The financiers will generally have security over the project agreement and sub-contracts, and the revenue stream of the project, but not over the project's physical assets. A direct agreement is a contractual document entered into between government and the financiers at the beginning of the project, that is intended to deal with the relationship between the two parties if the project agreements are terminated, or if there is a threat of termination, as a result of the private party's default. The direct agreement should provide the financiers' with the opportunity to step in and attempt to rescue the project, providing they can provide government with the comfort that they have the ability and resources to rescue the project and meet critical timeframes and output standards.
Under a financiers' direct agreement:
• Government will agree not to exercise its rights of termination under the project agreements until it has given the financiers the prescribed notices and opportunity to step into the project in place of the private party; and
• The procedures for step-in will be detailed, including the financiers' responsibility for remedying the private party's default and arrangements for payment.