A.37 Authorities should:
• work closely with their financial advisers to identify and monitor the development of project-specific issues that may affect the terms of finance;
• where the senior debt terms suggested by bidders are - in the view of the Authority and its financial adviser - not supported by market evidence, provide all bidders with standard financing assumptions;
• monitor the financing market and update their affordability and VfM sensitivity analyses and, where applicable, any standard financing assumptions provided to bidders;
• evaluate dialogue responses so as to understand the financial implications (such as operational gearing) for alternative bids e.g. where some bids are capital-intensive and others service-intensive; and
• seek guidance from their sponsoring department and/or Infrastructure UK on financing assumptions which might be appropriate for the project.
A.38 In addition to the assessment of a project's technical characteristics undertaken earlier in the dialogue phase, by late in dialogue, financial models should be sufficiently developed to reveal any unusual cash flow characteristics about which funders might have concern. To avoid difficulties following the announcement of the preferred bidder, financial advisers should run typical lender sensitivities on financial models to verify that there are no adverse results in the operational gearing, cash / ADSCR break-even and cost step-up sensitivities in particular. They should also verify that bidders' financial models do not rely upon unusual definitions of cash flow to achieve acceptable sensitivity results.