Manchester Airport Grp Funding PLC ANNOUNCEMENT OF CONSENT SOLICITATION (9101N)

TIDM38LZ

RNS Number : 9101N

Manchester Airport Grp Funding PLC

26 May 2020

MANCHESTER AIRPORT GROUP FUNDING PLC ANNOUNCES A CONSENT SOLICITATION

26 May 2020

Overview

Manchester Airport Group Funding PLC (the "Issuer") today announced a consent solicitation in respect of the following series of bonds (the "Bonds"):

   (a)        GBP450,000,000 4.75 per cent. Fixed Rate Bonds due 2034 (ISIN: XS1032630771); 
   (b)       GBP360,000,000 4.125 per cent. Fixed Rate Bonds due 2024 (ISIN: XS1057530393); 
   (c)        GBP300,000,000 2.875 per cent. Fixed Rate Bonds due 2039 (ISIN: XS1718393512); and 
   (d)       GBP350,000,000 2.875 per cent. Fixed Rate Bonds due 2044 (ISIN: XS1991245017). 

Capitalised terms used in this announcement and not defined herein have the meanings ascribed to them in the STID Proposal Information Memorandum dated 26 May 2020 (the "STID Proposal Information Memorandum").

Background

Following solid growth in both summer 2019 and into the early winter season, the COVID-19 outbreak has affected the global travel industry and caused a significant drop in passenger traffic across each of the airports owned by the Security Group (the "Group Airports"). MAG faces into this in a strong and prudent financial position, with supportive shareholders. Ratings action will be fluid during the impact phase of COVID-19. MAG's strategy continues to incorporate targeting Baa1/BBB+ ratings.

As part of its strategic response to COVID-19, MAG has implemented a robust financial strategy. This includes a combination of over GBP480 million of cash mitigation measures over the next two years, together with a significant GBP300 million of equity support from its Shareholders (as defined below), to maintain MAG's strong financial health through this period and to be well positioned for rebound and recovery.

The Security Group has taken, and continues to take, immediate actions to mitigate the effects of the drop in passenger numbers by reducing both capital expenditure and operating costs. In addition, MAG's shareholders are looking to make a significant equity contribution of GBP300 million in order to prudently protect MAG's financial position, including against any significant downside cases.

The Security Group Agent anticipates that EBITDA will be significantly lower than expected in the coming months as a result of the impact of the COVID-19 outbreak. Given that EBITDA is expected to be at significantly reduced levels, even with the significant Shareholder Subscription (as defined below) the nature of the Interest Coverage Ratio and the Leverage Ratio means that the Security Group Agent expects that the Security Group will therefore breach the Default Ratios in respect of the Interest Coverage Ratio and Leverage Ratio in the current financial year and is seeking the support of its Secured Creditors by means of a waiver in that regard. MAG's strategy is to return back within compliance during the 2022 financial year. In addition, MAG is also proposing that the Default Ratios will be tested on 30 September 2021 by reference to the EBITDA for the 6 months ended 30 September, annualised on a seasonal basis, which will be more reflective of prevailing trading conditions at the time.

Whilst airports in the UK remain operational despite the reduction in passenger numbers, it should also be noted that there is a small risk that one or more Group Airports may need to temporarily close, either as a result of passenger numbers being reduced to zero or due to such closure being mandated by the UK Government.

Shareholder Support for the Security Group

The Security Group has agreed a support package with its shareholders, Conyers Trust Company (Cayman) Limited (in its capacity as trustee for IFM Global Infrastructure Fund), the Council of City of Manchester and Greater Manchester District Councils (the "Shareholders"). The Shareholder support package is conditional upon the STID Proposal being approved and the Implementation Documents (as defined in the STID Proposal) being entered into (and certain other conditions described below).

