Index

Notes: References refer to paragraph numbers in Parts 1, 2 and 3; ES indicates paragraphs in the Executive Summary on pages 1-7; a number followed by (n0) refers to a footnote attached to the paragraph – for example 1.2(n6) refers to footnote 6 to paragraph 1.2.

£1 million as immediate payment to Prison Service ....................... 1.30

ABN Amro (financiers) .............................................................. .2.16

additional benefits .................................................................. Fig 7

additional value, shareholders ....................................... Fig 6, 2.4, 2.7

advisers see Freshfield; Rothschild

advisers

costs .............................................................................. .3.39

remuneration ............................................................... .3.36–39

Agecroft prison ......................................................................... 3.11

amendments, PFI contract .......................................................... 1.31

applying principles, strategies .............................................. ..3.23–39

approval by Prison Service .......................................................... 1.14

approval rights

contracts .......................................................................... 1.23

department negotiation ................................................ .3.28–29

assessing refinancing, departments ........................................... 3.2–22

assets, new ................................................................................ 2.5

Bank of America ......................................................................… 2.16

bank loans, fixed interest rate .............................................. 1.15, 1.17

banks, underwriting loans ..........................................................… 2.7

bearer instruments, definition ..................................................... 2.17

benchmarking techniques

identifying costs reductions ............................................. 3.9–10

refinancing benefits ......................................................... 3.6–12

sources of refinancing ..................................................... 3.11–12

benefits ………………………………………………………………………………………….……...2.1

additional ..................................................................... Fig 7

benchmarking .............................................................. 3.6–12

bringing forward ............................................................... 2.2

dependent on Prison Service consent ................................. 1.22

early repayment ........................................................... 2.8–11

extending term of funding ............................................... 2.3–4

FPSL .............................................................. Fig 4, 1.13, 1.22

future refinancing ............................................................ 3.27

lenders .......................................................................... 3.30

maximization ................................................................. 3.36

Prison Service .................................................. Fig 4, 1.13, 1.22

private sector .................................................................. 3.3

risk .............................................................................. 3.3–5

shareholders ................................................................. 2.3–4

bonds

bearer instruments .......................................................... 2.17

early repayment penalties ..................................... 17(n17) 2.17

issue ............................................................................. 2.17

sale .............................................................................. 2.18

borrowing rates ...................................................................... 2.19

Bridgend prison ………………………………………………………………………. 15(n16) 2.15

Bridgend prison

benchmarking techniques ............................... 3.11(n25), 3.12(n26)

financial savings ......................................................…. 3.17(n27)

Bridgend prison contract ..........................................................….. 1.23

Carillion plc (Tarmac) ............................................................... ES 1(n1)

FPSL investor ...................................................................…... 1.2

compensation

departments ..............................................................………… 3.13–14

Prison Service, risk .....................................................…………. 1.28–29

risk, Prison Service .....................................................…………. 1.24–33

termination liability exposure .......................................………….. 3.13–14

completion of implementation phase, funding costs ...................……………. 2.5–7

consortiums

refinancing withheld .................................................... …………3.32–35

relationship with departments .......................................... 3.20

termination liability ......................................................... 2.25

construction phase completion ................................................ 2.5–7

contingent liability, termination payments ................................. 2.24

contracts

see also PFI contract

additional termination liabilities ........................................ 1.11

approval rights ............................................................... 1.23

negotiation .................................................................... 3.22

prices ............................................................................. 3.6

Prison Service and FPSL .................................................... 1.33

private sector ..................................................... 2.12, 3.21–22

renegotiation ............................................................. 3.21–22

rights to share in gains ................................................. 1.6–12

termination

FPSL ...................................................................... 1.19

liability .................................................................. Fig 3

