BAA, the airports operator, has abandoned plans to sell its £1 billion property portfolio intact because of turbulence in the financial markets and will instead sell its buildings in batches.

The company announced yesterday that it would sell 33 properties to Arora Family Trust, a private group, for £265 million, but has yet to find a buyer for the remaining assets.

BAA, which was bought by the Spanish infrastructure group Ferrovial in 2006, put its noncore property up for sale last year in an attempt to reduce its £10 billion debt. The failure to secure a buyer for the entire property arm will raise questions about BAA’s ability to refinance its debt this year. If the company cannot refinance it may run out of cash.

The Airport Property Partnership (APP) is a joint venture between BAA and Morley Fund Management and owns dozens of properties on airport sites around the UK, primarily office blocks and cargo warehouses.

APP was initially valued at about £1.1 billion. However, falling property prices and market difficulties have delayed a sale and BAA has been forced into breaking up the assets.

Two property groups, ProLogis and Brixton, are thought to have teamed up to buy APP last year but they walked away from the deal when BAA refused to reduce the price. Morgan Stanley, which is advising BAA and Morley on the sale, is believed to have suggested breaking up APP.

Money raised from the sale of the 33 properties to the Arora Family Trust property fund will be used to reduce APP’s debt and pay deal fees. The remaining money will be split between BAA and Morley. The Arora trust bought nine airport hotels from BAA two years ago in a £300 million deal.

BAA said yesterday that it would continue to negotiate the sale of the remaining parts of its property division and was confident that it would find buyers. The portfolio comprises 35 warehouses, 17 development sites, six aviation-related interests and offices.

However, if BAA fails to find a buyer for the remaining properties it may be forced to put a more important asset on the market to reduce its massive debt burden. Analysts believe Gatwick airport is the most likely to be sold if BAA becomes desperate.

Ferrovial took on about £10 billion in debt when it bought BAA and its interest payments nearly doubled last year to €1.9 billion. It is selling noncore BAA assets to reduce its liabilities and last week announced that Autogrill, of Italy, would buy World Duty Free for £546 million.

Ferrovial has also been trying to refinance the BAA debt since last year but has struggled with the credit crunch. If it fails to refinance, its interest payments will increase further and BAA’s credit rating is likely to be cut to junk status, making it almost impossible to raise more money.

BAA wants to migrate bondholders owed £4.6 billion into a new debt vehicle secured against the income generated by its London airports. The company started negotiations with bondholders last week through the Association of British Insurers.

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax