BAA, the airports operator, was under increased pressure today to refinance debts after rating agency Moody's threatened to downgrade the group to junk status.

Moody's last night confirmed the Baa2 rating for BAA and said that it remained on review for possible downgrade to sub-investment grade, pending completion of the refinancing.

Ten days ago, BAA's shareholders were forced to pump an emergency £400 million into the airport operator after the group hit problems refinancing part of £10 billion of debts.

In a statement to the stock market, the company detailed the hurdles that it had still to overcome to achieve the refinancing.

BAA wants to transfer its London airports into a ring-fenced structure, in which the assets would be rated separately from the rest of the group.

However, Moody's gave warning that the next two to three weeks were critical for the refinancing.

"Failure to secure adequate commitments from banks within this period could cause the transaction timetable to slip materially and, in a worst case, could reflect a difficulty in bringing it to fruition.

"While Moody's would expect BAA to successfully source the required ratings and bank commitments, failure to demonstrate progress towards the expected timetable within the next few weeks could exert pressure on the ratings: a downgrade into speculative grade is possible if Moody's concludes that progress is insufficient to indicate that a financial close of the ring-fenced financing around summer 2008 is achievable," Moody's said.

The ratings were initially placed on review for downgrade on April 10, 2006, following the announcement that Airport Development and Investment, the vehicle set up to buy BAA by Spanish construction group Ferrovial, had made a formal debt-financed cash offer for BAA.

Moody's went on to say that, in its view, BAA has sufficient cash and facilities to see it through to early 2009. However, it will need additional facilities, either bank finance or equity, to ensure that it can meet its cash needs throughout next year.

BAA said that it had not yet finalised aspects of its refinancing plans nor has it managed to convince all its lending banks to transfer £4.7 billion of bonds into the new ring-fenced funding structure. It also said that it had not yet begun negotiations with its bondholders, but planned to do so through a special committee set up by the Association of British Insurers.

The airport group gave warning that the credit market turmoil caused by the global credit crunch may prevent it from completing its refinancing, although it was confident it would do so by the end of the third quarter.

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