If a PPP Project is to be bond financed, the PPP Contract drafting must reflect the structure, parties and documentation involved. The key point to bear in mind is that in practice the drafting will not require much amendment. Broadly speaking, the main provisions affected are:
• Definition of the financing documents (e.g. "Senior Finance Documents") - this will need to include the bond finance documentation (but not any on-loan documents between the Issuer and the Private Partner).
• References to the relevant parties - the Issuer may need to be referred to if separate from the Private Partner, the definition of Lenders may need adapting.
• Termination payments - these need to reflect the bond mechanics. See Section 9.4.
• Confidentiality - apart from facilitating the disclosure around the PPP Project in the offering memorandum, the provisions will also need to permit details of the PPP Project to be disclosed to potential investors where the bonds are transferable. In addition, as well as the initial disclosure in the offering memorandum of the project arrangements, including details of contracts, securities laws will generally require ongoing public disclosure of project performance, especially of significant underperformance. This should both be borne in mind by project participants and be reflected in the Project Contract.
• Refinancing - the provisions need to permit ordinary trading of the bonds without triggering the refinancing provisions (e.g. by adapting the definition of "Exempt Refinancing").
The same applies to ensure the Direct Agreement works effectively (see Section 6, Lenders' Step-in Rights). Additional changes may be required to reflect certain bond mechanics (e.g. different reporting requirements/timing) and more than one party may want the rights normally afforded to the Agent (e.g. both the Credit Provider and the Security Trustee would normally receive all notifications usually provided to an Agent).
In considering amendments to documents, a Contracting Authority wishing to attract the full range of financing options will want to avoid making bond-specific amendments beyond those strictly necessary to ensure that it is not making other finance solutions less attractive to bidders and/or discouraging bank debt providers from participating. It will also want to ensure that any solution-specific amendments are objectively and duly justified.
Where the PPP Project is being financed through other means (e.g. bank debt) at financial close, but a bond refinancing is envisaged upfront, contract provisions should be drafted with this in mind. This may entail drafting provisions appropriately in the PPP Contract signed at financial close (e.g. as regards refinancing), as well as potentially scheduling amendments designed to come into effect when the bond refinancing is implemented. If a bond refinancing has not been contemplated in the PPP Contract, appropriate amendments will need to be agreed at the time when discussing consent and related matters. See Section 5, Refinancing.