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Allen & Overy (A&O) has advised on the structuring and documentation of a £100m bond issue for London City Airport in the world’s first securitisation of airport revenues made without an external guarantee. The deal was done on behalf of Morgan Stanley Dean Witter, as the arranger and lead manager of the deal. A&O senior securitisation assistant, Angela Clist, led the team, with direction from international capital markets partners, Paul Bedford and David Krischer. A team from Simmons & Simmons, led by banking partner James Bresslaw, advised London City Airport. Under the terms of the deal, the bonds were secured on all assets of the airport, including the airport site itself. The debt will also be repaid from London City Airport’s earnings, which come mainly from landing and take-off fees paid by airlines using the airport. Krischer said an historical analysis of the airport’s growth boosted confidence of the investment along with earnings growth from increased passenger and aircraft traffic. As a result, Morgan Stanley did not require an external guarantee of revenues because it was satisfied with forecasted profits. Krischer said the deal had been particularly successful because it had closed despite a “sluggish market for securitisation”, which he blamed on the run-up to the millennium.The deal is one of a number of innovative securitisation deals the firm has advised on this year. In May, Krischer advised stockbrokers BT Alex.Brown on the securitisation of income from the Tussaud’s Group, including London’s famous waxworks museum, Madame Tussaud’s. And in April, he also advised Morgan Stanley on the £1.54bn securitisation of Broadgate – Europe’s largest property securitisation. That deal also involved Simmons & Simmons, led by banking partner John Davies. Krischer said of the airport deal: “It shows how the securitisation market is expanding to cover a whole host of non-tradable assets. The conditions for a successful securitisation of an operating business is where there is a predictable cash flow and barriers to entry to the market.” London City Airport is understood to have earmarked the proceeds from the issue to pay off existing debt and finance acquisitions.

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