The type, duration, size, payment mechanism requirements and risk profile of the project will impact on the senior debt funding solution alternatives.
The table below provides a guideline of the applicable funding routes for senior debt for projects of various sizes in today's market. In recent times the trend has been for bond funding to become available to lower scale projects than hitherto.
Senior Debt Size £ | Bank | Public Bond | Private Placement |
0 - 50m | Yes | No | Yes |
50m - 150m | Yes | Yes | Yes |
150 - 250+m | Yes | Yes | Yes |
Therefore, Procuring Authorities may have to evaluate different types of senior debt funding solutions within in bids and across different bidders. This necessitates the Pas set consistent reference funding rates (Libor and gilts) for bank and bond solutions to ensure consistent and meaningful comparison.
Consortia should not be required to provide alternative senior debt funding solutions when the alternative is not deliverable or will not enhance VfM / affordability of the project.
Whilst alternative funding options are a welcome sign of good competition for funding in the current market, bidders should nevertheless offer a clear and complete bid proposal to permit consistent and fair evaluation and selection of a preferred bidder. If an alternative funding solution is offered, the identity of the alternative provider and the key terms, including any contractual derogations sought, must be established before preferred bidder stage.