79IU Gatwick Fd 43

TIDM79IU

RNS Number : 3869X

Gatwick Funding Limited

28 August 2020

Gatwick Funding Limited

28 August 2020

Issuer: Gatwick Funding Limited

28 August 2020

THIS ANNOUNCEMENT RELATES TO THE DISCLOSURE OF INFORMATION THAT QUALIFIED AS INSIDE INFORMATION WITHIN THE MEANING OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU) 596/2014

Gatwick Funding Limited

(incorporated with limited liability in Jersey with registered number 107376)

announces a consent solicitation

Gatwick Funding Limited (the "Issuer") today announced a consent solicitation (the "Consent Solicitation") in respect of the following series of its bonds (the "Bonds":

(i)GBP300,000,000 6.125 per cent. Notes due 2 Mar. 2028 (Scheduled Redemption Date: 2 Mar. 2026) (ISIN: XS0596919299);

(ii)GBP300,000,000 6.5 per cent. Notes due 2 Mar. 2043 (Scheduled Redemption Date: 2 Mar. 2041) (ISIN: XS0596919539);

(iii) GBP300,000,000 5.25 per cent. Notes due 23 Jan. 2026 (Scheduled Redemption Date: 23 Jan. 2024) (ISIN: XS0733794407);

(iv)GBP300,000,000 5.75 per cent. Notes due 23 Jan. 2039 (Scheduled Redemption Date: 23 Jan. 2037) (ISIN: XS0733786130);

(v)GBP350,000,000 4.625 per cent. Notes due 27 Mar. 2036 (Scheduled Redemption Date: 27 Mar. 2034) (ISIN: XS1047788523);

(vi)GBP300,000,000 2.625 per cent. Notes due 7 Oct. 2048 (Scheduled Redemption Date: 7 Oct. 2046) (ISIN: XS1502174581);

(vii)GBP350,000,000 3.125 per cent. Notes due 28 Sep. 2041 (Scheduled Redemption Date: 28 Sep. 2039) (ISIN: XS1691441924);

(viii)GBP300,000,000 3.25 per cent. Notes due 26 Feb. 2050 (Scheduled Redemption Date: 26 Feb. 2048) (ISIN: XS1781266793); and

(ix)GBP300,000,000 2.875 per cent. Notes due 5 Jul. 2051 (Scheduled Redemption Date: 5 Jul. 2049) (ISIN: XS2022203801).

Capitalised terms used in this announcement and not defined herein have the meanings given to such terms in the solicitation memorandum dated 28 August 2020 (the "Solicitation Memorandum"). This announcement does not contain the full terms and conditions of the Consent Solicitation, which are contained in the Solicitation Memorandum. Subject to the restrictions described under "Solicitation and Distribution Restrictions" below, Bondholders may obtain a copy of the Solicitation Memorandum from the Tabulation Agent, the contact details for which are set out below.

Purpose of this Announcement

The purpose of this announcement is to:

(a)provide information on the STID Proposal which is the subject of the Consent Solicitation, for which see "The STID Proposal" and "Comfort Package" below; and

(b)provide details on Gatwick Airport's financial and operational performance (including forecasts and projections), for which see "Background" below and the compliance certificate and investor report for the six months ended 30 June 2020, in each case published on 28 August 2020, which can be found here https://www.gatwickairport.com/business-community/about-gatwick/investor-relations/other-information.

Background

Along with the rest of the aviation industry, the COVID-19 global pandemic is having an unprecedented and global impact on air travel. Despite the pandemic having been reported in Asia at the start of 2020, it had a limited impact on Gatwick Airport's passenger numbers during the first two months of the year. The full impact was seen from mid-March 2020 where traffic declined sharply. This resulted in passenger numbers immediately falling to close to zero levels and has remained at close to zero throughout the second quarter of 2020. As airlines have adapted, and government guidance has evolved, traffic forecasts have accordingly been revised down over this period with Gatwick Airport now forecasting 2020 passenger traffic around 65%-70% below 2019 levels. This translates to a minimal EBITDA contribution for 2020 as compared with GBP473 million in 2019. Gatwick Airport has addressed the situation quickly and proactively including deferring GBP353 million of capital expenditure in 2020 and 2021 and early cost cutting measures across staff and non-staff costs saving over GBP100 million in 2020 with GBP73 million annual savings expected to be permanent.

