3.14 The July 1999 Treasury guidance recommends that, in the event of contractor default, a department's termination liabilities should be determined by reference to the market value of the contract (paragraph 2.23). If this basis is adopted, the termination liabilities in the event of contractor default should not be affected by any changes in the capital structure of the defaulting contractor whether through refinancing or otherwise. In respect of other termination scenarios, such as through the fault or volition of the department where compensation payments refer directly to senior debt, termination liabilities may still increase as a result of refinancing.