A public sector body which lets a PFI contract. This may be a government department or an agency of a department. | |
The percentage rate applied to cash flows to enable comparisons to be made between payments occurring at different times. The rate quantifies the extent to which a sum of money is worth more to the Government today than the same amount in a year's time. | |
The capital contributed by the shareholders of a project company. The value of the equity is the value of a company or project after all liabilities have been allowed for. The equity is owned by the shareholders. | |
The first major PFI project to be refinanced and was the subject of an NAO report. | |
Spreadsheets designed to predict the most likely financial outcome of a particular set of estimated costs, revenues and fixed and capital charges for delivering a service over time. | |
The IRR is the discount rate at which the present value of the investors' receipts from a project equals that of their payments, including their initial investment. The IRR percentage return aggregates a series of annual percentages. It does not mean the investors will receive the IRR rate as a constant return each year. | |
London interbank offered rate. The interest rate at which banks will lend to each other. | |
NPV is calculated by aggregating the discounted values of a series of future cash flows with the initial investment. | |
A policy introduced by the Government in 1992 to harness private sector management and expertise in the delivery of public services, while reducing the impact of public borrowing. | |
The process by which the terms of the funding (which was put in place at the outset of a PFI contract), are later changed during the life of the contract, to take advantage of reduced risk in the project and often also improved terms and conditions from a more mature PFI funding market usually with the aim of creating refinancing benefits for the consortium company. | |
The refinancing of a project in financial difficulties. | |
The benefits to shareholders of increasing and/or bringing forward their returns from the project as a result of changes to the financing structure of the consortium company. | |
Payments made by the consortium to its shareholders in the form of dividends and interest on subordinated debt. | |
A market in which an investor purchases a security from another investor rather than the issuer, subsequent to the original issuance in the primary market. In the PFI market this tends to take the form of the sale of equity by investors in the project company in many cases to secondary funds that wish to build a portfolio of PFI assets. There is also a secondary market in debt (the syndicated debt market) usually between banks but also to other types of investors. | |
The original holder of loan assets (the "originator") transfers them to a special purpose vehicle ("asset backed securitisation") in order to capture incremental benefits derived from the lower probability of loss associated with a mixed pool of loan assets rather than an individual loan. Alternatively the originator may transfer only the economic risk and not the assets themselves ("synthetic securitisation"). This is typically done through a financial instrument, such as a credit default swap, and funding relating to the portfolio's risk is raised without using the originator's balance sheet. | |
Debt that, in the event of bankruptcy, must be repaid before subordinated debt receives any repayment. Senior debt lenders take security over the borrowers assets such that they have the highest ranking claim over the assets of the project company compared to all other lenders and investors. | |
Debt over which senior debt takes priority. In the event of bankruptcy, subordinated debt lenders receive payment only after senior debt is repaid in full. | |
A financial instrument that can be used to change the basis on which interest is paid on an asset or liability, for instance a floating rate is turned into a fixed rate or vice versa. | |
The amount of compensation payable by the Authority to the consortium's banks in the event of voluntary termination before the expiry date of the contract. | |
The achievement of the optimum combination of whole life cost and quality to meet the user's requirements. | |
The single periodic payment due from the Authority to the consortium in respect of the provision and operation of the asset. |