Toggle Facility is expected to capitalise as anticipated.

BAA
Financial and operational performance

*CAGR: Compound Annual Growth Rate.
(1) Passenger traffic and net income from 2007 onwards is adjusted to exclude businesses sold in 2007 and 2008 such as World Duty Free, commercial property interests, Budapest Airport and certain Australian airports and is stated before exceptional items and certain re-measurements.
(2) Figures include passengers, revenues and net income for Gatwick Airport only for the period up until its divestment in October 2009.
(3) 2005 to 2007 Adjusted Operating profit. 2008 to 2009 Adjusted EBITDA.