Stephen Nelson, the chief executive of BAA, has quit amid growing concern that the beleaguered airports operator faces severe debt problems.

BAA, which owns Heathrow and Gatwick, will confirm his departure today, sources close to the company said.

Mr Nelson has been head of the BAA for less than two years, during which time the company has come under sustained pressure for poor service and long queues at its airports.

Mr Nelson has also squeezed every penny out of the seven airports that BAA owns to pay the enormous debt that Ferrovial, the Spanish infrastructure company, took on to buy the company.

He is expected to be replaced by Colin Matthews, the former chief executive of Severn Trent.

Mr Nelson is one of several senior BAA executives to have left since Ferrovial took over the company and he leaves the group as it is forced to consider drastic measures to reduce its £10 billion debt, including a cash injection from a new investor or a sovereign wealth fund.

The company, which owns Heathrow, Gatwick and Stansted airports, wants to reduce its interest payments by refinancing the debt.

Its preferred option is to securitise income from the airports and replace about £4.7 billion of bonds.

It is also selling assets, including the retailer World Duty Free.

The credit crunch has made debt deals hard to put together and BAA has delayed refinancing by six months.

If it failed to refinance, the interest rate would rise further and the debt could be moved to junk status, making it almost impossible for the company to raise more money.

Analysts have given warning that this could lead to BAA running out of cash, potentially forcing it to stop maintenance at airports and to halt building projects, such as the renovation of Heathrow’s Terminals 1 and 2 before the 2012 Olympic Games in London.

Ferrovial has said that it can continue with its existing financing arrangements until 2011, but analysts believe that it must complete a deal within a few months or the company could be crippled.

Robert Crimes, an analyst with JPMorgan, said: “They will be forced to refinance to maintain their debt ratings, but it is going to be tough to get it done by the middle of the year.”

Alternatives to the securitisation plan are thought to include taking on new bank debt or finding someone to swap debt for equity.

BAA is advised by Royal Bank of Scotland and Citigroup: the latter received a cash injection from the Abu Dhabi sovereign wealth fund last year.

Nicolas Villen, chief financial officer of Ferrovial, admitted that it was considering alternatives to refinancing. “The capital markets are very difficult. We are working on the refinancing. We think it is possible but we have to study alternatives,” he said.

Ferrovial hopes to complete a £400 million sale of World Duty Free next month, with Dufry, the Swiss retailer, the French conglomerate Lagardère and Altadis, the Spanish tobacco group, among the bidders.


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