PFI Lenders hold on to PFI funds
Senior lenders on Jarvis's former private finance initiative construction projects are understood to be withholding cash needed to complete work on schools and hospitals because they want to satisfy themselves that they are getting value for money.
It has emerged that the banks controlling the money will not release it until they have carried out their own audits, threatening further delays to projects including new acute facilities at the Whittington hospital in London and work on primary schools in Richmond upon Thames. Jarvis's apparent success in quitting its PFI obligations without jeopardising the 14 projects involved was hailed by proponents of PFIs as evidence that, even when the private sector runs into difficulties, the partnership model still works.
News of the latest hitch, however, may bolster critics who have warned that PFIs were vulnerable to financial problems suffered by the private consortiums responsible for delivering them.
Jarvis and investors in its former special purpose vehicles (SPVs) - set up to run the PFI contracts - raised more than £100m to get the outstanding work completed on all 14 contracts.
That sum is now being kept in trust accounts to ensure that Jarvis and its creditors cannot touch it.
But its release and use requires consent from two current SPV stakeholders and the senior creditors that lend money to the projects. The investors that now own the SPVs - Barclays Private Equity, the Secondary Market Infrastructure Fund and Halifax Bank of Scotland - have had technical teams assess how long the work will take to finish. They have also selected a series of subcontractors. But the project lenders, which are understood to include Barclays Bank, SociétéGéné rale, Bank of Ireland, NIB Capital, AXA, Nationwide and Helaba bank, are not satisfied and want to carry out their own assessments with their own technical consultants.
One person close to the deal said: "The banks are suffering from a lack of reality. They control the money going out of the door but delays and empty sites cost money. The delays in releasing the cash only mean that more money will eventually be needed to complete the projects. I estimate that every week of delay across all the projects costs about £500,000."
Nationwide said: "The funding will be released when appropriate. This is normal process." AXA said: "Our unlisted financial activities are confidential." SG Corporate and Investment banking said: "We are the agent bank on one of the projects. We act as a co-ordinator but we cannot comment further. We are not holding up the paperwork."
The Bank of Ireland, Barclays Bank and NIB Capital declined to comment.
http://news.ft.com/cms/s/2605e12e-821c-11d9-9e19-00000e2511c8.html
It has emerged that the banks controlling the money will not release it until they have carried out their own audits, threatening further delays to projects including new acute facilities at the Whittington hospital in London and work on primary schools in Richmond upon Thames. Jarvis's apparent success in quitting its PFI obligations without jeopardising the 14 projects involved was hailed by proponents of PFIs as evidence that, even when the private sector runs into difficulties, the partnership model still works.
News of the latest hitch, however, may bolster critics who have warned that PFIs were vulnerable to financial problems suffered by the private consortiums responsible for delivering them.
Jarvis and investors in its former special purpose vehicles (SPVs) - set up to run the PFI contracts - raised more than £100m to get the outstanding work completed on all 14 contracts.
That sum is now being kept in trust accounts to ensure that Jarvis and its creditors cannot touch it.
But its release and use requires consent from two current SPV stakeholders and the senior creditors that lend money to the projects. The investors that now own the SPVs - Barclays Private Equity, the Secondary Market Infrastructure Fund and Halifax Bank of Scotland - have had technical teams assess how long the work will take to finish. They have also selected a series of subcontractors. But the project lenders, which are understood to include Barclays Bank, SociétéGéné rale, Bank of Ireland, NIB Capital, AXA, Nationwide and Helaba bank, are not satisfied and want to carry out their own assessments with their own technical consultants.
One person close to the deal said: "The banks are suffering from a lack of reality. They control the money going out of the door but delays and empty sites cost money. The delays in releasing the cash only mean that more money will eventually be needed to complete the projects. I estimate that every week of delay across all the projects costs about £500,000."
Nationwide said: "The funding will be released when appropriate. This is normal process." AXA said: "Our unlisted financial activities are confidential." SG Corporate and Investment banking said: "We are the agent bank on one of the projects. We act as a co-ordinator but we cannot comment further. We are not holding up the paperwork."
The Bank of Ireland, Barclays Bank and NIB Capital declined to comment.
http://news.ft.com/cms/s/2605e12e-821c-11d9-9e19-00000e2511c8.html
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