Bradford council has reached financial close with the IntegratED consortium, Depfa and HSBC bank on its £400m (US$779m) BSF programme Local Education Partnership (LEP) agreement and phase one schools- the fifth BSF to close so far

After a  lapse since the first BSF closed for Bristol in June 30 2006, four more BSF scheme's; Greenwich, Manchester, Lancashire and Bradford  have closed within the last few weeks.

Greenwich and Manchester were announced to have reached financial close in November, Lancashire closed 15 December and Bradford - the latest to close - was on the 18 December.

What has become apparent since BSF was first launched that there is no real uniform way in which each local authority's BSF is structured.

This is not to say that the programme lacks structure- far from it - it seems at times to be burdened with an excess of it.

So far we have seen schemes  within BSF structured with:

• Local Education Parterships (LEPs)
• Strategic Partnerships
• BSF frameworks
• PPP
• non-PFI
• PFI

The BSF programme has for this reason been criticised for its over-complexity, for delays reaching financial close with individual schemes and for the participants being more concerned with debating structures than delivering projects.

What the programme is now showing with the recent spate of closes is that it is adaptable to authorities' individual needs and doesn't suffer from the problem of rigidity.

The projects in relation to each other

Greenwich is using a 'strategic partnership' structure with its private partner VT.

Manchester is closing individual schools one by one instead of having one financial close for the whole programme, and it is using a framework agreement with its private contractors, and is non-PFI and Lancashire has a PFI structure and a Local Education Partnership (LEP) with Catalyst education.

Bradford is also PFI, with its financial close consolidating its LEP agreement for each of its subsequent phases with its private partner IntegratED.

Looking at the amount of debt financing that has actually been signed off -£95m (US$185m) and a £9.3m (US$18m) equity bridge facility - only the first phase of schools have technically closed.

Bradford - the project

Bradford is one of four pathfinder schemes for the BSF programme. The others include:

• Sheffield
• Bristol
• and a joint scheme between the London boroughs of Greenwich, Lewisham and Southwark

The scheme involves three phases; the first is in wave one, the second in wave three and the last has just been confirmed in wave five.

The first phase has now closed together with the LEP agreement only for the rest of the phases, but not the financing of the other phases.

The first phase involves the construction (rebuilding) of three schools - Buttershaw High, Tong and Salt Grammar schools.

Construction has now started and is expected to finish in August 2008.

Phase Two will involve the renovation of Beckfoot, Grange Technology College, Greenhead and Hanson, plus the creation of six new special schools co-located on mainstream sites.

Funding has also now been confirmed for Phase Three which will see the rest of the regions secondary schools refurbished in the next five years, excluding recently completed buildings and those in the Academies programme

Bradford county council has now formed a Local Education Partnership (LEP) for a 10-year period with IntegratED - Bradford and Partnerships for Schools - the body set up by the DfES to deliver the BSF programme.

IntegratED were chosen as preferred bidder for Bradford on 16 January this year.

The consortium includes:

• Amey - partner
• Costain
• HSBC Infrastructure Fund Management

IntegratED is also supported by a construction JV of Costain and Ferrovial Agroman, Sun Microsystems and Amey Business Services.

Financing

Bradford's phase one has a capex of £75m (US$146m). Phase two will have a capex of around £112m (US$218m) and the whole programme has a value of around £400m (US$779m).

The financing covers phase one of Bradford's programme, and is provided by joint 50:50 MLAs Depfa and Bank of Scotland (BoS).

Phase one's full funding requirement is £104.3m (US$203m). The sum is a combination of:

• debt at £95m (US$185m)
• and a £9.3m (US$18m) equity bridge facility

The debt:equity ratio is around 91:9 and the debt is priced at around Libor +80-90bp.

KMPG acted act as financial adviser to the council, Addleshaw Goddard provide legal advice and Precept acted as technical adviser.

RBS was financial adviser to the sponsor with Allen & Overy acting as legal adviser.

The banks - Depfa and HSBC - were advised by Ashurst.

Conclusion

Even though the BSF programme had a slow start, it now seems to be picking up momentum. It isn't sticking to a uniform PFI structure, and neither is it strictly governed by the LEP structure.

Manchester is choosing to follow a structure of closing each school project individually, and Greenwich has entered into an agreement with its private partner - VT Group - to jointly make strategic decisions over the future of its own programme, giving VT a closer level of involvement.

Lancashire and Bradford have reasonably standard PFI/LEP structures, albeit with semi-closed programmes, waiting for subsequent phases.

Regions which have reached preferred bidder stage and are waiting to close are:

• Sheffield - Paradigm consortium as PB in July 2006
• Newcastle - Aura consortium as PB in August 2006
• Solihull - BAM PPP as PB in August 2006
• Knowsley - Transform schools as PB in December 2006
• Leicester - Miller consortium as PB in August 2006

The values of various council's programmes also greatly differ. While Waltham Forest's programme is valued at £200m (US$392m) Kent's programme could be anything between £500m (US$981m) to £1.8 billion (US$3.5m).

The lesson to be learnt at this stage of BSF is that programmes of this scope are pathfinders as a whole, within the sector and - to an extent - can avoid being limited by the same restrictions and rules that apply to smaller scale projects - such as all projects needing to have a uniform structure for the programme to progress - by redefining conventions according to itself.

The project at a glance