"“We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” "

Chinese premier Wen Jiabao 12th March 2009

""We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system."

Timothy Geithner US Secretary of the Treasury, previously President of the Federal Reserve Bank of New York.1/3/2009

Thursday, January 24, 2008

Commons Metronet Fiasco report due as PFI funding is threatened as Monoline Insurers of PFI Bonds struggle for credibility and new credit lines

The House of Commons’ Transport Select Committee chaired by vinegar faced Gwyneth Dunwoody (see pic - details below) publishes their report into the London Underground and its Public-Private Partnership Agreements tommorow.

High powered, highly paid consultants at PricewaterhouseCoopers (PWC) (£21.4 Mn.as lead Financial advisors and with a large PFI practice of 132 projects across the UK, ) Ernst & Young (£1 Mn.) , and KPMG (£2.4 Mn. ) were paid over £25m for advising on this wonderful deal which has collapsed leaving the tax / London rate payer with an embarassingly large bill to pay to simply keep the Underground working.

That of course was only a small part of the total fees of £445 Mn in fees the The Public Accounts Committee found had been paid to put the 30 year project together : more than the equity put in by Metronet's shareholders -"world-class companies"; Thames Water, Balfour Beatty, French electricity supplier EDF (employees of Pm's bro.), Canadian train maker Bombardier and engineers WS Atkins.

Metronet had responsibility for renewing nine of the twelve lines on the entire London Underground network and were projected to spend £17 billion during its 30-year contract - of which £7 Bn. would be spenty in the first 7.5 years.

Ernst & Young got two bites at the cherry because they are now handling the administration which Alan Bloom of E&Y admitted to the Committee in November was costing £13m a day to run - not including work that Metronet is still contracted to carry out - meaning more costs for prospective new owners Transport for London - who had guaranteed 95% of the £2bn debt the five-member Metronet consortium took out which carry commercial interest rates and can be called in by the banks in 6 months. Loans from the European Investment Bank that are paying for infrastructure investment in the London Underground are insured with Monoline insurer Ambac (see below).

Bloom ( who guided Railtrack back into public hands) also refused to disclose information relating to the value that had been put on the ailing company by advisers Rothschild. 'It's very confidential, he said.

Train Naming ceremony: (From left) MD of London Underground Tim O'Toole, Managing Director of GB Railfreight, John Smith and Metronet Chief Executive Andrew Lezala with Gwyneth Dunwwody MP at the naming of Metronet's Class 66 engineering locomotives

Gwyneth Dunwoody, named by Gwyneth Dunwoody, Chair of the Parliamentary Transport Committee.
METRO-LAND, named by Tim O'Toole
Metronet Pathfinder, named by Sam Ellis, a 27-year-old project engineer who entered Metronet through its graduate scheme
Harry Beck, named by John Smith, MD of GB Railfreight honouring the designer of the modern tube map.
Sir Edward Watkin, chosen by David Jukes, winner of a competition run by RAIL magazine. Sir Edward was the pioneering chairman of the Metropolitan Railway

PS : Historically, funding for PFI came from bank debt, but bonds have proved an attractive form of long term financing. Bonds require an international rating. To secure a good rating and lower the cost of funding, companies buy insurance for their bond issues from Monolines. Monoline insurers in the UK are US owned AMBAC UK and MBIA - for example a £30m bond issue by the Royal Bank of Canada Financial Group, for the Greenwich University PFI in 2004 .

They were at it again jut before Christmas ... NEW YORK, December 20, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) announced today that Ambac Assurance UK Limited recently provided a triple-A credit enhancement for the financing (£146.4 million) of new and updated roads in Northern Ireland. This financing was completed as part of the Government's ongoing Private Finance Initiative (PFI) investment in the provision (of) transport services.

NEW YORK, December 6, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) said today that Ambac Assurance UK Limited recently provided a triple-A credit enhancement for a major U.K. hospital financing (£192.65 million ) completed as part of the British Government's ongoing Private Finance Initiative (PFI) investment in the provision of health care services. Mid Essex Hospital Services NHS Trust (“the Trust”) procured the scheme for a new 5-storey hospital and a multi-storey car park. The hospital is situated approximately 40 miles to the north east of London.

NEW YORK, November 26, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) said today that Ambac Assurance UK Limited recently provided triple-A credit enhancement to two major U.K. hospital financings completed as part of the British government's ongoing Private Finance Initiative ("PFI") investment in the provision of health care services.

The two bond issues by Consort Healthcare in September 2007 were for GBP 122 million (Salford Hospital) and GBP 78m (Tameside Hospital).

"These monoline insurers, the biggest of which are MBIA and Ambac, are hanging on to their crucial triple-A credit ratings by a thread. " Financial Times today

"US insurance bonds meltdown bad news for UK" James Doran in New York, Evening Standard today.

"Massachussets Regulator Subpoenas Bond Insurers MBIA, Ambac" Reuters Today

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