Financing

7  The risk profile for lenders was improved at the committed finance offer stage such that the worst case outcome put 5 per cent of the loan at risk (compared to at least 10 per cent previously). Changing the risk profile for lenders could materially influence financing options. As was done in this case, Departments should continually assess the scope for repackaging the various types of debt. Before accepting the final loan package and pricing, they should ensure that their written advice from financial institutions is updated from current market knowledge for both the proposed and alternative sources of finance.

8  As with the Tube Lines deal, market perceptions of political risks could initially lead to higher costs. Departments should consider whether the prospect of an early refinancing, before major project construction milestones have been achieved, evidences uncompetitive original terms. In such cases, as with Tube Lines, a larger public sector share than the 50 per cent envisaged in current guidance should be negotiated - 60 per cent was achieved in the Tube Lines deal. The appropriate percentage will depend on the scope for reducing risk in the specific case.