UPDATE 3-BAA to raise 500 mln stg equity, targets bond issue

* Cash to facilitate access to bond market

* To develop long-term finance platform to upgrade airports

* Ferrovial to contribute 112 mln stg to cash injection

* Ferrovial shares up 2.2 percent

(Adds amount of bond issue, analyst comment, Ferrovial share of cash injection)

By Ben Deighton and Tracy Rucinski

LONDON/MADRID, Nov 13 (Reuters) - BAA, the debt-laden operator of Britain's Heathrow airport, said on Friday it is to raise 500 million pounds ($831 million) in equity to help shore up its balance sheet as it works to access cheaper bond financing.

The chance for it to raise bonds will be a welcome relief for its majority owner, Spain's Ferrovial (FER.MC), which used debt to buy BAA at the top of the market in 2006, and is now being forced to sell off several key airports during a recession.

"The capital hike is in preparation for a bond issue, which will take place at the end of the first quarter of 2010," a Ferrovial spokesman told Reuters.

The spokesman later specified that the issue, which Ferrovial Chief Executive Inigo Meiras said in October would top 1 billion pounds [ID:nLE271830], was more likely to be launched before the end of this year or the beginning of next year.

"We believe this additional equity will be used to improve coverage ratios and is therefore driven more by opportunism than a need for more equity," said Scott Ryall, analyst for Macquarie Equities Research. BAA said in October that it was planning to re-enter the bond market "soon" after it offloaded Gatwick airport and paid down 1 billion pounds of its debt. [ID:nLS625675] [ID:nLL688906]

The firm currently has in place expensive bank loan financing, a legacy of its takeover in 2006 by a group led by Ferrovial.

At that time it planned to use the bond market to take out a 9 billion pounds bridge loan, but the securitization market shut down before it could complete the arrangements.

Ferrovial suffered a further setback when the UK's Competition Commission ruled in March that it should sell Stansted and either Edinburgh or Glasgow airports just as the credit crunch kicked in and financing disappeared or became highly expensive. It is now appealing the decision.

Bond pricing has since recovered, but before BAA can access the bond market it wants to raise equity to pay down more of its expensive bank debt and improve its financial ratios.

One bright spot came when the UK Department of Transport issued a watered down version of proposed solvency rules for airport operators, a move which analysts said would pave the way for new bond issues by BAA. [ID:nLD609219]

The airports operator will need to sell bonds on a regular basis to help it fund its programme of upgrading its portfolio of airports.

The new equity capital consists of 200 million pounds of new equity from shareholders, and 300 million from BAA Airports Limited and FGP Topco Limited, the ultimate holding company of BAA, which is jointly owned by BAA's three controlling shareholders.

Ferrovial, which holds 55.87 percent of BAA, will contribute 112 million pounds to the cash injection, a spokesman said, with the remainder coming from BAA's other shareholders.

Canada's Caisse de Depot et Placement du Quebec (CDPQ) controls 26.48 percent of BAA and the Government of Singapore Investment Corporation (GIC) 17.65 percent.

At 1318 GMT shares in Ferrovial were up 1.8 percent. ($1=.6017 pounds) (Reporting by Ben Deighton and Alex Chambers in London and Tracy Rucinski in Madrid; Editing by Kate Holton and Mike Nesbit)