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Greater Manchester PFI recycling and waste deal to close by end of February

The £3.3 billion Greater Manchester recycling and waste PFI deal is set to reach financial close by the end of this month, according to an insider close to the project.

Stakeholders including Greater Manchester Waste Disposal Authority, the Viridor Laing consortium and the group of banks financing the project are increasingly confident that the deal will be finalised before the end of February now that the banks involved are close to agreeing the structure of the finance.

The insider told MRW: The banking group is coming together. The deal itself hasnt changed. The financing costs have gone up considerably and it has simply been a case of getting the cash together. In an ordinary market the deal would have been done by the lead banks and then syndicated. But overseas banks are re-trenching to their home markets, as are UK banks, and as well as general nervousness about liquidity, this has made it difficult to structure deals of this size.

Since the PFI deal was first awarded in January 2007 to the Viridor Laing consortium - made up of Viridor Waste Management  and John Laing Infrastructure - the cost of borrowing for banks has gone up considerably. This means that the total lending required, which will ultimately be borne by GMWDA, will be much higher than originally expected when the deal comes to financial close.

The insider said that this will be the benchmark for other PFI deals such as Merseyside Waste Disposal Authority, Cumbria and North London Waste Authority in terms of how, and at what cost, projects are financed.

Although the insider would not speculate about the eventual costs of the project, he said that the financing costs were not in the hundreds of millions but would add significant cost in the tens of millions to the deal. He added that the market will dictate the borrowing costs at the time of the financial close.

MRW recently revealed (see MRW story) that the European Investment Bank is putting a £200 million loan towards the £750 million of initial finance cost required. 

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