Hospital rebuilding and refurbishment projects for the U.K.'s National Health Service are set to become a large source of securitization deals. While there are a huge number of projects out for bid nationwide, bankers say only those above the £100 million mark make sense for securitizations.
There are approximately 25 hospital projects requiring at least £100 million each in funding. In total there are roughly £5.401 billion in deals pending, according to NHS data. Of course, not every project will be financed via securitization, but bankers are optimistic a large number of them will be. "Healthcare is a politically hot subject," notes one securitization expert. "But, the government is looking at ways to optimize how it uses funds."
So far, there have been a few deals of this type. Last year University Hospitals Coventry and Warwickshire/Coventry Healthcare NHS Trusts raised £372 million via BNP Paribas. The bonds issued in this deal were index-linked, which makes sense for these kinds of issuers, notes Peter MacFarlane, securitization banker at Royal Bank of Canada in London. He says RBC is working on a few of these deals, but declined to say which ones.
Deals from Blackburn, Hyndburn & Ribble Valley Healthcare NHS Trust and Central Manchester Healthcare/Manchester Children's Hospitals NHS Trust are said to be in the pipeline. Deutsche Bank is said to be lead managing the deals. Calls to Deutsche Bank were not returned by press time.
These deals will be executed through whole business securitizations, whereby the consortium of contractors issue bonds backed by the payments due from the local NHS Trusts for the work. Similar deals to fund other so-called Private Finance and Investment schemes (PFI) are in the pipeline, such as the Metronet deal securitizing the London Underground and Exchequer Partnerships, which will fund the renovation of government offices in London.