1 We appointed RBC Capital Markets (a part of the Royal Bank of Canada Group) to review key areas of LCR's financing of its obligations to build the Link and fund the operation of Eurostar train services. We set the following questions:
■ Is the current funding structure, involving a combination of bank and bond financing of varying maturity, optimal?
■ Was the funding achieved at prices consistent with the market price for the relevant degree of risk taken?
2 In preparing its responses, RBC Capital Markets reviewed material held by the Department and made specific enquiries of LCR, the Debt Management Office and Citigroup, the Department's advisers. Information specific to the Section 2 financing transactions (issue of the 2002 Government Guaranteed Bonds; the 2003 bond issues for the securitisation of track access charges and the associated interest rate swaps transactions; and the 2003 bank facilities) was examined to gain an understanding of:
■ the decision making process of the Department;
■ the details of the selected funding route; and
■ the execution process.
3 RBC Capital Markets drew on its knowledge of the capital markets, market conditions at the time of the various debt issues, interest rate management and methods of placing debt in the market to assess, as best it could, the efficiency of the financing and whether best practice was followed. Wherever possible, RBC Capital Markets tested its own experience and views against publicly available information.