BAA ‘will struggle to get top airport prices’
26.04.08
BAA will struggle to get a premium price if it is forced to sell any of its airports in a hurry, especially one the size of Gatwick, Reuters reports. A weak financial climate and uncertainties surrounding the UK regulatory regime for airports could weigh down the sale price, fund managers and analysts told the news agency.
The Competition Commission said earlier this week the BAA's ownership of seven UK airports was not in the interests of passengers or airlines. It was particularly critical of BAA's ownership of three London airports (Heathrow, Gatwick and Stansted) and two lowland Scottish airports (Edinburgh and Glasgow). Its ruling at the end of the year could see the airports operator order to sell one or more hubs, with Gatwick and Glasgow seen as the most likely candidates for disposal.
However, Hamish Mackenzie, managing director and head of acquisitions for the £2.1 billion RREEF infrastructure fund, told Reuters: 'Glasgow you could finance because you would be looking for roughly 60% of debt to equity. £500 to £600 million is financeable.'
‘But if you are looking at Gatwick, which might be up to £3 billion , you would be looking at around £1.5 to £2 billion of debt. In the current environment that would be pretty challenging, given the number of banks that are essentially closed for business.'
ABN AMRO analyst Andrew Lobbenberg said attracting investor appetite should not be a problem if the sale process does start, pointing out the current interest in both Prague airport and Chicago Midway, which attracted six bidding teams earlier this month. But he said another complication is uncertainty surrounding the UK airport regulatory regime.
The Civil Aviation Authority (CAA) currently sets price caps on how much BAA can charge the airlines for using its London airports, but has little power to intervene on operational issues. Following the Competition Commission's acknowledgement that the CAA may be too 'light touch' to make a difference, the Transport Secretary Ruth Kelly launched a review of the system.
Mr Lobbenberg told Reuters: ‘The situation is complicated by the regulatory regime. It is somewhat up in the air. Can you find someone to buy on a punt?’ He added that, although BAA may not be short of suitors, under current circumstances it will not be an easy process, and it may have to settle for a lower price tag than it would like.
Add to: del.icio.us | Digg it | Newsvine | NowPublic | Reddit
