MoD closes largest PFI ever
The Ministry of Defence (MoD) has closed the largest UK PFI
transaction to date. The £551.7 million deal will refurbish and
service the MoD's main headquarters in London. It is rumoured that
the government will have to service some £70 million in annual
payments.
The arrangers on the deal are Dresdner Kleinwort Benson (lead arranger), Halifax Group Wholesale Treasury Banking (insurance bank), Bank of Scotland and Credit Agricole Indosuez (technical banks).
The funding on the transaction was split 90:10 between bank debt and equity. The equity tranche is being funded by the banks and includes an equity bridge.
Moreover, the total debt side of the deal was split between a £300 million 25-year facility and a £200 million 27-year facility. Each arranger picked up a quarter of the deal. However, Halifax is rumoured to have favoured more of the 27-year than the 25-year facility. Margins are said to be 120bps at construction, dropping to 100bps on operation.
The transaction backs the Modus consortium in its PFI contract to refurbish the MoD's Whitehall headquarters. Modus is made up of Hyder Investments (40% stake), Amey Ventures (20%), Macquarie Infrastructure Projects (27%) and Innisfree Partners (13%).
Although Kvaerner retains its role as the sole contractor on the project, Macquarie Infrastructure Projects has taken over the former's investment assets. In addition, Amey Ventures is investing £11 million in Modus Services Ltd, the special purpose vehicle (SPV) for the project.
The refurbishment of the main headquarters totals some £300 million over a four and a half-year programme period. The project is under a 30-year concession. In addition, the £1.5 billion project will allow Amey Business Services to manage over 60 services for the 30-year contract period. Part of the concession is the relocation of 4,000 personnel, whilst refurbishment takes place.
According to Cathryn Vickers, partner at Masons: ?The project not only involved a number of different legal considerations but also required a number of technical issues to be resolved, particularly concerning the logistics of relocating a large number of people for the duration of the refurbishment.?
Awarded in January 1999, Modus beat off consortia, led by Serco and Bucknall. Price Waterhouse advised the concessionaire, whilst Coopers and Lybrand worked together with the MoD. When both accountancy firms merged, each retained its separate advisory role.
Although the sponsors had examined the viability of tapping the bond markets, it was decided that despite the deal size, the bank market was able to absorb these larger volumes.
Other high profile PFI transactions for the MoD include an estimated £165 million to £247 million deal for the Apache Attack Helicopter Training facility. The sponsors, Boeing and GKN Helicopters, awarded the mandate to Royal Bank of Scotland, Bayerische Landesbank and HSBC.
With KPMG as its financial adviser, the MoD has been in talks with other potential sponsors. One of the proposed transactions is a SkyNet satellite deal, which is estimated to come in at £5 billion. Other mandates in the pipeline include a large Ro-Ro transaction and the Future Strategic Tanker Aircraft (FSTA) deals.
The arrangers on the deal are Dresdner Kleinwort Benson (lead arranger), Halifax Group Wholesale Treasury Banking (insurance bank), Bank of Scotland and Credit Agricole Indosuez (technical banks).
The funding on the transaction was split 90:10 between bank debt and equity. The equity tranche is being funded by the banks and includes an equity bridge.
Moreover, the total debt side of the deal was split between a £300 million 25-year facility and a £200 million 27-year facility. Each arranger picked up a quarter of the deal. However, Halifax is rumoured to have favoured more of the 27-year than the 25-year facility. Margins are said to be 120bps at construction, dropping to 100bps on operation.
The transaction backs the Modus consortium in its PFI contract to refurbish the MoD's Whitehall headquarters. Modus is made up of Hyder Investments (40% stake), Amey Ventures (20%), Macquarie Infrastructure Projects (27%) and Innisfree Partners (13%).
Although Kvaerner retains its role as the sole contractor on the project, Macquarie Infrastructure Projects has taken over the former's investment assets. In addition, Amey Ventures is investing £11 million in Modus Services Ltd, the special purpose vehicle (SPV) for the project.
The refurbishment of the main headquarters totals some £300 million over a four and a half-year programme period. The project is under a 30-year concession. In addition, the £1.5 billion project will allow Amey Business Services to manage over 60 services for the 30-year contract period. Part of the concession is the relocation of 4,000 personnel, whilst refurbishment takes place.
According to Cathryn Vickers, partner at Masons: ?The project not only involved a number of different legal considerations but also required a number of technical issues to be resolved, particularly concerning the logistics of relocating a large number of people for the duration of the refurbishment.?
Awarded in January 1999, Modus beat off consortia, led by Serco and Bucknall. Price Waterhouse advised the concessionaire, whilst Coopers and Lybrand worked together with the MoD. When both accountancy firms merged, each retained its separate advisory role.
Although the sponsors had examined the viability of tapping the bond markets, it was decided that despite the deal size, the bank market was able to absorb these larger volumes.
Other high profile PFI transactions for the MoD include an estimated £165 million to £247 million deal for the Apache Attack Helicopter Training facility. The sponsors, Boeing and GKN Helicopters, awarded the mandate to Royal Bank of Scotland, Bayerische Landesbank and HSBC.
With KPMG as its financial adviser, the MoD has been in talks with other potential sponsors. One of the proposed transactions is a SkyNet satellite deal, which is estimated to come in at £5 billion. Other mandates in the pipeline include a large Ro-Ro transaction and the Future Strategic Tanker Aircraft (FSTA) deals.
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