| Follow this topic: Infrastructure boom hits capital desert |
The sharp rise in the cost of bank lending to infrastructure PPP/PFI deals in the UK has prompted the UK Treasury to examine radical new solutions to the funding requirements of its pipeline of upcoming projects. The PPP market has been hit by the disappearance of the monoline guarantee companies and the sharp reduction in bank liquidity. When the PFI concept was first launched in the early 1990s, deals were being done at 140 basis points over Libor – today banks are looking for between 250bp and 350bp to take similar risks. At the height of the boom deals were being priced as low as 40bp over Libor. "The government is getting concerned about the terms of private money," says an expert close to the situation. "There are several different ideas being worked on which flow from the premise that bank finance is too expensive." The idea of a conduit-style funding vehicle for PFI is not new. Sir Adrian Montague, then chief executive of the government’s taskforce on PFI, is believed to have considered a similar scheme in the late 1990s.
