Last checked at 16 Jun 2020 14:07
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014
Heathrow Finance plc
(incorporated with limited liability under the laws of England and Wales)
(formerly BAA (SH) plc)
announces Consent Solicitationin respect of its Notes
16 June 2020. Heathrow Finance plc (the Issuer) announces today separate invitations (together the Consent Solicitation) to Noteholders of each class of notes described in the table below (together the Notes and each class of the Notes a Class) to consent to certain amendments and waivers with respect to the terms and conditions of each Class, as proposed by the Issuer (each a Proposal and together the Proposals) for approval by an Extraordinary Resolution at separate meetings (including any adjourned such meetings) of the holders of each Class (each a Meeting and together the Meetings), all as further described below.
Capitalised terms used in this announcement and not defined herein have the meanings given to such terms in the consent solicitation memorandum dated 16 June 2020 prepared by the Issuer in connection with the Consent Solicitation (the Consent Solicitation Memorandum).
Background
The COVID-19 outbreak represents a seismic challenge for the aviation industry, including Heathrow. Governments around the world have introduced restrictions on travel. In response to the COVID-19 pandemic, the Foreign & Commonwealth Office has issued guidance advising UK citizens against all but essential international travel indefinitely, followed by the UK Government introducing a stricter more general "lockdown" of people's movements which has been in place since 23 March 2020. The UK Government has imposed quarantine measures on arrivals into the United Kingdom to help prevent the spread of COVID-19, effective from 8 June 2020. It is unclear for how long all or any of these measures will be in place.
As explained more fully in the Consent Solicitation Memorandum, these measures have had a significant impact on Heathrow. Passenger numbers have fallen significantly, with a 96.6 per cent. decrease in passenger numbers in May 2020, with just over 225,000 passengers using the airport in the entire month (being the same number usually supported in one day in pre-lockdown times). Passenger demand is expected to remain weak until governments around the world deem it safe to lift travel restrictions and quarantine measures and withdraw guidance advising against all but essential international travel. As a consequence, passenger traffic is not expected to return to pre-COVID-19 levels until after 2022. The reduction in passenger numbers has had a negative effect on the revenue of the Group. As a consequence, the Group has considered the potential impact of COVID-19 on cash flow and liquidity over the next 12 to 18 months and the corresponding impact on the covenants associated with the Issuer's financial arrangements.
Whilst the Group could not have predicted the COVID-19 pandemic, it has been taking steps over the past decade to reinforce the financial resilience of the business should the unexpected happen. Despite its strength, the Group is not immune to this crisis. The Group has taken steps to significantly reduce its monthly cash burn and is acting responsibly to adapt, transform and rethink its business to continue providing a highly competitive offer to consumers and investors:
· the Group has taken action at an operational level such as cancelling executive pay, reducing pay across the company, restructuring the organisation, renegotiating many of its suppliers' contracts and consolidating its operations into a smaller footprint;
· the Group has proactively taken steps to reduce and defer its capital expenditure in order to preserve cash and prioritise liquidity for its debt investors which has led to a reduction in the Group's RAB; and
· under its forecast traffic scenario, the Group estimates its liquidity horizon to extend well into 2022. By 30 June 2020, the Issuer itself expects to have £442 million of cash available to it, which is sufficient to service its debt for the next 4 years without having to rely on funds being upstreamed from Heathrow Airport Limited. In addition, none of the Issuer's debt is due to mature until 2024.
Further details (including forecasts and cashflow projections) are set out in the investor report published on 16 June 2020 (the Investor Report), which can be found here: https://www.heathrow.com/company/investor-centre/reports/investor-reports.
The proposed amendments and waivers
As a result of the significant reduction in passenger demand, and temporary reduction in revenue that arises as a result of COVID-19, the Issuer is currently forecasting that, if the Group does not take any mitigating actions in the coming months, it will not be able to meet the HFP Group Covenants in respect of the Financial Year ending 31 December 2020 when tested in June 2021. Furthermore, it may not be able to meet the Group RAR covenant for the Financial Year ending 31 December 2021 (being the end of the current Regulatory Period) when it falls to be tested in June 2022.
The Issuer is therefore seeking a waiver of any Event of Default that would arise from its breach of the Group ICR covenant in relation to the Financial Year ending 31 December 2020 as reported in the Compliance Certificate to be delivered by the Issuer to the Trustee on or before the Compliance Reporting Date in June 2021.
In order to prevent a potential breach of the Group RAR covenant on the Relevant Testing Dates occurring on 31 December 2020 and 31 December 2021, the Issuer is seeking to amend the Group RAR covenant from 92.5 per cent to 95 per cent for the Relevant Testing Date occurring on 31 December 2020 and 93.5 per cent. for the Relevant Testing Date occurring on 31 December 2021.
