InfraNews Case Study: BAA Broadens its Investor Base with Inaugural US Dollar Bond
The BAA funding securitisation vehicle, set up by the Ferrovial-led Airport Development and Investment (ADI) consortium in August 2008 to refinance its GBP10.3bn acquisition of the company two years earlier, has now issued significant volumes of capital markets debt in its three important target currencies – sterling, euros and US dollars.
“The key reasons for issuing in dollars are to further diversify our funding sources and to have access to the deepest capital market in the world,” explained Andrew Efiong, BAA’s head of debt investor relations. “We’re a major bond issuer in the global markets by any yardstick, and it is important for us to have the option to fund in as many different currencies as possible.”
While the sterling, euro and US dollar markets will continue to provide the bulk of BAA’s financing requirements in future, Efiong added that the company may explore other possibilities in the future. “Clearly there are a number of other vibrant and viable bond markets in which we could issue going forward.”
Widening Corporate Spreads
Although the pricing on the 10-year bond, at 200bps over the benchmark 3.125% US Treasury due May 2021, was higher than the company and its bookrunners – Bankia, BBVA, BNP Paribas, Citigroup, Crédit Agricole, HSBC, RBC Capital Markets, RBS and Santander – would have been expecting a month earlier, this reflected the general market retreat in response to heightened fears about the eurozone sovereign crisis rather than any specific concerns about the BAA transaction.
“Corporate spreads had widened by some 10bps-15bps in a short time during a period of volatility that coincided with their planned launch,” commented Katrina Haley, head of structured bonds for EMEA at HSBC. She added that the impact on the overall cost of funding for BAA had been less significant, as the yield on the 10-year US Treasury had tightened, and the company had been pleased with the overall outcome.
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