With greater clarity on international government policies, along with domestic lockdown and quarantine measures being eased in part, airline re-starts have continued through July and August, and there are positive signs of booking demand returning for the summer period. Gatwick Airport is well positioned to take advantage of this recovery.

Gatwick Airport continues to actively engage with airlines and easyJet, BA, Norwegian and TUI (historically, Gatwick Airport's four largest airlines) which have started to reintroduce international flights through June (easyJet) and July, but to fewer destinations and at a reduced frequency. There does however remain uncertainty as to the pace at which passenger traffic will rebuild over the summer months, with the lifting or re-imposition of UK quarantine restrictions a key factor.

Gatwick Airport has steadily grown passengers, revenue, and EBITDA over the past decade and is well-placed to recover from the current pandemic, as it has from previous crises, through long-term relationships with airlines, a wealthy and populous catchment area, and highly experienced shareholders and management. Gatwick Airport's GBP535 million projected cash savings and deferrals in 2020 and 2021 across opex and capex efficiencies buttress Gatwick Airport's existing liquidity position to ensure resilience (cash balances of GBP326 million, as at 30 June 2020, and access to a GBP150 million Liquidity Facility).

The STID Proposal

Given the impact of the COVID-19 global pandemic, Gatwick Airport Limited (the "Borrower") is requesting that its Qualifying Borrower Secured Creditors provide a number of short term waivers, approvals and amendments to ensure the business is well positioned to recover.

In particular, the reduced EBITDA of the Borrower during 2020 is expected to have a significant impact on the financial ratios calculated in accordance with the CTA. A waiver of any Default in respect of the financial ratios which may arise in respect of the Calculation Dates falling on 31 December 2020 and 30 June 2021 is requested.

In addition, an amendment to the calculation of Transfer RAB is being sought, which will apply until 30 June 2023. The Borrower's leverage covenant is calculated by dividing net debt by RAB, which is calculated based on Transfer RAB. Transfer RAB is equal to the average of the Relevant EBITDA for the last three years multiplied by 11.1x. An average of the last three years' Relevant EBITDA (as opposed to the last year's Relevant EBITDA) was used to ensure that the Transfer RAB (and therefore the implied borrowing base of the business) was less volatile, and not driven solely by outperformance (or underperformance) in a given year. However, given the severe and exceptional impact of COVID-19 on the Relevant EBITDA for 2020, the Transfer RAB will be materially changed, and this impact will persist until December 2023.

The Borrower is therefore seeking an amendment to the calculation of Transfer RAB for the Calculation Dates from (and including) December 2021 to (and including) June 2023, such that the amount to be included in the calculation as Relevant EBITDA for each calendar quarter in the period of 12 months commencing on 1 April 2020 is replaced with an average of the respective quarterly Relevant EBITDA in 2017, 2018 and 2019. These averages have been calculated and are set out in paragraph 3(b) of the STID Proposal.

The Borrower is also requesting the waiver of certain other technical Defaults which may arise from actions taken by any Governmental Agency relating directly to the COVID-19 pandemic and which result in a full or partial closure of, or a full or partial suspension of operations at, Gatwick Airport, although currently no such Defaults are expected. These are set out in paragraph 3(c) of the STID Proposal.

At present, the Borrower has a strong liquidity position and so has no plans to access the Bank of England's Covid Corporate Financing Facility (the "CCFF"). However, the Borrower believes it would be prudent to ensure it is able to access the CCFF programme, which would provide additional liquidity if required. The Borrower is therefore requesting approval pursuant to paragraph (a)(iv) of the definition of "Permitted Financial Indebtedness" in the MDA to permit issuance of up to GBP300,000,000 of unsecured commercial paper under the CCFF programme (such Financial Indebtedness being, the "CCFF Debt"). Given its unsecured nature and in light of the fact that the CCFF commercial paper holder will not accede to the STID, any CCFF Debt shall not be included within the calculation of the Senior RAR, and shall not constitute Borrower Secured Liabilities or benefit from the security created pursuant to the Security Documents.

