28.2.1 During the life of the Project, the Contractor may wish to replace, augment or change the structure, nature or terms of the financing solution that it put in place at Financial Close for the purposes of financing the Project. Where such restructurings or changes will have the effect of increasing or accelerating Distributions to investors or of reducing their commitments to the Project, these effects are individually and collectively referred to as Refinancing Gains.
28.2.2 A non-exclusive list of transactions which could be undertaken by the Contractor following Financial Close and which could give rise to a Refinancing Gain is set out below:
• reduction in interest margins;
• reduction or release of reserve accounts;
• release of contingent junior capital;
• extension in the maturity of debt;
• increase in the amount of debt;
• refinancings undertaken without the direct involvement of the Contractor, for example through a special purpose or holding company, but which rely upon rights being granted in respect of the cash flow, assets, or contracts of the Contractor; and
• refinancing undertaken in respect of an aggregated funding vehicle established to raise finance and lend debt finance to the Contractor.
28.2.3 Authorities should ensure that they review all finance documents prior to Financial Close and are provided with conformed copies of these at Financial Close. Authorities should further ensure that, if the Project is financed through an intermediate holding or associated company structure, the contractual restrictions on Refinancing are drafted to reflect this.
28.2.4 Refinancing is likely to be a matter for consideration by the Authority at different times during the life of a Project, notably when developing Contract terms in advance of the competition, when appraising bids submitted in response to the ITPD and during the Contract period itself. The complexity of refinancings means that it is important that Authorities seek appropriate advice when considering the subject and they should consult with their respective sponsoring Departments, Private Finance Units or HMT if there is any doubt about how the principles can best be applied in individual projects. It is also very likely that Authorities will need to seek the assistance of appropriate external advisers in respect of the financial and legal issues arising from refinancings both to ensure that this Guidance is properly reflected in project documentation and in any negotiations with the private sector on proposed refinancings.