Refinancing guarantee - To mitigate the impact of the financial crisis, the Flemish government introduced in April 2009 a refinancing guarantee scheme. The scheme is available to projects (i) which have already been tendered or would become ready for tender by April 2011 and (ii) which are undertaken as DBFM contracts with "De Lijn", the Region-owned company in charge of public transportation in the area.
Under the scheme, the Flemish government guarantees the lenders under certain conditions, such as where: (i) the debt refinancing obligation of the PPP company falls between year 5 and year 10 of the DBFM contract life; and (ii) the PPP company is not able to refinance the debt at prevailing market conditions.
In the event of a call under the guarantee, the Flemish government would repay the senior lenders and would substitute the original loan facility with a new one on identical terms albeit with a 25 bps pricing increase.
As a quid pro quo for providing the guarantee, the scheme requires that, if the refinancing is successfully implemented on the banking market, 75% of the financial benefits from the refinancing are passed through to the public sector.
Loan guarantee / Refinancing guarantee / Sub-sovereign creditworthiness guarantee - Recently, public sector guarantees have been granted in the context "Flemish PPP schools" project, a significant investment which will potentially include up to 211 schools. The transaction reached financial close in June 2010. The guarantees provided cover trigger events such as default on the senior debt service, failure to refinance and sub-sovereign status events.