As a demonstration of commitment from the Group and its shareholders, to the creditors, the Issuer is proposing to make the following amendments to the current Conditions of the Notes in consideration of Noteholders agreeing to the above amendments and waivers: (i) a prohibition on dividend payments from being made by the Issuer which will apply for the duration of the Waiver Period or, if later, the date on which the Month-End Group RAR is not greater than 87.5 per cent.; (ii) the introduction of a minimum liquidity covenant requiring the Issuer to have at least £200 million of liquidity in cash and cash equivalent investments which broadly equates to 24 months' of interest on its Permitted Financial Indebtedness, to be tested on the last day of each quarter commencing on the first quarter end date after the Implementation Date until the end of the Waiver Period; and (iii) the introduction of an additional Group RAR covenant requiring the Issuer to ensure that Group RAR is not greater than 95 per cent. and 92.5 per cent. as tested on 30 June 2021 and 30 June 2022 respectively, and reported by no later than 30 September 2021 and 30 September 2022 respectively.
In further consideration of Noteholders agreeing to the above amendments and waivers, the Issuer is proposing to offer Noteholders a coupon step-up of up to 0.75 per cent. per annum contingent upon the occurrence of certain trigger events. A coupon step-up of 0.25 per cent. per annum on each Class of Notes shall come into effect on the Implementation Date and apply until the end of the Interest Period in which the Waiver Period End Date occurs. The Issuer would also like to offer Noteholders a further coupon step-up of 0.25 per cent. per annum on each Class of Notes which shall come into effect if, during the Waiver Period, the Group RAR as stated in the quarterly, semi-annual or annual consolidated financial results of Heathrow (SP) exceeds 92.5 per cent. The Group remains committed to the pre-COVID credit ratings and is working with the Rating Agencies to restore these credit ratings as soon as practicable. To mitigate against any potential deterioration of credit ratings, the Issuer would like to offer Noteholders a coupon step-up of 0.25 per cent. per annum on each Class of Notes which shall come into effect if during the Waiver Period, the rating of any Class of Notes is downgraded below Ba3 or BB- rating by any Rating Agency or any such rating is withdrawn.
Impact of COVID-19 on the Heathrow (SP) Group Financing
This unprecedented crisis will also impact the Heathrow (SP) Group financing in respect of its Interest Coverage Trigger Event Ratio Levels when tested on or before 30 June 2020. Heathrow expects that the forecast Senior ICR and Junior ICR for the year ending 31 December 2020 will fall below the Senior ICR and Junior ICR Trigger Event Levels. As a result, a Trigger Event will occur under the Heathrow (SP) Group financing. The Trigger Event will be remedied if the Senior ICR and the Junior ICR (measured on a backward-looking and forward-looking basis by reference to each Financial Year) are equal to or greater than 1.40 and 1.20 respectively, on the most recently occurring Calculation Date. The Heathrow (SP) Group is taking steps to strengthen its financial ratios. Until such Trigger Event has been addressed, the Heathrow (SP) Group cannot make any Restricted Payments. As detailed further above, by 30 June 2020, the Issuer expects to have £442 million of cash available to it and is not relying on funds being upstreamed from Heathrow to it. More broadly, the Group has £3.0 billion of cash and committed facilities available to the business, designed to maintain at least a 12-month liquidity horizon even under the extreme stress-test of no revenues. As noted in the Investor Report, no default is expected with respect to the Heathrow (SP) Group financing.
Consent fee
In accordance with the terms in the Consent Solicitation Memorandum, each Noteholder from whom a valid Consent Instruction in respect of the relevant Extraordinary Resolution (irrespective of whether such Noteholder votes in favour or against the Extraordinary Resolution) is received by the Tabulation Agent by 4:00 p.m. (London time) on 29 June 2020 (such time and date with respect to each relevant Class, as the same may be extended, the Consent Fee Deadline) will be eligible to receive payment of an amount equal to 0.125 per cent. in respect of the Notes that are the subject of such Consent Instruction (the Consent Fee).
Noteholders may continue to submit Consent Instructions after the Consent Fee Deadline and up to the Expiration Deadline (in favour or against the Extraordinary Resolution), but any Noteholder from whom a valid Consent Instruction is received after the Consent Fee Deadline will not be eligible to receive the Consent Fee. Payment of the Consent Fee in relation to a Class is conditional on the satisfaction of the Consent Conditions in respect of such Class.
