UK Law – Freshfields advises on first UK PFI monoline replacement

10 January 2012 – Freshfields Bruckhaus Deringer LLP has advised Worcestershire Hospital SPC Plc (formerly Catalyst Healthcare (Worcester) plc) (the Issuer) and the monoline guarantors, Assured Guaranty (Europe) Ltd. and Assured Guaranty Municipal Corp. (Assured Guaranty) on the replacement of Ambac Assurance UK Limited (Ambac) as monoline guarantor in relation to the Worcester PFI Hospital Project.

The Issuer entered into concession agreement (with a 30 year operational term) in March 1999 with the Worcester Acute Hospitals NHS Trust to design, build and provide certain facilities management services for a 452 bed hospital in Worcester. The Issuer is a wholly owned subsidiary of Catalyst Healthcare Worcester Holdings Limited which is owned by Consolidated Investment Holdings Limited, Semperian PPP Investment Partners No 2 Limited and Elbon Holdings (2) Limited. In 1999, the Issuer raised £97.2m senior bonds to finance the Project (the Bonds), guaranteed by Ambac. However, since the issue of the Bonds, the value of the credit enhancement provided by the Ambac guarantee was considered to have fallen.

On 22 December 2011, following approval by the bondholders, Ambac’s guarantee was terminated and replaced by guarantees from Assured Guaranty, with Moody’s providing a rating on the Bonds and the underlying project throughout the life of the transaction. The transaction is expected to provide a valuable credit enhancement to, and improve the liquidity of, the Bonds for bondholders.

According to Freshfields partner Alex Carver: ‘This is the clearest signal yet that parts of the monoline insurance industry still have plenty to offer for infrastructure finance’.

Freshfields fielded multi-disciplinary teams to advise on the new financing arrangements. Alex Carver, Alistair Curzon, Keith Gamble, Victoria Szostak and Ronan McCole advised on the financing and project documentation, whilst Chris Barratt, Duncan Kellaway and Sabah Nawaz advised on the bond specific documentation and process. Linklaters advised the Bond Trustee.

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