The Shareholders have agreed with Manchester Airports Holdings Limited to make an investment in Manchester Airport Finance Holdings Limited (the holding company of the Security Group) ("MAFHL") by way of shareholder loan notes (the "Shareholder Subscription"), with the proceeds of such Shareholder Subscription to be used by MAFHL to subscribe for ordinary shares in the share capital of the Security Group Agent (the "Onward Subscription"). The Security Group Agent will use the proceeds of the Onward Subscription for general corporate purposes.

The aggregate amount of the Shareholder Subscription would be GBP300 million.

The Shareholder Subscription is conditional on:

(i) no expropriation event having occurred and being continuing in respect of any Group Airport;

(ii) no insolvency event having occurred and being continuing in respect of Manchester Airports Holdings Limited or any of its subsidiaries from time to time;

(iii) no illegality event having occurred and being continuing in respect of any Shareholder;

(iv) the Obligor Security Trustee not having received an instruction from the Qualifying Obligor Secured Creditors (through their Obligor Secured Creditor Representatives) to deliver an Obligor Enforcement Notice; and

(v) execution of the Implementation Documents (as defined in the STID Proposal) by the Obligor Security Trustee and MAG pursuant to paragraph 9.1 of the STID Proposal following approval of the STID Proposal.

The STID Proposal

The STID Proposal seeks the consent of the Obligor Security Trustee to the Requested Consents set out in the STID Proposal which is appended to the STID Proposal Information Memorandum. Bondholders are also invited to access an investor presentation prepared in connection with the STID Proposal by visiting https://www.netroadshow.com/nrs/home/#!/?show=991981a8 and using the requested entry code

" MAG2020 ".

As more fully set out in the STID Proposal and as described above, the Security Group Agent is requesting that the Obligor Security Trustee agrees that (i) the Default Ratios will not be tested in respect of any Relevant Historic Period ending during the Waiver Period; (ii) the Default Ratios will be tested on 30 September 2021 by reference to the EBITDA for the 6 months ended 30 September, annualised on a seasonal basis; and (iii) the Security Group Agent is not required to confirm in the Compliance Certificate, for the duration of the Waiver Period, whether the Distribution Ratios in respect of the Relevant Forward Looking Period are or are not satisfied.

In addition, the Security Group Agent is requesting pursuant to the STID Proposal that, for the duration of the Wavier Period, the Obligor Security Trustee waives any Obligor Event of Default which may be said to have arisen under:

(i) paragraph 3 (Breach of Other Obligations) of Schedule 3 (Obligor Events of Default) to the CTA as a result of any breach of the covenant in paragraph 1(c) (Authorisations) of Part 3 (General Covenants) of Schedule 2 (Security Group Covenants) to the CTA;

(ii) paragraph 4 (Misrepresentation) of Schedule 3 (Obligor Events of Default) to the CTA as a result of the repetition of the representation under paragraph 5(b) (Validity) of Schedule 1 (Security Group Representations) to the CTA;

(iii) paragraph 11 (Cessation of business) of Schedule 3 (Obligor Events of Default) to the CTA, only insofar as such Obligor Event of Default arises as a result of any one or more temporary suspensions of any such operations or business of an Obligor;

(iv) paragraph 13 (Regulatory issues) of Schedule 3 (Obligor Events of Default) to the CTA, only insofar as such Obligor Event of Default arises as a result of any one or more temporary suspensions of any Authorisation; or

(v) paragraph 14 (Expropriation) of Schedule 3 (Obligor Events of Default) to the CTA, only insofar as such Obligor Event of Default arises as a result of any intervention, restriction or other action by or on behalf of any government, regulatory or other authority in relation to any member of the Security Group or any of its assets,

in each case, as a result of a COVID-19 Event, without any admission that any such Obligor Event of Default has arisen and irrespective of whether any such Obligor Event of Default arises before or at any time during the Waiver Period.