Prison Service .......................................................... 1.20

value for money ............................................................... 3.18

costs

additional termination liability ........................................... Fig 5

advisers .......................................................................... 3.39

funding ........................................................................... 2.19

completion of construction/implementation ................ 2.5–7

The Prison Service ........................................................... 1.26

reductions ................................................................... 3.7–10

semi-annual .................................................................. Fig 6

unwinding arrangements .................................................. 2.22

costs and benefits .................................................................. 3.16

debts, subordinated ................................................................ 2.8–11

departments

approval rights ........................................................... 3.28–29

assessing refinancing ................................................... 3.2–22

consortiums' alternatives ............................................. 3.32–35

consortiums' relationships ................................................ 3.20

future refinancing benefits ................................................ 3.27

general principles, refinancing .............................. ES 13, 3.1, 3.2

help with applying principles ........................................ 3.23–39

negotiations .............................................................. 3.28–29

other learning points ..................................................... ES 14

refinancing principles .................................................... 3.1–39

right to approve refinancing ......................................... 3.23–27

seeking compensation ................................................. 3.13–14

termination liability .................................................... 2.20–23

withholding consent ........................................ 3.23–31, 3.32–35

early completion of prison ................................................. ES 3, 3.19

early repayment

benefit ......................................................................... 2.8–11

bonds ................................................................... 17(n17) 2.17

equity capital ................................................................ 2.8–11

penalties .............................................................. 17(n17) 2.17

subordinated debts ........................................................ 2.8–11

equity capital, early repayment .............................................. 2.8–11

expanded guidance on refinancings ................................... ES 11, 1.12

extending term of funding, benefits .......................................... 2.3–4

falling interest rates ........................................................... 2.12–15

Fazakerley Prison Services Limited (FPSL)

consent, new financing arrangements .................................. 1.21

formation ........................................................................ ES 1

gains .......................................................................... 3.17–19

lenders ...................................................................... 1.1, 1.21

benefits .................................................................... 3.3

premature contract termination ........................................... 1.19

refinancing consent ................................................... ES 2, 1.21

reward ................................................................ ES 10, 1.9–11

risk, service payment deductions ........................................ 1.32

service payment deductions, risk ........................................ 1.32

Shareholders' benefit........................................................... 3.4

shareholder's returns........................................................ 1.2–4

subordinated debts............................................................ 2.11

Treasury guidance .............................................................. 1.7

fixed interest rate

bank loans ............................................................... 1.15, 1.17

breaking arrangements ...................................................... 1.19

Prison Service's consent ..................................................... 1.17

fixing rate, interest ................................................................. 2.14

FPSL see Fazakerley Prison Services Limited

Freshfields (legal advisers) ................................................ 1.16, 1.18

share of refinancing benefits advice .................................... 1.22

funding

availability ...................................................................... 2.19

costs .............................................................................. 2.19

completion of construction/implementation .................. 2.5–7

types ......................................................................... 2.16–18

further refinancing, PFI contracts ............................................. 2.1–25

future projects, other learning points ........................................ ES 14

future refinancing

benefits .......................................................................... 3.27

terminal liability .............................................................. 3.14

gains

attracting criticism ........................................................... 3.14

FPSL ................................................................ Fig 3.1, 3.17–19

general principles, refinancing ................................................ 3.1–39

Goddard, Theodore .................................................................. 1.17

Group4, FPSL investor ................................................................ 1.2

guidance

consortiums .................................................................... 2.25

PFI contractual terms ....................................................... 2.23

termination liability .......................................................... 2.25

Treasury .................................................................. 2.23, 2.25

guidance on refinancing

private sector risk .............................................................. 1.8

Treasury ........................................................................ 1.7–8

help with applying principles .................................................... 3.23–39

HMP Altcourse ....................................................................... ES 1(2)

identifying costs reductions ..................................................... 3.9–10

interest rates

favourable movement ...................................................... 3.3–4

fixing rate ....................................................................... 2.14

future projections .............................................................. 3.4

markets ..................................................................... 2.14–15

project company exposure ................................................. 2.13

risk in movement ............................................................. 2.12

taking advantage of fall ............................................... 2.12–15

issue, bonds ........................................................................... 2.17

lenders

benefits .......................................................................... 3.30

FPSL, seeking confirmation on new financing arrangements .... 1.21

risk taking ...................................................................... 2.19

lending margins, loans ..................................................... 1.15, 2.6–7

liability, see also termination liability

loans, lending margins ..................................................... 1.15, 2.6–7

Lowdham Grange prison ........................................................... 3.11

markets

development ..................................................................... 3.6

interest rates .............................................................. 2.14–15

negotiation

advisers' remuneration .................................................. 3.36–39

contracts ......................................................................... 3.22

remuneration linked to outcome ..................................... 3.36–39

strong position ............................................................ 3.23–31

negotiations, factors influencing ......................................... Fig 4, 1.22

opportunities for refinancing, PFI contracts ................................. 2.2–4

other learning points .............................................................. ES 14

payments

contingent liability ........................................................... 2.24

termination .............................................................. 2.22, 2.24

penalties, early repayment of bonds ................................. 17(n17) 2.17

