8.6. Substitution Agreement

This is a tripartite agreement among the lenders, the private partner and the public entity. The objective of the Substitution Agreement is to create or strengthen the framework for enhancing the flow of institutional debt finance, especially bank finance, to infrastructure projects. The public entity agrees to assign the rights, title, and interests in the concession to, and in favour of, the lender's representative (the nominated company under the provisions of the Substitution Agreement).

In general, the lender's representative may invoke the Substitution Agreement arising from private partner default to the public entity or from private partner default to the financial institutions under the financing agreements.

The Substitution Agreement may arise out of financial default by the private partner and this includes:

• material breach in the terms and conditions of financing agreements

• continuous default in debt service by the concessionaire for three months or more

If the private partner defaults, the public entity informs the lenders' representative of the need to substitute the private partner with a nominated company.

The senior lender's representatives may procure offers either by private negotiations, public auction or tenders for the takeover and transfer of the assets and liabilities of the private partner. The proposed nominated company needs to fulfil the eligibility criteria that were laid down by the Government for the original short-listing of the award of the concession.