Review by a group of Noteholders
The Issuer understands that currently the Investment Association is not available to assist with the convening of meetings with holders of notes in relation to consent solicitation processes. Accordingly, the Issuer decided to wall-cross a number of Noteholders from each Class prior to the launch of this Consent Solicitation and invited them to consider the Proposals described in this Consent Solicitation Memorandum. Such Noteholders, who hold in aggregate approximately 41.38 per cent. of the outstanding principal amount of the HFP 2024 Notes, approximately 24.59 per cent. of the outstanding principal amount of the HFP 2025 Notes, approximately 42.68 per cent. of the outstanding principal amount of the HFP 2027 Notes and approximately 50.90 per cent. of the outstanding principal amount of the HFP 2029 Notes, (and collectively, Noteholders who hold in aggregate approximately 40.50 per cent. of the outstanding principal amount of the Notes) have examined the Proposals and have informed the Issuer that they find the Proposals acceptable and that, subject to client and other approvals, they intend to vote in favour of the Proposals in respect of their holdings of Notes.
The position above in relation to the review by a group of Noteholders relates only to the proposals set out in the Consent Solicitation Memorandum and not to any future offers or proposals which the Issuer may make. Noteholders should, however, nonetheless undertake their own detailed assessment of the relevant proposals.
Review by other creditors of the Issuer
The Issuer has engaged with the lenders and investors which are party to the agreements documenting the Issuer's other Permitted Borrower Debt with a view to implementing amendments to, and waivers of, the financial covenants included in the terms of such Permitted Borrower Debt on the same terms as the Proposals (the PBD Proposals). Such lenders and investors have reviewed the PBD Proposals and, as of the date of the Consent Solicitation Memorandum, lenders and investors representing approximately 85.42 per cent. of the aggregate principal amount of the Issuer's Permitted Borrower Debt (excluding the Notes) have informed the Issuer that they find the amendments and waivers acceptable and that, subject to final credit and/or investment committee approvals, they intend to approve the PBD Proposals in respect of their facilities.
Overall creditor support
Taking into account the position above in relation to the review by a group of Noteholders and the support from other lenders and investors of the Issuer, as of the date of the Consent Solicitation Memorandum, approximately 65.32 per cent. of the aggregate principal amount of all of the Issuer's Permitted Borrower Debt (including the Notes) have indicated that subject to client, credit or investment committee or other approvals, they intend to approve the Proposals or the PBD Proposals (as applicable).
Consent Solicitation Memorandum
This announcement does not contain the full terms and conditions of the Consent Solicitation, which are contained in the Consent Solicitation Memorandum. Subject to the restrictions described under "Solicitation and Distribution Restrictions" below, Noteholders may obtain a copy of the Consent Solicitation Memorandum from the Tabulation Agent, the contact details for which are set out below. Noteholders are advised to carefully read the Consent Solicitation Memorandum before any decision is made with respect to the Consent Solicitation.
Timetable for this Consent Solicitation
Set out below is an indicative timetable showing one possible outcome for the timing of the Consent Solicitation, which will depend, among other things, on timely receipt (and non-revocation) of Consent Instructions, the rights of the Issuer (where applicable) to extend, waive any condition of, amend and/or terminate the Consent Solicitation (other than the terms of any Extraordinary Resolution) as described in the Consent Solicitation Memorandum and the passing of each Extraordinary Resolution (and satisfaction of the Consent Conditions) at the initial Meeting for the relevant Class. Accordingly, the actual timetable may differ significantly from the timetable below.
