37.1.1 As discussed in Section 1.3 (Assumptions), the general assumptions behind this guidance are that a SPV contracts with the public sector, with Sub-Contractors providing the actual performance on its behalf, and makes use of a significant level of limited-recourse debt to finance the Project. This structure is known as 'project finance', meaning that the debt financing (provided by banks or the bond market) is raised on a project-specific basis, relies primarily on the PFI Contract and the various Sub-Contracts for security, and on the specific project cash flows for repayment.
37.1.2 However, "corporate finance", where the funding is raised based on the credit strength of the Contractor's or its parent company's general (non project-specific) business and balance sheet, also plays a role in some PFI transactions.
37.1.3 The differences between project and corporate finance (discussed in Section 37.2 below) mean that some aspects of this guidance will not be fully applicable to corporate-financed transactions. A number of issues follow from this:
• procurement implications, where some or all bidders may choose to use corporate finance (see Section 37.3 below);
• evaluation of corporate-financed bids (see Section 37.4 below);
• required amendments to standard drafting, especially as to Unitary Charge adjustments, insurances, refinancing and termination provisions, where a bidder wishes to use corporate finance (see Section 37.5 below);
• situations where a Contractor proposes to change from corporate to project finance, or vice-versa, at some time after Financial Close (see Section 37.6 below); and
• 'variant' structures which fall between corporate and project finance (see Section 37.7 below).