9. The Departments and the banks that had lent money to Mapeley to buy the estate had "step-in rights" to take over the contract in the event of Mapeley's failure. Nevertheless, before the signing the contract, the Departments had not worked out all the consequences if Mapeley did fail. Since contract signature the Departments had considered what their position would be with the banks and how taxpayers' interests could be safeguarded. The Departments were still trying to encourage a greater degree of openness with Mapeley and its bankers. They had also commissioned work to build a better financial model of what would happen if, for instance, the property market collapsed.9 The Departments considered that their risk management strategy would provide an early indication if Mapeley were likely to get into financial difficulties again, and they expected Mapeley or its bankers to tell them if further problems were anticipated.10
10. In the STEPS deal, the money borrowed by Mapeley is secured on the Departments' estates, giving the lenders a higher degree of security than is normally the case under PFI arrangements.11 In a standard PFI deal, finance raised by the private sector is secured on the future cashflows of the project. Since those cashflows are dependent on delivery of a service to the public sector, lenders to a deal will only recoup their investment and make a return if the project is successful.
11. The arrangements for the termination of PFI deals because of contractor default had never been tested, so nobody could be sure what would happen. It was normal to give banks and other lenders a commercial incentive to step in and sort things out so that the public sector continued to get a service, which was better than a system that gave financiers an incentive to step in to protect their own interests, regardless of public sector concerns. The Departments were still looking at what they would need to do to ensure that facilities management services for the estate were protected. The contract would not become void if Mapeley failed and the Departments retained rights of occupation over the buildings.
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9 Q 183