Announcement of Consent Solicitation | |
Announcement of Consent Solicitation via the RNS. Notice of Meetings delivered to Clearing Systems for communication to Direct Participants. | 16 June 2020 |
Copies of the Consent Solicitation Memorandum and documents referred to under "General" in the Notice to be made available from the Tabulation Agent (copies of which are obtainable by Noteholders upon request, free of charge). |
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Consent Fee Deadline |
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Deadline for receipt by the Tabulation Agent of valid Consent Instructions in favour or against the relevant Extraordinary Resolution from Noteholders for such Noteholders to be eligible to receive the Consent Fee. | 4:00 p.m. (London time) on 29 June 2020 |
Expiration Deadline |
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Final deadline for receipt by the Tabulation Agent of valid Consent Instructions in respect of the relevant Extraordinary Resolution from Noteholders and to be represented at the Meetings, to the extent such Noteholders have not submitted valid Consent Instructions prior to the Consent Fee Deadline. | 10:00 a.m. (London time) on 7 July 2020 |
This will also be the deadline for making any other arrangements to attend or be represented or to vote at any Meeting. However Noteholders making such other arrangements or submitting consent instructions after the Consent Fee Deadline will not be eligible to receive the Consent Fee. |
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Meetings | |
Subject to "The Meeting may not be a physical meeting" below, Meetings to be held at the offices of Freshfields Bruckhaus Deringer LLP, 65 Fleet Street, London EC4Y 1HS. The initial Meeting (in respect of the HFP 2024 Notes) will commence at 10.00 a.m. (London), with subsequent Meetings in respect of each other Class (in the order each Class is listed in the table on page 4 of this Consent Solicitation Memorandum) being held at 10 minute intervals thereafter or after the completion of the preceding Meeting (whichever is later). | From 10:00 a.m. (London time) on 8 July 2020 |
Announcement of results of Meetings and satisfaction of Consent Conditions |
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Announcement via the RNS of the results of the Meetings and, if any Extraordinary Resolution is passed, whether the Consent Conditions in respect of such Class have been satisfied or not. Notice to be given to Noteholders through the Clearing Systems for communication to Direct Participants. | As soon as reasonably practicable after the Meetings |
Payment Date |
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If the Consent Conditions are satisfied, payment of the Consent Fee to the relevant Noteholders. | Expected to be 15 July 2020 and in any event, no later than 5 Business Days following the date on which the Consent Conditions in respect of such Class have been satisfied. |
THE NOTES
No. | Issuer | Description of the Notes | ISIN | Outstandingprincipal amount | Notes |
1. | Heathrow Finance plc | GBP300M 4.75% Senior Secured Notes due 2024 | XS1904681944 | £300,000,000 | HFP 2024 Notes |
2. | Heathrow Finance plc | GBP250M 5.75% Senior Secured Notes due 2025 | XS1120937617 | £250,000,000 | HFP 2025 Notes |
3. | Heathrow Finance plc | GBP275M 3.875% Senior Secured Notes due 2027 | XS1622694617 | £275,000,000 | HFP 2027 Notes |
4. | Heathrow Finance plc | GBP300M 4.125% Senior Secured Notes due 2029 | XS2081020872 | £300,000,000 | HFP 2029 Notes |
Terms of the Consent Solicitation
Noteholders should note that if an Extraordinary Resolution is passed and the Consent Conditions are satisfied, the terms of the Extraordinary Resolution will be binding on all Noteholders of the relevant Class, whether or not they choose to participate in the Consent Solicitation or otherwise vote at the Meeting.
If an Extraordinary Resolution is passed at the relevant Meeting in respect of any Class and the Consent Conditions in respect of such Class are satisfied, the Issuer will announce the effective date for implementation of the Proposals in respect of such Class as soon as reasonably practicable after the Meeting.
Noteholders are advised to review the relevant Supplemental Trust Deed relating to the relevant Class, which sets out the proposed amendments to the Conditions and is available from the date of the relevant meeting Notice to the conclusion of the Meetings (or any adjourned Meetings).
Meetings
At each Meeting, Noteholders will be invited to consider and, if thought fit, approve the Extraordinary Resolution relating to the relevant Class, with any implementation of that Extraordinary Resolution being subject to the satisfaction of the Consent Conditions (as described below) relating to that Extraordinary Resolution, all as more fully described in the relevant Notice.
In accordance with the procedures for participating in the Consent Solicitation and at the Meetings each Noteholder must make certain confirmations in order to participate in the Consent Solicitation or otherwise participate at the relevant Meeting. A Consent Instruction which does not include such confirmations will be treated as not having been validly submitted and will be rejected.
The Meeting may not be a physical meeting
In light of ongoing developments in relation to the COVID-19 pandemic, it may be impossible or inadvisable to hold a physical Meeting. In that event, the Issuer and the Trustee may prescribe further or alternative regulations regarding the holding of the relevant Meeting, which may include holding the Meeting by audio or video conference call. In such circumstances, those Noteholders who have indicated that they wish to attend the relevant Meeting in person will be provided with further details about attending the relevant Meeting.
The Consent Conditions
The implementation of each of the Proposals in respect of a Class and the related Extraordinary Resolution will be conditional on:
(a) the passing of the relevant Extraordinary Resolution in respect of that Class; and
(b) the execution of the relevant Supplemental Trust Deed by the relevant parties,
((a) and (b) together, the Consent Conditions).
If the necessary quorum for any Extraordinary Resolution is not obtained, the relevant Meeting will be adjourned and the adjourned Meeting held at such time as will be notified to Noteholders of the relevant Class in accordance with the relevant Conditions and the relevant Meeting Provisions. If the Extraordinary Resolution is passed at the adjourned such Meeting, the relevant amendments and waivers in respect of the Conditions and the Trust Deed in respect of such Class described in the Consent Solicitation Memorandum will be implemented as soon as reasonably practicable after such adjourned Meeting and insofar as the Consent Conditions in respect of such Class are satisfied.