The Security Group Agent is additionally requesting pursuant to the STID Proposal that any time the representation under paragraph 5(b) (Validity) of Schedule 1 (Security Group Representations) to the CTA is to be made or repeated, it shall not be made or repeated to the extent it is not accurate as a result of a COVID-19 Event, without any admission that any such inaccuracy has arisen and irrespective of whether any such inaccuracy arises before or at any time during the Waiver Period.

The Security Group Agent is grateful to the group of Secured Creditors (including both banks and bondholders) holding, in aggregate, 55.69 per cent. of the Outstanding Principal Amount of all Qualifying Obligor Senior Debt, who were willing to discuss the STID Proposal prior to announcement of the Consent Solicitation and who have indicated that, subject to client and other approvals, they intend to vote in favour of the STID Proposal. The Issuer hopes that other Secured Creditors will see this as a positive indication that the STID Proposal represents a fair and appropriate package of measures to be effected in these unprecedented circumstances.

For detailed information on the STID Proposal see the form of the STID Proposal (appended at the Schedule to the STID Proposal Information Memorandum).

Instruction Fees

Subject to the conditions set out in the STID Proposal Information Memorandum, the approval of the STID Proposal and the announcement by the Obligor Security Trustee of such approval, the Issuer will pay to a holder of the Bonds who has 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 Instruction Fee Deadline, which has not been validly withdrawn following the Instruction Fee Deadline and which remains in full force and effect until the announcement of the results of the STID Proposal, the Instruction Fee equal to 0.05 per cent. of the Principal Amount Outstanding of such Bonds in respect of which the relevant holder has delivered an Electronic Voting Instruction in relation to the STID Proposal, in each case received by the Tabulation Agent at or prior to the Instruction Fee Deadline. The Instruction Fee will be paid on the Payment Date via the relevant Clearing System for onward payment to the cash account of an eligible holder of the Bonds in such Clearing System. The payment of any such amounts to the relevant Clearing System will discharge the obligations of the Issuer in respect of the Instruction Fee to all such relevant Bondholder(s).

Holders of Bonds will not be eligible to receive the Instruction Fee if they do not submit a valid Electronic Voting Instruction which has been received by the Tabulation Agent at or prior to the Instruction Fee Deadline or if they revoke their instructions after the Instruction Fee Deadline or unblock their Bonds prior to the Payment Date.

It is a condition to the obligation to pay or procure the payment of the Instruction Fee to relevant holders of Bonds that the STID Proposal has been approved and the Obligor Security Trustee has announced such approval. Such condition(s) are waivable at the discretion of the Issuer.

