2.26 AGP got a very good price on the sale of bonds to finance the project when launched on 20 March 2002. On this day, demand in the markets for the AGP bond was strong. The financial advisers carried out a thorough benchmarking process on the bond prices, monitoring spreads in the market prior to launch to establish appropriate benchmarks. They concluded that the terms of the bond achieved on launch were satisfactory and represented best available in the market rates. There was not a premium to the spread on existing bonds being traded on the market. The spread achieved was 65 basis points for the index-linked bonds and 70 basis points for the fixed rate bonds. These spreads were the cheapest new issue in the market for 5 years. Partnerships UK considers that the cost of financing reflected the good financial structure developed for the project, the Home Office decision, as far as possible, to use "standardisation" - the standard PFI contract terms issued by Treasury Taskforce10 - and a risk profile that was well understood in the market. Partnership UK agrees with AGP's advisers' view that the strength of the contractor, the track record of the sponsors to the bond, the central London location of the scheme, and the disciplined approach to the marketing of the bonds by the lead manager were also important influences. As well as this the bond launch was made easier by the absence of any major competitor for bond issues at the time. A planned utility securitization had been pulled shortly beforehand.
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10 Partnership UK’s predecessor.