Given the complex issues which Refinancings raise, it would not be surprising for an Authority to conclude that the simplest Refinancing proposal-particularly one that does not involve any change to Contract termination liabilities-was also the best. However, this assumption cannot necessarily be made and Authorities should be prepared to consider positively Refinancing proposals made by Contractors which involve features (including potentially increased termination liabilities in certain circumstances) which require separate and thorough VfM assessment. The Authority's work in completing this assessment will be greatly assisted by the Contractor presenting alternative Refinancing proposals which highlight the incremental VfM benefits available to the Authority of each proposal compared with another.
Refinancings raise important issues for Authorities both in evaluation and transaction implementation and so careful attention is needed in applying the relevant guidance. The VfM of each aspect of a Refinancing proposal should be thoroughly assessed, whether the assessment is quantitative, qualitative or both. Authorities should seek suitable expert advice, including financial and legal advice, from the outset of a Refinancing proposal and discuss, at each key stage, with HM Treasury the VfM assessment particularly in relation to refinancing proposals involving substantially increased levels of borrowings by the Contractor (§1.2).
HM Treasury
18th February 2005