Noteholders are advised to check with any bank, securities broker or other intermediary through which they hold their Notes when such intermediary would need to receive instructions from a Noteholder in order for such Noteholder to participate in, or (in the limited circumstances in which revocation is permitted) validly revoke their instruction to participate in, the Consent Solicitation and/or the relevant Meeting(s) by the deadlines specified above. The deadlines set by any such intermediary and any applicable Clearing System for the submission and (in the limited circumstances in which revocation is permitted) revocation of Consent Instructions will be earlier than the relevant deadlines above.
Unless stated otherwise, all announcements in connection with the Consent Solicitation will be made by the Issuer by delivery of a notice to the Clearing Systems for communication to Direct Participants and by publication on the website of the London Stock Exchange. Such announcements may also be made on the relevant Reuters Insider screen page and/or by the issue of a press release to a Notifying News Service. Copies of all announcements, notices and press releases can also be obtained from the Tabulation Agent, the contact details for which appear on the last page of the Consent Solicitation Memorandum. Significant delays may be experienced where notices are delivered to the relevant Clearing Systems and Noteholders are urged to contact the Tabulation Agent for the relevant announcements during the course of the Consent Solicitation. In addition, Noteholders may contact any of the Solicitation Agents for information using the contact details on the last page of the Consent Solicitation Memorandum.
Noteholders are advised to read the Consent Solicitation Memorandum carefully for full details of, and information on the procedures for participating in, the Consent Solicitation.
HSBC Bank plc or J.P. Morgan Securities plc are acting as Solicitation Agents and Lucid Issuer Services Limited is acting as Tabulation Agent.
Questions and requests for assistance in connection with the Consent Solicitation may be directed to the Solicitation Agents:
SOLICITATION AGENTS | |
HSBC Bank plc8 Canada SquareCanary WharfLondon E14 5HQUnited Kingdom Telephone: +44 (0) 20 7992 6237Attention: Liability Management GroupEmail: LM_EMEA@hsbc.com
| J.P. Morgan Securities plc25 Bank StreetLondon E14 5JPUnited KingdomTelephone: +44 2071344353 Attention: Liability ManagementEmail: liability_management_EMEA@jpmorgan.com |
Questions and requests for assistance in connection with the delivery of a Consent Instruction may be directed to the Tabulation Agent:
TABULATION AGENT |
Lucid Issuer Services Limited Tankerton Works 12 Argyle Walk London WC1H 8HA United Kingdom Telephone: +44 207 704 0880 Attention: Arlind Bytyqi Email: heathrow@lucid-is.com |
This announcement is released by Heathrow Finance plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR), encompassing information relating to the Consent Solicitation and the Proposals described above. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/155, this announcement is made by Sally Ding, Director of Treasury and Corporate Finance.
DISCLAIMER This announcement must be read in conjunction with the Consent Solicitation Memorandum. The Consent Solicitation Memorandum contains important information which should be read carefully before any decision is made with respect to the Consent Solicitation. If any Noteholder is in any doubt as to the action it should take or is unsure of the impact of the implementation of any Extraordinary Resolution, it is recommended to seek its own financial and legal advice, including in respect of any tax consequences, immediately from its broker, bank manager, solicitor, accountant or other independent financial, tax or legal adviser. Any individual or company whose Notes are held on its behalf by a broker, dealer, bank, custodian, trust company or other nominee or intermediary must contact such entity if it wishes to participate in the Consent Solicitation or otherwise participate at any Meeting. None of the Issuer, the Solicitation Agents, the Tabulation Agent or the Trustee expresses any opinion about the terms of the Consent Solicitation or the Extraordinary Resolutions or makes any recommendation whether Noteholders should participate in the Consent Solicitation or otherwise participate at the Meeting(s) applicable to them.
SOLICITATION AND DISTRIBUTION RESTRICTIONS
General
The distribution of this announcement and/or the Consent Solicitation Memorandum in certain jurisdictions may be restricted by law, and persons into whose possession this announcement and/or the Consent Solicitation Memorandum comes are required to inform themselves about, and to observe, any such restrictions. Nothing in this electronic transmission constitutes an offer to buy or the solicitation of an offer to sell securities in any jurisdiction in which such offer or solicitation would be unlawful.
Nothing in this announcement or the Consent Solicitation Memorandum constitutes or contemplates an offer of, an offer to purchase or the solicitation of an offer to sell any security in any jurisdiction and participation in the Consent Solicitation by a Noteholder in any circumstances in which such participation is unlawful will not be accepted.