Bond mars BAA passenger boost

BRITONS are flying again in record numbers, according to official figures out today. BAA, the airports operator that runs Heathrow, Gatwick and Stansted, said it handled 13.2m passengers in July, its second-busiest month on record.

The company said it would have broken its all-time monthly figure but for the British Airways strike at Heathrow, which reduced the number of passengers BAA handled by about 100,000.

But BAA shares were under pressure today as it revealed it launched a surprise £425m convertible bond issue on Friday night through its advisers Cazenove and Citigroup.

The bonds, paying a coupon, or annual interest rate, of only 2.625%, will go to fund BAA's £8.9bn, 11-year investment programme, nearly half of which is earmarked for the construction of Heathrow's new Terminal 5.

The new issue can be converted any time in the next six years into BAA shares at a strike price of 576p, 20% above Friday night's close. It replaces £314m of existing convertible bonds, which are being redeemed next month.

The move follows a similar £424m convertible bond issue from BAA 18 months ago with a coupon of 2.94% but at a strike price of 800p, reflecting BAA's stronger share price then.

BAA shares were off 6 1/4p at 472p, close to the five-month low a fortnight ago after it reported an 11% dive in profits for the first quarter of its financial year.