Heathrow6.45% S Regulatory News (88BX)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014

16 June 2020

Heathrow Funding Limited

Heathrow Finance plc

Publication of June 2020 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 "CTA").

The Investor Report is also being distributed by Heathrow Finance plc to various parties pursuant to Heathrow Finance plc's £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, £300 million 4.75% Senior Secured Notes dated 31 October 2018 and due 2024 and the £300 million 4.125% Senior Secured Notes dated 12 November 2019 and due 2029 (the 'Heathrow Finance Bonds'), a note purchase agreement dated 14 September 2018 (the "Note Purchase Agreement") and pursuant to Heathrow Finance plc's facilities agreements dated 5 October 2016, 22 November 2018, 23 November 2018, 1 February 2019, 8 May 2019, 16 August 2019 and 2 December 2019. In addition, the final facility raised by ADI Finance 2 Limited dated 6 July 2017 was migrated to Heathrow Finance plc on 15 March 2019 (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 an updated forecast for 2020 and 2021 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.

COVID-19 has had an unprecedented impact on the aviation industry, including Heathrow. The pandemic has resulted in significant reductions in passenger traffic as governments around the world closed their borders and airlines dramatically cut their capacity. While steps to ease these lockdowns are starting to emerge, the timing and speed of a recovery in passenger demand remain highly uncertain. Heathrow currently anticipates that traffic volumes may gradually recover in the second half of 2020. Overall in 2020, passenger traffic is expected to decline 63.9% compared to 2019 to 29.2 million passengers with a return to pre COVID-19 traffic volumes not anticipated until after 2022.

We have significantly revised our forecast since our December 2019 Investor Report. 2020 Adjusted EBITDA(1) is expected to decline 81.4% to £357 million compared to 2019. This is largely driven by revenue reducing by 58.9% to £1,261 million compared to £3,070 million in 2019 with aeronautical revenue declining by 60.6%, retail revenue by 73.8% and other revenue by 32.3%. We forecast operating costs to reduce to £904 million in 2020. The RAB is forecasted to be £16.4 billion at the end of 2020 compared to £17.7 billion published in the previous Investor Report, reflecting our plans to cancel or defer capital spend for 2020 and lower inflation expectations. Heathrow continues to benefit from a strong liquidity position with £3.0 billion of cash and committed facilities available to the business as at 30 April 2020.

At the date of this Investor Report, a Forecasting Event under the CTA has occurred, and a Trigger Event under the CTA is forecast to occur in relation to the forecast ICR for the year ending 31 December 2020 for Class A and Class B debt at Heathrow (SP) Limited when tested in June 2020.

Heathrow Finance plc is forecast to breach its RAR and ICR covenant tests in relation to the financial year ending 31 December 2020, when tested in June 2021. Heathrow's management is taking steps to resolve this issue including seeking a waiver on financial covenants from Heathrow Finance plc's creditors. Further details are provided under the Financing Matters section of the Investor Report.

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

http://www.rns-pdf.londonstockexchange.com/rns/1402Q_1-2020-6-16.pdf

The Investor Report is available from today via the Heathrow Investor Centre at https://www.heathrow.com/company/investor-centre/reports/investor-reports

By way of reminder, pursuant to the CTA, the Heathrow Finance Bonds, Note Purchase Agreement and the Heathrow Finance Facilities Agreements (as appropriate), the following is available on the Heathrow Investor Centre:

- consolidated financial information of Heathrow (SP) Limited for the year ended 31 December 2019

- consolidated financial statements of Heathrow Finance plc for the year ended 31 December 2019

This announcement is released by Heathrow Funding Limited and Heathrow Finance plc and contains information that qualified or may have qualified as inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 (MAR). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Javier Echave, Chief Financial Officer at Heathrow Airport Limited.

For investor enquiries please contact Christelle Lubin, Head of Debt Investor Relations and Corporate Finance, on +44 7764 805761

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