Ambac offered the best overall package

1.44  The terms of the funding competition allowed bidders to provide any combination of funding solutions with the exception of the minimum 3% equity from Exchequer Partnership. When evaluating the bids, it was therefore important to consider the overall bid cost rather than the individual elements of the bid. Ambac's bid can be broken down into four elements (Figure 7). Although it did not offer the cheapest solution for all elements, the combined bid provided the most cost effective financing solution.

1.45  As Figure 7 shows, Ambac's monoline insurance fee was higher than that offered by the second monoline insurer. However, the financing was made cheaper by structuring the fee so that only one third was payable immediately, the remainder being payable over the lifetime of the bond. The final part of the bid was the provision of mezzanine financing. Three factors made this part of the bid attractive to Exchequer Partnership and the Treasury. First, Ambac offered to provide the funding at a margin 50 basis points lower than that offered by Société Générale. The second was that, as the mezzanine funders, Ambac agreed to lower the concession life cover ratio from 1.25 to 1.22. The impact of this was that through achieving a lower overall cost of finance Exchequer Partnership could reduce the unitary charge to the Treasury as the concession life cover ratio would be satisfied by lower revenue. The third factor was that a single provider of the senior and mezzanine debt was viewed as being advantageous in terms of management and communication.