Already buckling under heavy debts, airports operator BAA suffered a further blow when its credit rating was slashed to BB-, relegating it to junk status.

Credit rating agency Standard & Poor's said poor quality service and high staff turnover in senior management had prompted the cut.

BAA, which operates Heathrow, Gatwick and Stansted, was acquired by a consortium led by Spanish group Ferrovial for £16.3bn. The deal was highly leveraged and the group has since encountered refinancing delays that could lead to 'liquidity tensions' S&P warned.

The high leverage allowed the consortium to take advantage of generous tax relief on interest on debt, but the company, with earnings of £879m, now has little headroom to cover the £820m debt on BAA's books.

The BAA rating cut will raise concerns over foreign acquisitions of key UK assets and the risks using of heavy leverage to make acquisitions.

Further reading:

Interest relief tops business tax agenda

Ewing flies out of BAA

BAA chief warns against flying tax