The Borrower also requests a waiver of the consequences of the occurrence of a Trigger Event pursuant to paragraphs 2.1 (Further Information and Remedial Plan), 4 (Independent Review) and 5 (Consultation with Regulator) of Part 2 (Trigger Event Consequences) of Schedule 3 (Trigger Events) to the CTA, where a Trigger Event arises under paragraph 1 (Financial Ratios) of Part 1 (Trigger Events) of Schedule 3 (Trigger Events) to the CTA in respect of a Calculation Date up to and including 30 June 2021, or otherwise relates directly to the COVID-19 pandemic (with such waiver ceasing to apply on and from 31 December 2021 if the relevant Trigger Event is continuing on such date). The requirements to be waived provide for the right of the Borrower Security Trustee to request information and receive a remedial plan, commission an Independent Review, and to participate in any discussions with the Regulator.

Following a Trigger Event under paragraph 1 (Financial Ratios) of Part 1 (Trigger Events) of Schedule 3 (Trigger Events) to the CTA, and following most other Trigger Events, such rights of the Borrower Security Trustee do not apply until the Trigger Event has been continuing for 12 months or more.

Finally, the Borrower is aware that one limb of the definition of "Relevant Period" set out in the MDA, as updated following the Borrower's change in financial year end to 31 December, is not correct. All Relevant Periods are 12 months except one, as set out in limb (b)(ii) of the definition of "Relevant Period". Given the seasonality of the business and irregularity of interest payments, limb (b)(ii) introduces a potentially distorted Senior ICR calculation. The Borrower proposes to amend the wording to reflect the intention and practice of the original documentation by replacing limb (b)(ii) in the definition of "Relevant Period" in the MDA with "the period of 12 months ending on 31 December in the same calendar year as that Calculation Date".

Comfort Package

The Borrower proposes that if the provisions set out above are waived, approved and/or amended (as applicable), the Borrower will provide the Borrower Secured Creditors and the Issuer Secured Creditors (by publication on the Designated Website) a quarterly information package in respect of quarter end dates from 30 September 2020 to 30 June 2021 inclusive, to include traffic updates, financial ratios and six month liquidity forecasts.

If any six month liquidity forecast shows that Available Cash minus Required Expenditure (each as defined in the STID Proposal) is less than GBP225,000,000, the Borrower will be required to provide a remedial plan outlining how it intends to address the issue, and monthly updates to both the plan and the liquidity forecast until the issue is resolved. If Available Cash minus Required Expenditure is less than GBP150,000,000, any failure to provide the remedial plan or undertake the actions set out in such plan within the time periods specified in the plan will result in a Loan Event of Default.

Finally, the Borrower proposes that, conditional upon the requested consents being provided, further restrictions on Restricted Payments shall apply, such that no Restricted Payments shall be made prior to the Calculation Date falling on 31 December 2021, and any Restricted Payments made in the period prior to the next Calculation Date falling after 30 June 2023 shall be subject to a tighter Senior RAR test (0.60 for Calculation Dates up to and including June 2022, and thereafter 0.65, on an adjusted basis), meeting the current Senior RAR threshold of 0.70 on an unadjusted basis, and a six month liquidity test, and may not be made if amounts are outstanding in respect of any CCFF Debt.

The Borrower considers this package of waivers, approvals and amendments, together with the related undertakings from the Obligors, will allow the Borrower to fully implement the management's recovery plans, and therefore asks for due consideration of the proposals.

For detailed information on the STID Proposal see the form of the STID Proposal (appended at Schedule 2 to the Solicitation Memorandum) and an investor presentation prepared in connection with the Consent Solicitation which is available to Bondholders via NetRoadshow at https://www.netroadshow.com/nrs/home/#!/?show=95cebc90 or by visiting www.netroadshow.com and entering the entry code: Gatwick2020 (not case-sensitive).

