BAA's massive £10 billion debt burden will be reclassified as "junk" within two months, potentially triggering a financial meltdown at the airports operator as lenders recall their loans.

The company, which was bought by Spanish infrastructure giant Ferrovial two years ago, is attempting to refinance its debt but admitted yesterday that it would miss its end of June deadline.

Credit ratings agencies have warned that unless the debt is refinanced they will move BAA to junk status, potentially allowing £5 billion of bondholders to recall their loans.

BAA's attempt to refinance its debt has run into difficulties because the Competition Commission is due to give a preliminary report later this month on the company's control of London's main airports: Heathrow, Gatwick and Stansted. BAA is trying to use the revenue from these airports to secure the new debt packages but the Commission may force it to sell one of the airports, probably Stansted.

Investors are said to be waiting to see the Commission's report before backing the new debt.

If BAA is moved to junk status by all the credit agencies it will have to pay more for its debt and more to insure the debt. The company said it was negotiating with the credit agencies and is believed to be asking for an extension to the refinancing deadline.

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