Banks Prepare Ferrovial BAA Stake Sale

November 26, 2010

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Spanish group Ferrovial has hired Goldman Sachs and HSBC to sell a 10 percent stake in BAA, Britain's largest airport operator, and the sale will begin next week, people familiar with the matter said.

The infrastructure group owns 55.9 percent of BAA, the operator of airports including London's Heathrow and Stansted. It announced the stake sale in October.

Analysts estimated the stake could fetch up to EUR€200 million (USD$265 million). By reducing its stake below a majority, Ferrovial will no longer need to consolidate the subsidiary's debt on its own balance sheet, which will more than halve its EUR€24.5 billion debt pile.

BAA, Ferrovial and Goldman Sachs declined to comment. HSBC did not respond to a request for comment.

BAA's current minority owners are Britannia Airport Partners, managed by Canada's Caisse de depot et placement du Quebec, which owns 26.5 percent, and Singapore's biggest sovereign wealth fund GIC with 17.6 percent.

The sale is likely to follow a standard auction format, lasting a few months and with two rounds of bidding.

BREAK-UP ORDER

In the coming days Ferrovial's banks will start to contact a wide range of potential buyers, some of the people said.

These are likely to include pension and infrastructure funds from Canada, Australia and Europe, and sovereign wealth funds -- all types of investor that have shown interest in owning airport stakes.

For example, Global Infrastructure Partners bought Gatwick airport from BAA last year. GIP later sold stakes to the Abu Dhabi Investment Authority (Adia), South Korea's National Pension Service (NPS), and California Public Employees' Retirement System (Calpers).

Last year the Competition Commission ordered BAA to sell Stansted and either Glasgow or Edinburgh airport, a decision BAA is still appealing. The commission asked for fresh feedback last week and said it could extend the break-up's timetable.

A pick-up in business flights at Heathrow, London's busiest airport, has helped stem losses at BAA. Pre-tax losses for the first nine months of this year shrunk by three-quarters to GBP£193 million (USD$301 million), as revenues rose 4.4 percent to GBP£1.54 billion.

(Reuters)