BAA Toggle Facility

BAA plc is one of the world's leading international airport operators and owner of seven UK airports, including the three London price regulated airports of Heathrow, Gatwick and Stansted. Over 144 million passengers passed through BAA's UK airports during the year ended 31 March 2006. BAA also owns or operates airports outside the UK.

During 2007 financial year, The Infrastructure Fund (TIF) acquired £11.7 million face value in the BAA Toggle Facility (BAA Toggle) arranged to part fund the acquisition of BAA by Airport Development and Investment (Holdings) Limited (ADI) in two separate transactions. The ADI consortium consists of Spanish construction and infrastructure group, Ferrovial Infraestructuras, 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.

The BAA Toggle is a perpetual hybrid security which pays an interest margin of 6.9 percent per annum over the London Interbank Offered Rate (LIBOR). The interest margin will increase by 1.0 percent per annum in each year from the 20th anniversary. Should repayment occur prior to year seven, a premium may be payable depending on the nature of the prepayment triggered. The BAA Toggle is a cash pay instrument with the ability to defer interest payments under certain events.

In February 2007, BAA announced its results for the nine months to 31 December 2006. Results relating to Budapest Airport were excluded to enable a comparison with the prior corresponding period. Group passengers increased by 3.0 percent to 120.5 million, group revenue increased by 6.4 percent to £1,833 million and group operating profit increased by 0.5 percent to £577 million. BAA incurred net exceptional items of £100 million for the period, with bid advisory costs (£45 million) and reorganisation costs (£22 million) the main contributors.

In April 2007, the Office of Fair Trading (OFT) made a reference to the UK Competition Commission for an investigation into the supply of airport services by BAA within the UK. The OFT based its decision on several structural features which it suspects are adversely affecting competition between airports in the South East of England and Lowland Scotland. BAA has objected to the terms of the OFT's referral, but it has stated that it accepts the need to review the structure of the airport market in the UK.

In May 2007, a consortium led by HOCHTIEF signed a contract with BAA to acquire its stake in Budapest Airport. The total sale price of €1.9 billion will be received in two instalments; €1.5 billion was received following financial close and the balance is due in 2011. The majority of the proceeds were used to repay senior debt. The remaining 15 percent was offered to investors to repay part of the BAA Toggle at par. All BAA Toggle investors declined the offer.

BAA Toggle Facility
Financial and operational performance

* CAGR: Compound Annual Growth Rate