Cash payment would form part of BAA's strategy to fend off Ferrovial's £8.75bn takeover bid.

BAA, the airports giant, is to offer its investors a £1 billion cash payment as part of a defence manoeuvre against the hostile £8.75bn takeover bid from Spanish construction group Ferrovial.

According to Sunday newspaper reports, the payment is likely to be a key part of BAA's defence document, which will be published this week.

It is understood that the company could raise the money by increasing its debt rather than selling assets. Its current borrowings stand at £5.5 billion.

According to the Sunday Times, Ferrovial is expected to return with a higher offer, but it may wait until BAA has published its defence. A consortium led by Goldman Sachs is understood to still be considering whether to table a rival offer.

The Spanish group will be keen to see how BAA values its surplus land assets, its overseas airports and huge retail opportunities arising from the new Terminal 5 at Heathrow. BAA is committed to investing £9.5 billion over the next decade.