MADRID (Reuters) - Cash-hungry Spanish infrastructure group Ferrovial (FER1.MC) is set to sell-off more assets to cut its debt pile and placate embattled investors, with British airports likely to be next under the hammer.
A boom-years buying spree, which included the high-profile capture of UK airports operator BAA in 2006, has come back to haunt the firm, after debt concerns weighed on its stock and UK regulators forced the sale of Gatwick at a loss.
Complicating matters is the hefty personal debt held by Chairman Rafael del Pino"s family, who control 44 percent of Ferrovial and bought 5 percent stakes in firms like Acerinox (ACX.MC) and Indra (IDR.MC) at the top of the market.
The investments have since caused friction among the siblings as, while the official level of the family"s debt is unknown, sources said part of it was backed by Ferrovial shares priced at record highs in 2007.
"The del Pino family wants to be sure dividends keep flowing up. They have their own debt that has to be repaid," an industry source said.
Ferrovial lifted its 2008 dividend to 2.0 euros per share from 1.15 euros in 2007 after shaving debt by over 6 billion euros.
It cut debt by a further 1.8 billion euros last year to 22.2 billion euros, but a total dividend for 2009 won"t be announced until the company"s annual shareholders" meeting, likely to take place this spring.
"The company"s idea is to have a reasonable dividend within the industry it operates. Given it"s meeting debt covenants, we could see another dividend similar to last year"s," said Deutsche Bank analyst Daniel Gandoy.
Any hike in the 2009 dividend may be met coldly by the del Pino"s fellow investors, however, many of whom think the company should remain focused on cutting debt rather than pleasing shareholders, said analysts.
Ferrovial has a net debt-to-equity ratio of 487 percent, more than double that of Spanish infrastructure peer ACS (ACS.MC) with 215 percent.
NO-STRESS SELLING
The new asset disposals will likely mirror Ferrovial"s move last week to sell 10 percent of its crown jewel, Canada"s 407 Express Toll Route (ETR), and a BAA stake or one of its airports could be next in the shop window.
Ferrovial could fetch over 500 million euros from the high-profile ETR sale, analysts said, helping to pay down debt while providing a higher benchmark valuation for the tollway, thus easing debt financing costs and driving its shares.
"We believe the potential sale could close the discrepancy between that implied by Ferrovial"s share price and that which potential acquirers may be wiling to pay," Credit Suisse analyst Robert Crimes said.
Lower financing costs would help the infrastructure giant nurse a bruised bottom line after a 92 million euro loss in 2009. But if bids don"t match Ferrovial"s aspirations, it will pull the sale.
"They"re not stress sellers. But they could sell other assets where they can give a valuation benchmark," said Gandoy, citing a stake in BAA as one possibility. Deutsche Bank values Ferrovial"s 55.8 percent of BAA at 1.1 billion euros excluding debt.
The sale of a minority stake in BAA would also help Ferrovial service 1.6 billion pounds of subordinated debt that matures in 2011, as would the sale of another BAA airport such as Glasgow or Stansted.
UK regulatory pressure has temporarily abated since Ferrovial won an appeal against a ruling it should break up control of Britain"s airports within two years.
However, Ferrovial Chief Executive Inigo Meiras hinted at a 2009 results presentation the company could sell another airport before a fresh competition ruling, which he expects toward the end of 2011.
"If credit markets prove to pick up, we could see the sale of an airport in Scotland this year," Gandoy said.
BAA is already in exclusive talks to sell its stake in property holding Airports Property Partnership, which has airport hangars, warehouses and offices and has been valued at around 400 million pounds ($611.1 million).
Beyond BAA, other possible disposals include the Ausol I and Ausol II motorways in southern Spain, the Autema motorway in Catalonia and non-regulated airports such as Naples. Services assets in Spain could also fall under the axe.
The sales will also help Ferrovial finance a heavy investment drive, which includes a 4.8 billion pound investment in Heathrow and 3.2 billion euros in two big Texas road projects awarded to its Cintra motorway unit.
"Ferrovial has made clear its asset rotation strategy will continue," said Bruno Silva of Portuguese brokerage BPI.
($1=.6545 Pound) ($1=.7318 Euro) (Editing by Simon Jessop)
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