REG - Consort Hlth.T'side - Settlement with the Trust

Ambac FinancialAnnouncement

10/12/2024 19:45

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RNS Number : 5850P  Consort Healthcare (Tameside) PLC  10 December 2024

 

CONSORT HEALTHCARE (TAMESIDE) PLC

 

The outstanding 1.9810 per cent. Index-Linked Guaranteed Secured Bonds due
2041

ISIN XS0321115130

(the "Notes")

 

SETTLEMENTS WITH THE TAMESIDE & GLOSSOP INTEGRATED CARE NHS FOUNDATION
TRUST AND EQUANS SERVICES LIMITED

 

 

London, 10 December 2024 - Consort Healthcare (Tameside) plc (the "Company"),
a project company for the Private Finance Initiative (PFI) concession contract
(the "Project Agreement") to design, construct, finance, maintain and manage
the lifecycle costs of hospital facilities in Tameside for the Tameside &
Glossop Integrated Care NHS Foundation Trust (the "Trust") provides the
following update regarding settlements reached between the Company and each of
the Trust and Equans Services Limited.

 

In this announcement, words and expressions defined (expressly or by
reference) or interpreted in the trust deed constituting the Notes shall,
unless otherwise defined herein, bear the same meaning herein.

 

Settlement with the Trust

 

The Company has entered into a deed of settlement and variation in relation to
the Project Agreement with the Trust in order to settle certain claims between
them, to formally discontinue the restructuring plan initiated in April 2024,
and to amend the terms of the Project Agreement.

 

The settlement shall take effect as from 2 December 2024 (the "Settlement
Date") pursuant to the terms of a deed of settlement and variation (the
"Settlement Deed").  The Settlement Deed waives certain existing claims of
the Trust against the Company, provides a mechanism for the identification and
rectification of existing defects at the hospital site within agreed
timeframes and in a financially sustainable manner, and establishes certain
procedures to minimise the risk of, and ensure the timely resolution of,
future disputes between the parties, as more particularly set out below:

·      The Company will pay to the Trust a settlement sum (the
"Settlement Sum"), by way of a sculpted reduction to the monthly service
payments due to the Company under the Project Agreement for the remainder of
its term.  The Settlement Sum is in addition to the sums previously deducted
or withheld by the Trust. This amount is subject to indexation in accordance
with the terms of the Project Agreement.  The Company and the Trust are under
an obligation to meet in the first quarter of each year to reassess and
discuss (acting reasonably) whether, if both parties agree, a revised
repayment profile should apply.

·      In consideration of the payment of the Settlement Sum the Trust
will waive all financial claims and entitlements: (1) to levy deductions from
monthly service payments ("Service Failure Deductions") and service failure
points ("Service Failure Points") in relation to any matters detailed in
Performance Monitoring Reports issued by the Company pursuant to the terms of
(and as defined in) the Project Agreement prior to the Settlement Date; and
(2) referred to by either party and determined in the prior adjudication
commenced on 30 May 2022, relating to certain matters in dispute between the
Company and the Trust.

·      Within two weeks of the Settlement Deed date the Company and the
Trust will file and serve a notice of discontinuance of the restructuring plan
proceedings commenced under Part 26A of the Companies Act 2006, and the Trust
shall not enforce the associated order for its costs.

·      The Company is required to carry out and complete certain
existing rectification works being undertaken by the Company at the hospital
site in respect of fire protection, grounds and gardens and rendering (the
"Rectification Works"). Associated costs in respect of the Rectification Works
will be for the account of the Company.

·      In addition to the Rectification Works the Trust is in the
process of finalising a centre of best practice ("COBP") survey at the
hospital site, which includes but is not limited to an asset register and
condition appraisal, an environmental condition validation report and a
compliance audit report. Although currently only provided in draft form, such
draft COBP survey highlights non-compliant items requiring further
investigation and/ or a potentially extensive rectification programme by the
Company (the "COBP Works").

·      If any future event or matter occurs or is identified where the
Company reasonably considers that the primary cause of such event or matter
may be related to a design or construction defect in multiple functional units
of the hospital, the Company may require that a surveyor is jointly appointed
to establish the cause of such event or matter and the programme of works
necessary to rectify the same ("Future Works", and together with the
Rectification Works and the COBP Works the "Necessary Works").

·      An outline programme of Rectification Works has been included in
the Settlement Deed, which shall be later updated once final investigative
works are complete and the works categorised according to relative
complexity.  The Settlement Deed contains a detailed mechanism for the
Company to submit, and the Trust to comment and agree (on defined grounds),
the proposed classification of the outstanding Rectification Works and the
required programmes for such other Necessary Works.

·      Relief from Service Failure Deductions or Service Failure Points
is provided for in respect of the carrying out of the Rectification Works
during the period from the date of the Settlement Deed to the relevant
longstop dates set out in the agreed final programme of Rectification Works or
(absent agreement) stated in the Settlement Deed, except where the Trust is
required to decant a functional unit (in which case the Trust and the Company
are required to seek to reasonably agree suitable alternative accommodation or
other reasonable mitigation measures).  If the Rectification Works are not
completed by the relevant longstop dates, the Trust retains its right to apply
Service Failure Deductions and Service Failure Points as per the existing
payment mechanism of the Project Agreement.

