Catalyst Healthcare (Manchester)Fin Statement re Settlement Agreement (6095U)

TIDM40CZ

RNS Number : 6095U

Catalyst Healthcare (Manchester)Fin

30 July 2020

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF HOLDERS OF THE BONDS. IF HOLDERS OF THE BONDS ARE IN ANY DOUBT AS TO THE MEANING OR IMPORT OF THE CONTENTS OF THIS NOTICE OR REQUIRE FURTHER ADVICE, THEY SHOULD CONSULT THEIR OWN INDEPENDENT PROFESSIONAL ADVISERS (INCLUDING IN RESPECT OF ANY TAX CONSEQUENCES).

Catalyst Healthcare (Manchester) Financing PLC (the "Issuer")

GBP218,050,000, 2.411 per cent. Index-linked Guaranteed Secured Bonds due 2040

(including up to GBP38,000,000 Variation Bonds) unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest pursuant to a bond financial guarantee issued by AMBAC Assurance UK Limited (ISIN XS0208052265) (the "Bonds")

NOTICE

To the holders of the Issuer's Bonds

Settlement Agreement with Central Manchester University Hospitals NHS Foundation Trust

Unless otherwise provided, terms defined in the Master Definitions Schedule dated 8 December 2004 (as the same may be amended, varied or supplemented from time to time) shall have the same meaning where used in this Notice.

In summary:

a) Central Manchester University Hospitals NHS Foundation Trust (now, Manchester University NHS Foundation Trust) (the "Trust") has issued unavailability notices to the Issuer's associated company, Catalyst Healthcare (Manchester) Limited ("Project Co"), because of alleged construction defects in respect of the fire doors and smoke doors (the "Door Defects") at the Central Manchester University Hospital (the "Hospital") forming part of Project Co's PFI project;

b) the Issuer and Project Co have been working (and continue to work) with the Trust, Lend Lease Construction (EMEA) Limited (the "Contractor") and its supply chain to resolve these issues. The vast majority of the Door Defects have now been remedied;

c) Project Co estimates that to date the Trust has accrued alleged Availability Deductions of around GBP25 million in relation to the Door Defects. The Trust has deferred taking any sum in relation to these Availability Deductions (the "Deferred Deductions");

d) there is a dispute as to the Trust's entitlement to the Deferred Deductions. Project Co does not consider that the Trust has any entitlement (the "Dispute"); and

e) following an adjudication between the Trust and Project Co (which was decided in favour of Project Co), in order to finally resolve the Dispute, on 22 November 2019, Project Co issued Part 7 court proceedings against the Trust, the Contractor and Lendlease Construction Holdings (Europe) Limited) (the "Guarantor").

The Trust, Project Co, the Contractor and the Guarantor have now entered into a settlement agreement in relation to the Dispute (the "Settlement Agreement"). The Settlement Agreement will not become fully effective until Project Co obtains written consent from the Majority Creditors and Credit Providers (the "Funders").

The Settlement Agreement, should it become fully effective, will settle the claim for the Deferred Deductions and it will prevent the Trust from potentially terminating the Project Agreement in reliance on the Deferred Deductions.

The key provisions of the Settlement Agreement are that:

1 the Trust's claims for the Deferred Deductions in relation to the Door Defects are waived and released;

   2             the Contractor will pay a sum of money to Project Co and a sum of money to the Trust; 
   3             Project Co will not pay any sums to either the Trust or the Contractor; and 

4 all legal proceedings between the parties in relation to the Door Defects and Deferred Deductions shall be discontinued with no order as to costs.

Project Co is seeking the consent of the Funders to the terms of the Settlement Agreement in accordance with the terms of the Security Trust and Intercreditor Deed.

If such consent is not received by 31 August 2020 (or such later date as is agreed by the Trust, Project Co, the Contractor and the Guarantor) (the "Long Stop Date"), then the Settlement Agreement will lapse and be of no further effect.

If the Settlement Agreement were to lapse, then legal proceedings between the parties would continue. If the Trust is successful in the legal proceedings then the Trust would be entitled to take the Deferred Deductions. In these circumstances:

1 Project Co considers that it would be able to recover the Deferred Deductions from the Contractor and/or the Guarantor; and

2 the Trust would have grounds to terminate the Project Agreement because of the level of the Deferred Deductions. However, Project Co and the Issuer are hopeful that matters would be resolved amongst the parties before it reached that stage.

Project Co and the Issuer continue to take legal advice with respect to the matters mentioned in this Notice and keep the matter under continual review.

A further update will be given in due course.

Enquiries

If you have any enquiries, please direct them to the Issuer.

The Issuer

Catalyst Healthcare (Manchester) Financing PLC

c/o Albany SPC Services Limited,

3rd Floor,

3-5 Charlotte Street,

Manchester,

M1 4HB

Attention: Ailison Mitchell

The Principal Paying Agent

The Bank of New York Mellon,

International Corporate Trust Services,

Merck House, Seldown,

Poole, Dorset,

BH15 1PX

The Bond Trustee

Law Debenture Trustees Limited

Fifth Floor, 100 Wood Street,

London

EC2V 7EX

This notice is given by Catalyst Healthcare (Manchester) Financing PLC

30 July 2020

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July 30, 2020 05:02 ET (09:02 GMT)