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PFI consortium in risky head start: Cathy Hayward reports on unfinished business at a Mancunian housing project.

Document Cited in Related
Vincent
AuthorHayward, Cathy
PositionPrivate Finance Initiative - Private finance initiative

Manchester City Council's private finance initiative housing deal faces uncertainty after starting without having reached financial close.

Contracts for the 90 million [pounds sterling], 30-year deal were signed on 25 March by the authority and Grove Village Consortium, and service began on 31 March. But the contract is not expected to reach financial close until late July at the earliest, as the backers conduct due diligence.

The consortium denied that there was cause for concern. "Not having reached financial close is not a problem," said Ian Perry, chief executive of Harvest Housing Group, which owns a 25.5 per cent share in the consortium. "It is taking the backers more time to do due diligence, as there are many contractors, but nobody is worried. All the costs have been fixed except swap [the market interest rate paid by the council] and we have made allowances for any movement. There's no risk involved, and any risk there is rests with the local authority anyway"

Bridget Gilfoyle, PFI project manager at the council, was more circumspect. "I'm sure there are risks," she said, but denied that there was a funding problem, pointing out that all of the consortium members had funds in place at the start.

PricewaterhouseCoopers, which acted as consultant on the contract, declined to comment, but Professor Allyson Pollock, a PFI specialist from the school of public policy at University College, London, argued that there were serious concerns.

"The problem is that the financial terms dictate the whole affordability issue. This is a debt that has to be serviced. It's rather like signing your mortgage...

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