·      If any deductions accrue in respect of the decant of functional
units, the Trust and the Company will seek to agree (acting reasonably) to
amortise the same by way of a sculpted reduction to the monthly service
payments over an agreed period (or the remainder of the concession, in the
absence of agreement). Subject to a right for the Company to repay any
outstanding amortised decant deductions at any time, the Company shall be
subject to a distribution block to its shareholders until such time as all
such decant deductions are fully repaid.

·      Except where the Trust is required to decant a functional unit
and suitable alternative accommodation or other reasonable mitigation measures
cannot reasonably be agreed, the  Company receives relief from Service
Failure Deductions or Service Failure Points in respect of the carrying out of
the COBP Works and any Future Works: (1) during any period in which the
relevant surveys to are being conducted, until such time as the surveyor's
final report is issued; and (2) a period of 14 months (for COBP Works) or 12
months (for Future Works) from the date such final report is issued.  This
period may also be extended where the programming of the Necessary Works
require the procurement of complex design services.

·      The Company is entitled to an extension of relevant relief
periods where the Trust is unable to provide the Company or its contractors or
surveyors access to the hospital site at the times set out in the relevant
agreed works programme.

·      If any specified supervening events occur (defined on the same
basis as the Project Agreement), any affected relief periods shall be extended
by such period as is fairly and reasonably attributable to any delay caused by
such event or breach.

·      The Settlement Deed provides for certain mechanisms to reduce the
risk of future disputes arising, including the establishment of a steering
committee of senior representatives of the Trust, the Company and the FM
Service Contractor to oversee the delivery and co-ordination of  such
rectification works and provide a forum for strategic discussion, and the
reinstatement of quarterly liaison committee meetings in accordance with the
existing terms of the Project Agreement.

·      The Project Agreement has been amended to include a fast-track
dispute resolution procedure in the event of any future dispute of a
Performance Monitoring Report or monthly payment report (and certain other
matters), and to streamline the appointment process for adjudicators under the
adjudication process.

·      The Project Agreement has been amended to clarify that the
Company will not be subject to deductions in the event that any Necessary
Works are completed in advance of the agreed times.

·      The Project Agreement has been amended to state that, if it is
terminated for ineffectiveness, as a result of the Settlement Deed,
termination shall be on an equivalent basis as for force majeure.

 

Settlement with the FM Service Contractor

 

The Company has entered into a deed of settlement and variation in relation to
the FM Service Contract with Equans Services Limited (the "FM Service
Contractor"), in order to settle certain claims between such parties and to
amend the terms of the FM Service Contract (the "FM Deed").

 

The FM Deed acknowledges the variations to the Project Agreement implemented
under the Settlement Deed, waives certain existing claims as between the FM
Service Contractor and the Company, requires the FM Service Contractor to
provide support (on a time and cost basis) to the Company in the Company
carrying out the Necessary Works and relief for the FM Service Contract in
respect of the same, and flows-down equivalent mechanisms to minimise disputes
risk as are contained in the Settlement Deed.

 

Financial Position and Forecasts

 

 

·      The Company confirms that it had sufficient funds available to
meet scheduled debt service in September 2024; however all its reserve
accounts have now been fully drawn or to a minimal level.

·      Under the Company's base case financial forecast, the funding of
the debt service reserve account, the lifecycle reserve account and the change
in law reserve account (collectively the "Reserve Accounts") are expected to
build up gradually over several years.

·      Under the Collateral Deed, transfers to and from the debt service
reserve account are not included in periodic debt service coverage ratio
calculations however transfers to and from the lifecycle reserve and change in
law reserve are.

·      The Company is currently in discussions with Ambac Assurance UK
Limited (the Bond Financial Guarantor and Controlling Creditor) in relation to
a package of short to medium term relaxations and/ or waivers of the existing
financial covenant requirements as a result of forecast event of default
covenant breaches primarily as a result of a combination of historical
performance, the payment of the Settlement Sum, costs estimated in connection
with Necessary Works and the future build-up of the Reserve Accounts to the
required levels under the Collateral Deed.

·      The base case financial forecasts and the estimated level of
cover ratios referred to above will, however, be subject to uncertainty which
potentially could be material. There are various factors that could influence
this including, but not limited to, the Rectification Works and COBP Works
cost estimates, the Company's ability to complete such works within the time
frames agreed, the level of decant required to remediate defects comprised for
such works of a more complicated nature, and any unknown defects or
circumstances not currently anticipated.

This announcement is given by the Company.

Enquiries:  consorttameside@vercitygroup.com
(mailto:consorttameside@vercitygroup.com)

 

THIS ANNOUNCEMENT CONTAINS INFORMATION THAT QUALIFIES OR MAY HAVE QUALIFIED AS
INSIDE INFORMATION WITHIN THE MEANING OF ARTICLE 7 OF THE MARKET ABUSE
REGULATION (EU NO. 596/2014), AS IT FORMS PART OF UNITED KINGDOM DOMESTIC LAW
BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED.

 

Forward-Looking Statements

Certain statements in this document constitute forward-looking statements.
Such statements involve known and unknown risks, uncertainties, and other
factors that may cause actual results, performance, or achievements to be
materially different from those expressed or implied by such statements.
  These statements are based on management's current expectations and
beliefs and are subject to a number of risks and uncertainties. The company
undertakes no obligation to update these forward-looking statements, except as
required by law. Readers are cautioned not to place undue reliance on these
forward-looking statements.

 

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