Lovells

National Air Traffic Services (NATS) has successfully raised £600 million in an inaugural issue of London listed guaranteed secured bonds.  Lovells advised NATS on the bond issue and the associated refinancing of its bank debt, as envisaged in the restructuring implemented in March this year.  The firm has been working continuously with NATS since 1999.  

NATS has raised £600 million through an issue by its subsidiary, NATS (En Route) plc (the Issuer), of £600 million 5.25 per cent Guaranteed Secured Amortising Bonds due 2026, which are unconditionally and irrevocably guaranteed as to payments of principal and interest by MBIA.  The bonds are also secured by fixed and floating charges by the Issuer, NATS and NATS Holdings, on an equivalent basis to its existing bank debt.  The net proceeds of the bond issue are being applied towards repayment of an acquisition facility of £600 million and in meeting the expenses of the issue.  

The Lovells team on the bond issue was led by capital markets partner David Harris with support from capital markets partner Tauhid Ijaz and Julian Craughan, Natasha Williams and Kevin Ng on capital markets issues, corporate partner Roddy McKean and Charlotte Stracey-Clitherow on corporate issues, Vanessa Dennett on regulatory issues, and Jonathan Gay, Bryan Paisley, Susan Ghassemi and William Mendham on banking issues.  

Lovells worked closely with the NATS Group Legal Adviser, Kate Gregory.  Allen & Overy acted for the Managers, the Bond Trustee and the Financial Guarantor and CMS Cameron McKenna acted for the Intercreditor Agent and the senior finance parties.  Richards Butler advised the CAA.  

Commenting today, for the Lovells team, David Harris said:  

"This has been a complex and highly challenging transaction on which we were able to draw on our structured finance expertise and our experience in other specialist areas and provide advice on a fully integrated basis.  We were also able to build on our knowledge from advising on the PPP and the Composite Solution and were assisted by the close working relationship we have developed with the NATS team over the last four years.  This helped us achieve a very tight timetable for the launch of the transaction.  

It is satisfying that following an intensive period of activity, this important transaction for the NATS Group has been brought to a successful close.  It also represents another milestone transaction for Lovells Finance Practice, following the London Underground PPP transaction and the US$2 billion bond issue by SABMiller which closed last week."  

NATS (En Route) plc provides air traffic control services to traffic operating in UK airspace, as well as in the Shanwick Oceanic Control Area (being part of the North Atlantic for which the UK provides services).  It also provides terminal approach air traffic services to aircraft preparing to land at or departing from Heathrow, Gatwick and Stansted Airports.  

The provision of air traffic services is primarily controlled in the UK by the Transport Act 2000 and the Civil Aviation Act 1982.  The Issuer is the holder of the only licence issued under the Transport Act.  

The structure of the NATS Group derives from the implementation of the public private partnership (PPP) in July 2001, which provided for the separation of the provision of air traffic services (carried out by the NATS Group) from the economic, safety and air space policy regulation (carried out by the Civil Aviation Authority (CAA)).  Two operating subsidiaries were created, the Issuer and NATS (Services) Limited.  The PPP also provided for the introduction of a private sector partner, the Airline Group Limited (AG) as a significant shareholder in NATS Holdings, with strategic responsibility for the management of NATS Holdings and the NATS Group.  The other significant shareholder in NATS Holdings, the UK Government, has in addition to its ordinary shareholding, a special share in NATS Holdings.
 
The events of 11 September 2001 placed the Issuer's financial position under pressure and during 2002 a restructuring of the Group's financial position (known as the "Composite Solution") was developed.  This restructuring was finalised on 19 March 2003 and included the introduction of BAA plc as the second private sector shareholder in the NATS Groups.  Lovells advised NATS in relation to the PPP and the Composite Solution.

Previous involvement advising NATS

Lovells has been acting for NATS since the beginning of 1999 when the firm was appointed to act for them in connection with the proposed PPP which was the first Government sponsored PPP.  A Lovells team co-led by Peter Watts and Roddy McKean advised NATS over a period of two and a half years taking the transaction to the financial close in July 2001. This was the first successful completion of a PPP at that time.
 
Following financial close in July 2001, the events of September 11 had a severe impact on NATS' financial position.  Over an eighteen month period, a Lovells team led by Roddy McKean, Peter Watts and Matthew Cottis advised NATS in relation to the proposals for a restructuring of its financial position.  The intense negotiations over that period eventually culminated in a successful completion of the restructuring in March 2003.

The Bond issue referred to above was the final stage of the restructuring process.

Lovells' capital markets practice is part of the international finance practice, which includes 89 partners and 180 other fee earners, focused on four main areas:

• banking
• business restructuring and insolvency
• capital markets
• project finance

SABMiller plc

This is the second significant bond issue, on which Lovells has advised, that has closed in the last week.  On 13 August 2003, Lovells announced that it had advised SABMiller, the world's second largest brewer by volume, on its successful US$2 billion issue of London listed, investment grade corporate bonds.