Expected Timetable

 
                         Event                                           Date 
 Announcement and delivery of the STID Proposal.               26 May 2020 
STID Proposal Information Memorandum to be made 
 available at the specified office of the Tabulation 
 Agent (copies of which are obtainable by Bondholders 
 upon request, free of charge). 
Commencement of Decision Period (subject to                   3 June 2020 
 no dissenting notice pursuant to Clause 13.4 
 of the STID having been delivered to the Issuer 
 in writing within seven Business Days of the 
 date of receipt of the STID Proposal). 
Instruction Fee Deadline: Latest time and date                4.00 p.m. (London 
 for receipt of Electronic Voting Instructions                 time) on 16 June 
 by the Tabulation Agent through the Clearing                  2020 
 Systems for holders to be eligible for payment 
 of the Instruction Fee. 
Expiration Time: Latest time and date for receipt             4.00 p.m. (London 
 of valid Electronic Voting Instructions by the                time) on 25 June 
 Tabulation Agent through the Clearing Systems                 2020 
 (such Electronic Voting Instructions are irrevocable 
 from this date). 
STID Voting Date: The last day of the Decision                25 June 2020 or 
 Period (as may be extended in accordance with                 later, if the Decision 
 Clause 16.2 of the STID).                                     Period is extended 
                                                               in accordance with 
                                                               Clause 16.2 of 
                                                               the STID. 
Announcement by the Obligor Security Trustee                  26 June 2020 or 
 of approval of the STID Proposal: The date on                 earlier, should 
 which the notice of consent (as appended to                   the Obligor Security 
 the STID Voting Request) announcing the approval              Trustee have received 
 of the STID Proposal executed by the Obligor                  votes in favour 
 Security Trustee is delivered to the Security                 of the STID Proposal 
 Group Agent pursuant to Clause 14.6 of the STID               from Participating 
                                                               Qualifying Obligor 
                                                               Secured Creditors 
                                                               representing at 
                                                               least 75 per cent. 
                                                               of the total Outstanding 
                                                               Principal Amount 
                                                               of Qualifying Obligor 
                                                               Senior Debt. 
If the STID Proposal is approved and the Obligor 
 Security Trustee has announced such approval 
Execution of Implementation Documents and implementation      On the Implementation 
 of the STID Proposal                                          Date - currently 
                                                               expected to occur 
                                                               within 5 Business 
                                                               Days from the announcement 
                                                               of approval of 
                                                               STID Proposal. 
                                                               The Implementation 
                                                               Documents shall 
                                                               take effect from 
                                                               the Effective Date 
                                                               (which shall have 
                                                               the meaning given 
                                                               to it in the STID 
                                                               Proposal). 
If the conditions to payment of the Instruction 
 Fee are satisfied 
Payment of the Instruction Fee to those Bondholders           On the Payment 
 who are eligible for payment in accordance with               Date which is expected 
 the conditions set out in the STID Proposal                   to be on or about 
 Information Memorandum.                                       the fifth Business 
                                                               Day following the 
                                                               STID Proposal having 
                                                               been approved and 
                                                               the Obligor Security 
                                                               Trustee having 
                                                               announced such 
                                                               approval. 
 
 

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

General

Subject to applicable law and as provided herein, the 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 STID Proposal Information Memorandum and, if so, should adhere to such deadlines if such deadlines are prior to the deadlines set out in the STID Proposal Information Memorandum.

In relation to the delivery or revocation 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 STID Proposal Information Memorandum. The deadlines specified by the relevant Clearing System may be earlier than the Expiration Time.

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

A complete description of the terms and conditions of the Consent Solicitation will be set out in the STID Proposal Information Memorandum. Bondholders are also invited to access read-only copies of an investor presentation prepared in connection with the Consent Solicitation by visiting https://www.netroadshow.com/nrs/home/#!/?show=991981a8 and using the requested entry code

" MAG2020 ".

For Further Information:

Further details on the Consent Solicitation and copies of the STID Proposal Information Memorandum can be obtained from:

The Solicitation Agents

Barclays Bank PLC

5 The North Colonnade

Canary Wharf

London E14 4BB

United Kingdom

   Tel:                  [phone] 
   Email:             [e-mail] 
   Attention:        Liability Management Group 

NatWest Markets Plc

250 Bishopsgate

London EC2M 4AA

United Kingdom

   Telephone:       [phone] 
   Email:             [e-mail] 
   Attention:        Liability Management 

The Tabulation Agent

Lucid Issuer Services Limited

Tankerton Works

12, Argyle Walk

London WC1H 8HA

   Telephone:       [phone] 
   Email:             [e-mail] 
   Attention:        Arlind Bytyqi 
   Website:          www.lucid-is.com/mag 

Disclaimer

This announcement must be read in conjunction with the STID Proposal Information Memorandum. The STID Proposal Information 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. This announcement is issued by Manchester Airport Group Funding PLC. None of the Solicitation Agents, the Tabulation Agent, the Obligor Security Trustee or the Bond Trustee accepts any responsibility for the contents of this announcement.

This announcement is released by Manchester Airport Group Funding PLC and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), encompassing information relating to the STID Proposal described above. For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is made by Jenny Cochrane (Secretary) at Manchester Airport Group Funding PLC.

Legal Entity Identifier number:

Manchester Airport Group Funding PLC - 2138006NA5VAMMBK3892

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May 26, 2020 03:01 ET (07:01 GMT)