PFI contracts .......................................................................... 1.2–4

ambiguity ......................................................................... 3.5

amendments ................................................................... 1.31

cost reductions .................................................................. 3.7

further refinancing ................................................ ES 12, 2.1–25

price ............................................................................... 2.19

Prison Service's approval for refinancing .......................... 1.13–14

refinancing opportunities .................................................. 2.2–4

sharing refinancing benefits ................................................. 1.6

termination ................................................................. 2.21–22

terms ............................................................................. 2.23

Treasury guidance ............................................................ 2.23

PFI deals

early .............................................................................. 2.19

refinancing opportunities ................................................... 2.19

PFI prison project, risk ....................................................... 1.10, 1.11

price, PFI contracts .................................................................. 2.19

prices, contracts ........................................................................ 3.6

The Prison Service

accepting £1 million offer ............................. ES 8–9, 1.25–27, 3.13

additional termination liability, value ................................. Fig 5

amendments to FPSL contract ............................................ 1.31

approval for refinancing ................................................ 1.13–14

approval rights, contracts .................................................. 1.23

benefits dependent on consent ........................................ 1.22

compensation consistency risk .................................... 1.28–29

compensation received .............................................. ES 8–11

consent

compensation ................................................ Fig 7, 1.28

initial refinancing proposals ................................ 1.15–17

new fixed interest rate ........................................... 1.17

refinancing ............................................................ 3.31

contracts

approval rights ...................................................... 1.23

with FPSL .............................................................. 1.33

price exploration .................................................... 1.11

rights ................................................................ 1.6–12

termination ................................................... Fig 3, 1.20

early completion benefit ................................................. ES 3

factors influencing negotiations ............................... Fig 4, 1.22

FPSL refinancing proposals ......................................... 1.15–17

FPSL reward ............................................................... 1.9–11

immediate payment ....................................................... 1.30

increased costs ..................................................... Fig 5, 1.26

initial refinancing proposals ........................................ 1.15–17

legal advisers ............................................................... 1.16

new contract ................................................................. 1.33

position summary ....................................................... ES 4–7

proportion of refinancing benefits .................................... 1.22

refinancing, consent ....................................................... 3.31

refinancing gains share ................................................ 1.6–12

refinancing objectives ................................................. 1.1–33

rewards ................................................................... 3.17–19

scope of the study ......................................................... ES 7

seeking advice, refinancing proposals ............................... 1.18

seeking compensation for risk ..................................... 1.24–33

strong negotiation position ............................................. 3.31

termination liability ...................... Fig 3, 1.13, 1.14, 1.20, 1.24–33

Treasury guidance ........................................................... 1.7

value for money ............................................................ 1.11

Private Finance Initiative (PFI) ................................................ ES 1

private sector

benefits ......................................................................... 3.3

contract renegotiation ............................................... 3.21–22

contracts ...................................................................... 2.12

costs reductions .............................................................. 3.8

gains attracting criticism ................................................... 3.14

value for money ........................................................... 3.15–16

private sector risk

gains ................................................................................ 1.8

guidance on refinancing ...................................................... 1.8

refinancing benefits ............................................................ 1.8

rewards ............................................................................ 1.8

project company, interest rate movement .................................... 2.13

proportion of refinancing benefits ............................................... 1.22

public sector

costs reductions ................................................................. 3.8

refinancing benefits ....................................................... 1.9–11

rate of return, shareholders ................................................. 3.17(n28)

refinancing, general principles ....................................... ES 13, 3.1, 3.2

refinancing opportunities, PFI contracts ...................................... 2.2–4

refinancing withheld, consortiums .......................................... 3.32–35

remuneration

linked to outcome ........................................................ 3.36–39

Rothschild ................................................................ 3.37, 3.39

renegotiation, contracts ........................................................ 3.21–22

reserve accounts ............................................................ 15(n10) 1.15

rewards to Prison Service ...................................................... 3.17–19

right to approve refinancing .................................................. 3.23–27

risk