Royal Bank of Scotland, book-runners for the stage as well as joint leads with Deutsche Bank, received a 100% strike rate with a list of familiar PFI names. Dexia, DG, NatWest, HypoVereinsbank, Bayerische Landesbank, Scotia Bank, Dai-Ichi Kangyo, Lloyds and DEFPA  all bit for a £15 million ticket, scaled back to £10 million.

The loan's term life is 25 years, with a margin pre-completion of 120bp over Libor. After the hospital has been built it drops to 100bp. The loan pricing was fairly good viewed from a banking perspective, given the plummeting margins attracted by PFI projects in this half of the year. Ronnie Jack, from RBS' PFI unit in Edinburgh, noted that there was still a degree of enthusiasm in the market for the project.

RBS' involvement goes back to their mandate as debt provider back in the summer of last year, although the project itself has been gestating since 1994, when the consortium was named as preferred bidder. The hospital was designed to replace the ageing Queen Margaret Hospital in Swindon, and the project got the green light from the government in mid-1997. The successful bidder was The Hospital Company (Swindon & Marlborough), a special purpose company formed by Carillion, United Medical Enterprises (UME) and Barclays Infrastructure.

Difficulties over obtaining a suitable site and approval for the building, located on a greenfield site, caused most of the delay on the project. The consortium was forced to put into place elaborate screening measures to obscure the hospital and car park outlines, and to point out that the land taken up was of low agricultural grade.

Swindon Borough Council granted outline planning permission in July 1998, with final approval from the Department of the Environment, Transport and the Regions in January of 1999. Due diligence took place in April, and construction started within days of funding in October.

According to Graham Farley, Director of Project Finance at Carillion's PFI Unit in Wolverhampton, the deal "took longer than most because it was one of the first PFI projects in the health sector and involved complex planning and land issues". Over the life of the project several banks fell away from the deal, including UBS at the time of its takeover. The final arrangers emerged after Carillion asked for a review of the pricing and structure of the deal last summer.

The new hospital is run on a 30-year concession basis, although Swindon and Marlborough NHS Trust will continue to provide clinical services at the hospital. UME has a management contract with the SPC to manage the facilities and services provided there. These are subcontracted to Carillion's services arm, in a similar fashion to Carillion's construction contract for the hospital.

The hospital has been a long time in development, and hospital projects can arouse strong emotions in the public at large. Swindon's process of consultation has gone smoothly, however. The project's sponsors have maintained a close relationship with the Trust's management during the development of the hospital, even going so far as to set up shop near to the existing trust offices on a nearby industrial estate. Farley says, "We've had a good working relationship with the trust and we'll continue to build on it."

Swindon represents the last of the first wave of 15 PFI hospital deals that have been conducted under the government's Treasury Taskforce. The proposed new guidelines emanating from the taskforce over 1999 have caused a great deal of head-scratching by PFI bankers, however. The guidelines on contractor default concession termination, while applying a more rigorous approach on the part of the government to the value of their projects, will have to be tested in the risk allocation process. With luck, according to one banker, more overt market value compensation scenarios should emerge.

This trend looks set to continue with the next wave of projects - not merely because of the change in emphasis signalled by the creation of Partnerships UK, successor to the Treasury Taskforce. Structures have become tighter to respond to a similar process in the market. In the future, competition between contractors and a revision in NPV assumptions could alter the terms given on PFI deals.

PFI specialists are at present tight-lipped about how margins will be affected, but concede that the structural shift will cause some shake-ups in the previously torpid PFI market.