Investors are holding off buying bonds in British airports operator BAA due to uncertainties about the sale of London Gatwick airport, as the company said its debt level would not fall as quickly as previously expected.
The sale of Gatwick, which may raise up to GBP1.5 billion pounds (USD$2.4 billion), had been expected in the first half of this year but BAA said it should now complete by October.
The proceeds of the disposal will be used to repay part of the company's debt maturing in 2010.
"Bond investors are delaying buying into BAA bonds because of the uncertainty around the Gatwick sale," said one credit analyst, who declined to be named.
"The fact that BAA has not sold Gatwick does not make the balance sheet much worse, but it does stop it getting better," said a second credit analyst.
BAA, majority owned by Spain's Ferrovial, expects total debt to be GBP8.7 billion at the end of 2009, GBP400 million more than previously expected, but down from GBP9.3 billion in 2008.
The forecast includes proceeds from the planned Gatwick sale although BAA is currently appealing a Competition Commission ruling that it must sell that airport and two others.
The first credit analyst thought the Gatwick sale would go through shortly and so BAA bonds were "cheap". The bonds are currently trading at around 75 percent of face value.
"The timing of events has not been kind to BAA but many people's perception of the company is too harsh," he said.
BAA said that the higher level of debt in Friday's forecast was not linked to Gatwick's shrinking price tag.
"There are other significant moving parts, such as the level of capex, which have not been disclosed," a BAA spokesman said.
FEWER PASSENGERS, MORE TURNOVER
BAA said fewer passengers passed through its airports in the first quarter but revenues rose due to higher aeronautical income, such as landing charges, and retail income.
The company now expects 117.7 million passengers will pass through its airports this year, down from December's forecast of 119.8 million.
In the first quarter turnover increased to GBP522 million, up from GBP452 million in the same period in 2008.
BAA raised its forecast for revenue and adjusted core earnings this year, as the delayed Gatwick sale will lead to an three extra months of contributions from the airport.
The forecasts for earnings were "pretty positive for the economic climate", the second credit analyst said.
Revenue this year is now seen at GBP2.3 billion, while adjusted earnings before interest, tax, depreciation and amortization (EBITDA) are expected to be just over GBP1.02 billion versus a previous forecast of GBP974 million.
The company, which also owns Heathrow, Stansted, Glasgow and Edinburgh airports, said forecast capital expenditure for this year was unchanged at GBP1.2 billion.
