9.16 If adopted, this approach could be implemented on an individual PFI project in the following manner.
9.17 As currently, the PFI contractor would be responsible for engaging its financial partners subject to a limited number of restrictions, related to the credit worthiness of the credit provider selected. The funders would provide guarantees to pay principal and interest as and when they fall due, rather than cash advances to commit to fund the project. At signature of the PFI contract, the Government would lend to the PFI project the sums needed to finance the senior debt portion of the overall financing package, provided the PFI contractor was able to offer credit guarantees for the full amount of these loans from credit providers of acceptable standing
9.18 With this arrangement in place, the Government would be lending funds to the PFI project with the benefit of a guarantee from the credit providers. If there was a default by the PFI contractor for any reason, these credit providers would fully repay the Government's loans in a timely manner. The Government's principal risk in lending would therefore be the credit worthiness of the credit provider, not the PFI project itself. In using this approach, the Government would not seek any significant additional rights, either in respect of drawdown limitations, covenants or in respect of events of default to those normally required by investors in similar transactions where they are currently guaranteed by specialised insurance companies.