Macquarie has a knack for extracting value from airport investments; it has significant stakes in several high profile airports including Sydney, Rome, Birmingham and Bristol. Macquarie Airports is now the world's second-largest airport operator not owned by a government. In December 2004 it added Brussels airport to this roster.

The Macquarie-led consortium MABSA closed the Eu765.3 million ($1 billion) acquisition financing for 70% of the Brussels International Airport Company (BIAC) on 29 December 2004. The remaining 30% of BIAC is retained by the Belgian state. Vinci, Copenhagen Airports, 3i, Schiphol, Fraport and Ferrovial were all potential bidders, of which Ferrovial and Vinci were among the strongest runners-up.

The MABSA consortium comprises Macquarie Airports (Eu522.2 million), Macquarie European Infrastructure Fund (Eu100 million), Macquarie Global Infrastructure Fund (Eu30 million) and Macquarie Bank (Eu51.1million) (see diagram above for shareholder structure). The original financing also comprised a Eu62 million bridge facility underwritten by RBC and SG.

Macquarie Airports funded its contribution through an equity placement, valued at A$510.2 million ($391.221) and the issuance of tradable, interest-bearing, convertible to equity trust securities (TICKETS). TICKETS are a hybrid of debt and equity, with liability going back to the consortium – a 6.475% per annum interest rate is paid for the first year, but after five years, these can be exchanged for Macquarie Airports shares. The TICKETS issuance raised A$465 million.

The issue continues the tradition for Macquarie of finding catchy names for its hybrid debt – toll road convertibles have been named CARS, while MAP used FLIERS to finance Sydney Airport. Macquarie is funding the remainder of its equity contributions through internally-generated cash.
MABSA subsequently closed the Eu1.135 billion refinancing on 25 February 2005. The mandated lead arrangers of the refinancing, RBC Capital Markets and SG, originally decided, given the size of the deal, to roadshow and then go to general syndication, with final signatures expected at the end of April. But such was the initial demand, the deal closed ahead of schedule as a club deal with 13 other banks joining the MLAs as joint lead arrangers.

The club participants are: Caja Madrid, Calyon, Commonwealth Bank of Australia, Dexia, HSH, HVB, KfW, ING, Ixis, Lloyds, RBC, RBS, SG, SMBC and WestLB.

The proceeds will refinance existing debt; make distributions to shareholders (in part to refinance the bridge facility); fund future capital expenditure; and meet working capital requirements.

The Eu1.135 billion consists of five tranches. A seven-year Eu917.5 million Tranche A, which amortizes in two equal instalments in 2009 and 2011. It pays a margin of 65bp over Euribor for the first five years, stepping up to 80bp in the sixth year, and 95bp in the final year. Given the repayment schedule and margin profile, the deal is suitably set up for a bond take out before year 5.

The remaining tranches have a five-year tenor. Tranche B is a Eu100 million capital and expenditure facility; and tranche C is a Eu50 million credit facility. Tranche D is a letter of credit facility of Eu55 million; and tranche E a Eu12.5 million loan to a wholly owned subsidiary.
Fees to sub-underwriters were 45bp in total, comprising a 7.5bp sub-underwriting fee and a 37.5bp participation fee. Such was lender appetite that banks, invited to commit to Eu100 million underwriting, were pared down to a final take of Eu75 million.

BIAC received a BBB+ corporate rating from Standard & Poor's with a recovery rating of '2' (between 80% and 100%of the principal is expected to be recovered in a default event). The Ebitda for 2003 was Eu113.7 million, and for the corresponding period in 2004, this increased 19.5% to Eu135.9 million. Revenues were up 11.2% to Eu303.8 million.

The key strengths mentioned in the S&P report were the high share of origin and destination traffic, favourable location as the political centre of the EU, no capacity constraints and manageable capital expenditure program. The main weaknesses are an aggressive financial profile and refinancing risk, shareholder distribution expectations, and competitive threats form enhancements of high-speed rail links and other airports.

Tellingly BIAC's improving operational status is indicated by the current BBB+ with a stable outlook – higher than the private rating of BBB issued during the sale process.

Brussels International Airport Company (BIAC)
Status: Closed 25 February 2005
Description: Refinancing of MABSA's acquisition of 70% of Brussels Airport
Size: Eu1.135 billion ($1.5 billion)
Location: Brussels, Belgium
Equity: Macquarie Airports; Macquarie European Infrastructure Fund; Macquarie Global Infrastructure Fund; Macquarie Bank
Mandated lead arrangers: RBC; SG
Financial adviser to the consortium: Macquarie Bank
Consortium legal counsel: Allen & Overy
Lenders' legal counsel: Clifford Chance
Government legal counsel: Cleary, Gottlieb, Steen and Hamilton
Government financial adviser: ING