Heathrow6.45% S Regulatory News (88BX)

20 December 2018

Heathrow Funding Limited

Heathrow Finance plc

Publication of December 2018 Investor Report

On behalf of Heathrow Airport Limited, Heathrow Express Operating Company Limited, Heathrow (AH) Limited and Heathrow (SP) Limited, LHR Airports Limited (as 'Security Group Agent') is today distributing its semi-annual Investor Report to various parties pursuant to the terms of the Common Terms Agreement entered into on 18 August 2008.

The Investor Report is also being distributed by the Security Group Agent and Heathrow Finance plc to various parties pursuant to Heathrow Finance plc's £275 million 5.375% Senior Secured Notes dated 10 December 2012 and due 2019, £250 million 5.75% Senior Secured Notes dated 13 October 2014 and due 2025, £275 million 3.875% Senior Secured Notes dated 5 June 2017 and due 2027 and the £300 million 4.75% Senior Secured Notes dated 31 October 2018 and due 2024 (the 'Heathrow Finance Bonds') and pursuant to Heathrow Finance plc's Facilities Agreements dated 15 December 2014, 10 February 2016, 5 October 2016, 14 September 2018, 22 November 2018 and 23 November 2018 (the 'Heathrow Finance Facilities Agreements').

The Investor Report contains information relevant to creditors of both Heathrow (SP) Limited (and its subsidiaries) and Heathrow Finance plc.

The attention of potential readers of the Investor Report is drawn to page 2 of the document which contains an Important Notice, including in relation to certain forward-looking statements included in the Investor Report, and contains a description of the basis on which the operational and financial information included in the document has been prepared.

The Investor Report includes 2018 and 2019 forecasts for the financial performance of Heathrow (SP) Limited prepared on a consolidated basis, forecast nominal debt and financial ratios for Heathrow (SP) Limited and Heathrow Finance plc. Heathrow (SP) Limited, through its indirect subsidiary, Heathrow Airport Limited, owns Heathrow airport.

Heathrow (SP) Limited's latest formal forecast for financial performance for the year ending 31 December 2018 indicates that Adjusted EBITDA(1) will be £1,825 million, an increase from £1,816 million included in the previous Investor Report published in June 2018. The increase in 2018 is driven by a revised traffic forecast for the year of 79.9 million passengers compared to 79.0 million in the previous Investor Report as well as excellent retail performance.

Heathrow (SP) Limited's forecast Adjusted EBITDA(1) for 2019 is £1,885 million up 3.3% on 2018. This is driven by traffic growth and an increase in the maximum allowable yield in 2019 to £22.91, a 4% increase on 2018. On top of this, we have included in our forecast a prudent contingency allowance for potential stress-test associated with Brexit. Inclusive of the BREXIT contingency, our forecast Adjusted EBITDA(1) reduces to £1,771 million, a decline of 3% on 2018. Since internal approval of this budget, we have been very encouraged that the EU and UK Governments have clarified that flights will continue and passengers will be able to fly even if the Withdrawal Agreement is not executed. In addition, the U.K. has also announced Air Service Agreements with key markets such as the U.S. While we hope that this contingency will prove to be too prudent, we believe it is right to leave it in given the ongoing uncertainty over Brexit. All forecast ratios have been calculated inclusive of this allowance. Despite this, S&P Global Ratings recently affirmed our Class A and Class B issue credit ratings but revised the outlook to negative. Although S&P Global Ratings recognises our resilience, the negative outlook reflects the operational and financial risks related to the uncertainties surrounding the future U.K.- E.U relationship. It is disappointing that S&P Global Ratings have given no credit to potential mitigating actions such as a more moderate dividend policy or drawing of subordinated debt already available in the group, mitigations that are capable to absorb the impact factored in S&P Global Ratings worst-case. We remain confident that we can manage our financial position through BREXIT to meet S&P Global Ratings requirements to return to a stable outlook as soon as possible.

The Investor Report document is available in pdf format at the following link:

https://www.heathrow.com/company/investor-centre/reporting/investor-reports

The Investor Report is available from today via the Heathrow Investor Centre at www.heathrow.com/company/investor-centre within the reporting section.

Pursuant to the terms of the Common Terms Agreement, the Security Group Agent is today also distributing the consolidated financial information of Heathrow (SP) Limited for the six months ended 30 June 2018.

Pursuant to the terms of the Heathrow Finance Bonds and the Heathrow Finance Facilities Agreements, Heathrow Finance plc is today also distributing its consolidated financial statements for the six months ended 30 June 2018.

(1) Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation, BREXIT contingency and exceptional items

For investor enquiries please contact James Hoskins on +44 (0)7525 597567.