Expected Timetable

The times and dates below (other than the Expiration Time) are indicative only. Accordingly, the actual timetable may differ significantly from the expected timetable set out below.

All references to times are to London time unless otherwise stated, and any announcements or notifications to be made to Bondholders arising out of or in connection with the STID Proposal will be made as soon as is reasonably practicable after the event giving rise to the announcement or notification by the Issuer in accordance with the provisions of the Bond Trust Deed and the Bonds.

All notices to Bondholders will be given by delivery through the Clearing Systems.

 
Event                                                 Date 
Announcement and delivery of the STID Proposal.       28 August 2020 
Solicitation Memorandum and draft amendment 
 documentation in respect of each of the CTA 
 and the MDA to be made available at the specified 
 office of the Tabulation Agent (copies of 
 which are obtainable by Bondholders upon 
 request, free of charge). 
Expiration Time                                       4.00 p.m. (London 
 Latest time and date for receipt of valid             time) 
 Electronic Voting Instructions by the Tabulation      on 16 September 
 Agent through the Clearing Systems.                   2020 
 
STID Voting Deadline                                  18 September 2020 
Announcement of results of the STID Proposal          23 September 2020 
                                                       or earlier, subject 
                                                       to the STID Proposal, 
                                                       should the Borrower 
                                                       Security Trustee 
                                                       have received votes 
                                                       in favour of the 
                                                       STID Proposal from 
                                                       75% of Participating 
                                                       QBS Creditors 
If the STID Proposal is approved and the 
 Borrower Security Trustee has announced such 
 approval 
Payment of the Instruction Fee to those holders       On the Payment 
 who are eligible for payment in accordance            Date which is expected 
 with the conditions set out in the Solicitation       to be on or about 
 Memorandum.                                           the fifth Business 
                                                       Day following the 
                                                       announcement of 
                                                       the results of 
                                                       the STID Proposal, 
                                                       if the STID Proposal 
                                                       is approved. 
If the Amendment Conditions are satisfied 
Execution of amendment documentation in respect       On the Amendment 
 of each of the CTA and the MDA and implementation     Date - currently 
 of the STID Proposal                                  expected to occur 
                                                       within five Business 
                                                       Days of the STID 
                                                       Voting Deadline 
                                                       (but, in any event, 
                                                       to be implemented 
                                                       at a time which 
                                                       is at Gatwick Airport 
                                                       Limited's sole 
                                                       and absolute discretion). 
 

Bondholders or Beneficial Owners are advised to check with the bank, securities broker, trust company, custodian, Clearing System or other intermediary through which they hold their Bonds whether such intermediary applies different deadlines for any of the events specified above, and then to adhere to such deadlines if such deadlines are prior to the deadlines set out above.

All of the above dates are subject to earlier deadlines that may be set by the Clearing Systems or any intermediary.

Instruction Fee

Subject to the conditions set out in the Solicitation Memorandum, including the approval of the STID Proposal by the requisite proportion of the Participating QBS Creditors and the announcement by the Borrower Security Trustee of such approval, holders of the Bonds who have delivered a valid Electronic Voting Instruction in respect of the STID Proposal which has been received by the Tabulation Agent at or prior to the Expiration Time, which has not been validly withdrawn following the Expiration Time and which remains in full force and effect until the announcement of the results of the STID Proposal, will be entitled to receive a fee equal to 0.05 per cent. of the Principal Amount Outstanding of such Bonds which are the subject of the relevant Electronic Voting Instruction (the "Instruction Fee"). The Instruction Fee will be paid on the Payment Date via the relevant Clearing System for payment to the cash account of an eligible holder of Bonds in such Clearing System.

Creditor Support

Special Committee of the Investment Association

The STID Proposal set out in the Solicitation Memorandum has been considered by a special committee of the Investment Association (the "Special Committee") at the request of the Issuer. The members of the Special Committee, who hold in aggregate approximately 35.5 per cent. in Principal Amount Outstanding of the Bonds have examined the STID Proposal. They have informed the Issuer that they find the STID Proposal acceptable and, subject to client and other approvals, they intend to vote in favour of the STID Proposal in respect of their holdings of Bonds.

