The challenge
Most types of project finance transaction make use of a bank or other financial organisation for the majority of the funds for the project. Good business practice suggests that it is sensible to survey the terms on offer from a number of potential funders before committing to a particular lender. If the transaction is to provide a service to a public sector organisation then a funding competition is an important part of the process of demonstrating value for money.
The way forward
The range of funding terms on offer will depend on the nature of the transaction. The risk profile accommodation PFI market is now well understood, with many funders willing to get involved, and lenders have sharpened their terms considerably. This does not mean that funding competitions are no longer necessary – the very process of holding a competition encourages lenders to improve terms and conditions.
Other areas of the market are more specialised, with fewer lenders familiar with the form of the transaction. In these cases it is important to build on long term relationships with funders and to take the time to explain the risk profile of the project, as well as the timing of major changes to the underlying operations phase.
Proper comparison of lenders’ terms requires a detailed review of the entire package on offer. The willingness to provide standby and working capital facilities can be critical for some types of project and may override small differences in margins and cover ratios.
Our services
- Management of the competition process
- Identification of lenders
- Negotiation of funding terms
- Review of lending documentation
- Modelling the financial impact of alternative funding strategies
How PKF can help
PKF has established a wide network of contacts with banks and other lenders at the highest level. Our knowledge of the market allows us to advise on the initial selection of lenders to invite into the competition.
The depth of our knowledge is also invaluable in identifying funders for more specialised projects and negotiating the best terms appropriate in each individual case.
We have carried out a wide range of competitions for both public and private sectors across the full range of the project finance market including waste, education, health, ITC and the emergency sector. Recent clients have included Dickerson Group, Guildhouse UK and North Tyneside Council.
Further information
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