There are in excess of 20 senior debt lenders in UK PPP. PAs should ensure that consortia provide evidence that they have competed the Bank funding solution in the ITN period, either in the period up to bid submission or within the ITN return itself. By competing the Bank funder role, best value can be passed onto the PA.
In order to be able to evaluate bank funding solutions consistently between bidders, PAs must provide clear reference terms for:-
i. Reference Swap rate / Libor, including where applicable details of average loan life on which it has been calculated upon / interest basis, and process for "live rate" pricing
ii. the level of buffer to price in bank solution (typically 25 to 50 basis points in accord with Departmental requirements / best practice)
iii. credit interest rate for cash balances
iv. the percentage (or acceptable range) of the Unitary Charge that can or is to be linked to the selected inflation index
v. RPI swap pricing elements
PAs must request clear reference terms for:-
vi. other elements that must be priced / tendered (credit spread, MLA, swap spread over mid swaps, reserving and ratio requirements)
vii. general terms and conditions (including timetable, due diligence, credit approval, inter-creditor issues)
These areas should be evaluated in priced solutions and benchmarked against the current market terms and conditions. Appropriate Evidence Bases should be utilised.