The Special Committee has advised the Issuer that this recommendation relates only to the STID Proposal set out in the Solicitation Memorandum and not to any future offers or proposals which the Issuer may make.

Other Qualifying Borrower Secured Creditors

The Borrower has undertaken pre-engagement regarding the STID Proposal with certain Qualifying Borrower Secured Creditors representing GBP600 million of Qualifying Borrower Debt and comprising 10 banks, and all banks have indicated that, subject to final approvals, they intend to vote in favour of the STID Proposal.

Overall Creditor Support

Taking into account the position above in relation to the review by a special committee of the Investment Association and the support from other lenders and investors of the Issuer, as of the date of the Solicitation Memorandum, approximately 46.9 per cent. of the aggregate principal amount of Qualifying Borrower Debt (including the Bonds) have indicated that subject to client, final and other approvals, they intend to vote in favour of the STID Proposal.

Amendment Conditions

Implementation of the STID Proposal is conditional on:

   1.    the approval of the STID Proposal; and 
   2.    the announcement by the Borrower Security Trustee of the approval of the STID Proposal; and 

3. the delivery to the Borrower Security Trustee of a legal opinion of Clifford Chance LLP as to matters of capacity and enforceability of the Amendment Document,

(the "Amendment Conditions"). The Issuer will announce satisfaction of the Amendment Conditions as soon as practicable thereafter.

It is intended that the STID Proposal will be implemented within five Business Days of the STID Voting Deadline, however the timing for the implementation of the STID Proposal is at the Borrower's sole and absolute discretion.

General

Subject to applicable law and as provided herein, the relevant Issuer may, in its sole discretion, amend the terms of (save for the Expiration Time), terminate or withdraw the Consent Solicitation at any time up to the Solicitation Amendment Deadline.

Bondholders are advised to check with the bank, securities broker, trust company, custodian, Clearing System or other intermediary through which they hold their Bonds whether such intermediary will apply different deadlines for participation to those set out in the Solicitation Memorandum and, if so, should adhere to such deadlines if such deadlines are prior to the deadlines set out in the Solicitation Memorandum.

In relation to the delivery of Electronic Voting Instructions, in each case, through the Clearing Systems, Bondholders holding Bonds in Euroclear or Clearstream, Luxembourg should note the particular practice of the relevant Clearing System, including any earlier deadlines set by such Clearing System.

Only direct accountholders in Euroclear or Clearstream, Luxembourg may deliver Electronic Voting Instructions. Bondholders who are not direct accountholders in Euroclear or Clearstream, Luxembourg should arrange for the accountholder through which they hold their Bonds to deliver an Electronic Voting Instruction on their behalf to the relevant Clearing System as more particularly described in the Solicitation Memorandum. The deadlines specified by the relevant Clearing System may be earlier than the Expiration Time.

Bondholders are advised to read the Solicitation Memorandum carefully for full details of, and information on the procedures for participating in, the Consent Solicitation.

Further Information

For general assistance and queries relating to the STID Proposal please contact the Solicitation Agents at:

Lloyds Bank Corporate Markets plc

10 Gresham Street

London EC2V 7AE

United Kingdom

Tel:+44 (0) 20 7158 1726 / 1719

Email:liability.management@lloydsbanking.com

Attention:Liability Management Team, Commercial Banking

NatWest Markets Plc

250 Bishopsgate

London EC2M 4AA

United Kingdom

Tel:+44 (0) 20 7678 5222

Email:liabilitymanagement@natwestmarkets.com

Attention:Liability Management

For questions or requests for assistance in connection with the delivery of Electronic Voting Instructions please contact the Tabulation Agent at:

