Magazine article Public Finance

PFI Contractors Baulk at Cuts in Their Share of Refinancing Profits

Magazine article Public Finance

PFI Contractors Baulk at Cuts in Their Share of Refinancing Profits

Article excerpt

Business leaders have warned that new Treasury guidance could deter prívate contractors from getting Involved in Private Finance Initiative schemes.

The guidance, issued last month. Is aimed at ensuring public authorities get a larger share of the gains when PFI deals are refinanced. This follows criticism of the windfalls that private firms have secured after refinancing deals In the past.

Refinancing is expected to Increase after a three-fold rise in the credit margin charged by banks financing PFI schemes over the past year, as those involved seek more advantageous terms in future.

The guidance Introduces a right for public authorities to request refinancing. It stipulates that the public body must receive 50% of any gains up to £1m, 60% for the next £2m and 70% thereafter.

Mark Fox, chief executive of the Business Services Association - whose members Include contractors Atney, Interserve and Rentokil Initial -said: 'These new rules substantially reduce the attractiveness of being involved with PFI deals and they come at a time of serious economic challenge and testing of confidence. …

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