As discussed in §1.1, the Authority's decision to agree to an increase in termination liabilities is quite separate from agreement to the Refinancing: this section considers the factors which the Authority should take into account in considering this issue.
As discussed in §1.2, the first step for the Authority is to establish its view of the maximum acceptable level of indebtedness for the Contractor. The proposed Refinancing will thus have been modified, as necessary, to comply with the Authority's view on the maximum acceptable level of Senior Debt. The Authority should then consider whether it is prepared to accept any increase in termination liabilities to reflect this increase in Senior Debt and, if so, on what basis.
Compensation is payable to the Contractor in a range of Contract termination scenarios, and the VfM implications of any increase in termination liabilities should be considered in each scenario, namely:
- Contractor default (cf. §1.3.1)
- Authority voluntary termination (or default) (cf. §1.3.2)
- Force majeure termination, and termination for Corrupt Gifts (cf. §1.3.3)