Lucid Issuer Services Limited

Tankerton Works

12 Argyle Walk

London WC1H 8HA

Tel: +44 207 704 0880

E-mail: gatwickairport@lucid-is.com

Attention:Arlind Bytyqi / Mu-yen Lo

Disclaimer

This announcement must be read in conjunction with the Solicitation Memorandum. The Solicitation Memorandum contains important information which should be read carefully before any decision is made with respect to the Consent Solicitation. If any Bondholder is in doubt as to the action it should take, it is recommended to seek its own financial, legal or other advice, including as to any tax consequences, from its stockbroker, bank manager, solicitor, accountant, independent financial adviser authorised under the Financial Services and Markets Act 2000 (if in the United Kingdom) or other appropriately authorised financial adviser. Any individual or company whose Bonds are held on its behalf by a broker, dealer, bank, custodian, trust company or other nominee must contact such entity if it wishes to participate in the Consent Solicitation. None of the Solicitation Agents, the Tabulation Agent, the Security Trustee or the Bond Trustee accepts any responsibility for the contents of this announcement.

Market Abuse Regulation

This announcement is released by the Issuer and contains information in relation to the Bonds that qualified as inside information for the purposes of the Market Abuse Regulation (EU) 596/2014 ("MAR"), encompassing information relating to the Bonds. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this Notice is made by Philip Iley, a Director of the Issuer.

Solicitation and Distribution Restrictions

Any materials relating to the Consent Solicitation do not constitute, and may not be used in connection with, any form of offer or solicitation in any place where such offers or solicitations are not permitted by law. If a jurisdiction requires that the Consent Solicitation be made by a licensed broker or dealer and any Solicitation Agent or any of their respective affiliates is such a licensed broker or dealer in that jurisdiction, the Consent Solicitation shall be deemed to be made by such Solicitation Agent(s) or such affiliate(s), as the case may be, on behalf of the Issuer and in such jurisdiction where it is so licensed and the Consent Solicitation is not being made in any such jurisdiction where the Solicitation Agents or one of their respective affiliates is not so licensed.

The distribution of the Solicitation Memorandum in certain jurisdictions may be restricted by law. Persons into whose possession the Solicitation Memorandum comes are required by the Issuer, the Obligors, the Solicitation Agents and the Tabulation Agent to inform themselves about, and to observe, any such restrictions.

The Solicitation Memorandum contains important information which should be read carefully before any decision is made with respect to the Consent Solicitation. If any Bondholder is in any doubt as to the action it should take, it is recommended to seek its own financial, legal or other advice, including as to any tax consequences, from its stockbroker, bank manager, solicitor, accountant, independent financial adviser authorised under the Financial Services and Markets Act 2000 (if in the United Kingdom) or other appropriately authorised independent professional adviser. Any individual or company whose Bonds are held on its behalf by a broker, dealer, bank, custodian, trust company or other nominee must contact such entity if it wishes to participate in the Consent Solicitation.

The communication by the Issuer of the Solicitation Memorandum and any other documents or materials relating to the Consent Solicitation is not being made, and such documents and/or materials have not been approved, by an authorised person for the purposes of section 21 of the Financial Services and Markets Act 2000, as amended (the "FSMA"). Accordingly, such documents and/or materials are not being distributed to, and must not be passed on to, the general public in the United Kingdom. Such documents and/or materials are only directed at and may only be communicated to (1) any person within Article 43(2) of the (Financial Services and Markets Act 2000 (Financial Promotion) Order 2005), which includes a creditor or member of the Issuer, and (2) to any other persons to whom these documents and/or materials may lawfully be communicated in circumstances where section 21(1) of the FSMA does not apply.

IMPORTANT - PROHIBITION RELATING TO EEA AND UK RETAIL INVESTORS: The Consent Solicitation is not intended to be made to and should not be made to to any retail investor in the European Economic Area ("EEA") or in the United Kingdom ("UK"). For these purposes, a retail investor means a person who is one (or more) of: (i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (as amended, "MiFID II"); (ii) a customer within the meaning of Directive (EU) 2016/97, where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined in Regulation (EU) 2017/1129. Consequently, no key information document required by Regulation (EU) No 1286/2014 (as amended or superseded, the "PRIIPs Regulation") had been prepared in relation to the Bonds and therefore certain actions in relation to the Bonds involving any retail investor in the EEA or in the UK may be unlawful under the PRIIPs Regulation.

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August 28, 2020 02:00 ET (06:00 GMT)