EIB pulls out of UK Midland Metro hospital project
The EIB has terminated its £107 million ($121.7 million) loan to the £350 million Midland Metropolitan Hospital PF2 project in the UK. The multilateral lender has pulled out of the deal following the collapse of Carillion which was co-sponsor of the project with local property investor Richardsons Capital.
The 30-year-plus-construction concession was awarded to Carillion in 2015 by Sandwell & West Birmingham Hospitals NHS Trust. The Carillion offer always appeared ambitious. The only other bidder for the scheme, Laing/Interserve, dropped out of the tender, and the annual availability payment on the scheme was reduced to under £20 million per year from £27 million in the original outline business case.
Financing for the project closed in December 2015. In addition to the EIB loan, the package included around £100 million of commercial bank debt from Credit Agricole, KfW IPEX-Bank, DZ Bank and SMBC, a £100 million capital contribution from Sandwell & West Birmingham Hospitals NHS Trust and £25 million of equity. The tenor on the debt was 32.5 years and the margin was around 150bp over Libor. HSBC advised the sponsor and Deloitte advised the NHS trust.
The EIB and commercial lenders have continued to pay project costs since Carillion’s collapse in January which have amounted to around £5 million. With work on the project at a standstill, and major extra costs predicted due to the existing works deteriorating as the project remains static, the EIB was forced to pull out. The commercial lenders are all expected to take a significant hit even if a rescue package for the project is put in place.
