TAMESIDE HOSPITAL PFI PROJECT

RNS REGARDING ISSUING OF PRACTICE STATEMENT LETTER

"Consort Healthcare (Tameside) plc

Part 26A Restructuring Plan Practice Statement Letter

London, 24 April 2024 - Consort Healthcare (Tameside) plc (the "Company"), a project company for the Private Finance Initiative concession contract (the "Project Agreement") to design, construct, finance, maintain and manage the lifecycle costs of new hospital facilities in Tameside for the Tameside & Glossop Integrated Care NHS Foundation Trust (the "Trust") provides an update regarding a proposed restructuring plan under Part 26A of the Companies Act 2006 in respect of the Company (a "Restructuring Plan").

The Company has been in dispute with the Trust for a number of years regarding issues under the Project Agreement.  That dispute resulted in an adjudication debt of £8,835,493.96 described in the Company's announcement dated 24 January 2024.  Further, the Trust has since asserted that for the period from 1 January 2022 to 31 October 2023 it is entitled to deduct from amounts due under the Project Agreement the sum of £20,315,933.38.  The Company believes that the amount the Trust may be entitled to deduct does not exceed £12,343,870.84 but in any event this deductions claim is likely to lead to a significant dispute between the Company and the Trust. 

The Company has for a number of years been seeking to achieve a commercial settlement with the Trust.  However, at this time the Company does not consider it possible to achieve a consensual settlement with the Trust on terms capable of acceptance by both parties.  The Company considers that, in order to avoid an insolvent outcome for the Company and to ensure the future viability of the project, the only realistic option currently available to the Company is to seek to implement a restructuring in respect of the project by way of a Restructuring Plan.  

Accordingly, earlier today the Company issued a practice statement letter (the "PSL") to creditors of the Company (which include the Trust) pursuant to the Practice Statement for Companies: Schemes of Arrangement under Part 26 and Part 26A of the Companies Act 2006 issued on 26 June 2020.  The PSL sets out the Company's key proposed terms of the restructuring to be implemented by way of a Restructuring Plan.  A summary of these terms is included in the Schedule to this announcement.  If, as requested by the Company, the court on or about 20 May 2024 orders the convening of the meetings of the creditors for the purpose of voting on the Restructuring Plan then it is assumed that the meetings will take place on 12 June 2024 and that any subsequent sanction hearing at court will take place in late June 2024.  An update will be provided once the dates are known.

If the Restructuring Plan is sanctioned by the court, then the Project Agreement will be amended and the project will continue in accordance with the terms provided for in the Restructuring Plan, unless the Trust exercises its right to terminate the Project Agreement within 30 days of the Restructuring Plan becoming effective.  If the Restructuring Plan is not sanctioned by the court, then the directors consider that the financial position of the Company will be such that the most likely outcome will be that the Company is placed into administration.

There can be no assurance that agreement will be reached amongst the relevant stakeholders with respect to the Restructuring Plan or that the Restructuring Plan will be sanctioned by the court.  The Company will provide further updates to the market in due course.

Enquiries

Consort Healthcare (Tameside) PLC

 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 THE UNITED KINGDOM DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018, AS AMENDED.

SCHEDULE

A summary of the terms of the Restructuring Plan contained in the PSL is included below.  The summary is not comprehensive.  A comprehensive set of terms will be included in an explanatory statement issued during the course of May 2024 if the court on 20 May 2024 orders the convening of creditor meetings for the purpose of voting upon the Restructuring Plan.  The Company has requested the convening of three meetings, being one for each class of creditors: the first for the Trust; the second for Ambac as financial guarantor and controlling creditor under the bonds; and the third for the Company's loan stock subordinated creditors, in each case to enable them to vote on the Restructuring Plan.  The proposal put to the creditors and the court will contain two options: a "Sustainability Option Restructuring Plan" and a "Settlement Option Restructuring Plan".  If sanctioned by the court, only one of those options will become effective.  

Under both options:

·      The Company shall pay to the Trust a settlement sum by way of sculpted reduction to the monthly service payments due to be paid to the Company under the Project Agreement for the remainder of the project term.  See below for further details.

·      The loan stock issued by the Company to loan stock subordinated creditors shall be written down and its repayment profile amended.

·      Deductions from the monthly service payments ("Service Failure Deductions") and service failure points ("Service Failure Points") levied, accrued or potentially accrued under the Project Agreement up to the restructuring effective date shall be settled and discharged.

·      The Company shall agree to carry out rectification works in respect of a number of works packages, including (1) lift shafts, (2) passive fire protection, (3) fire doors, (4) smoke detectors, (5) cavity barriers, (6) render and (7) grounds and gardens, in accordance with detailed rectification provisions.

·      Provisions shall be included in the Project Agreement in respect of a 'Centre of Best Practice' survey being undertaken by the Trust.

·      The Company's entitlement to relief from Service Failure Deductions and Service Failure Points under the Project Agreement during (1) the agreed rectification works and (2) the rectification of issues identified in the Trust's 'Centre of Best Practice' survey shall be clarified.

·      The Company's obligations in respect of the grounds and gardens service under the Project Agreement shall be amended.

·      The monthly performance reporting process under the Project Agreement shall be amended.

·      A new 'Functional Area Functional Unit' table shall be incorporated in the Project Agreement payment mechanism.

·      The Company shall be released from its obligation to reserve for certain risks in respect of a future change in law and the balance of its existing change in law reserve account shall be released to the Trust in exchange for such future risks being retained by the Trust.

·      Waivers including the temporary relaxation of some financial covenants shall be agreed by Ambac under the bond finance documents to enable payment of the settlement sum and the release of the change in law reserve.  The proposals do not involve any changes to the terms and conditions of the bonds.

·      The Trust shall have a right to terminate the Project Agreement for default within 30 days of the restructuring effective date on the terms of the Project Agreement without any modification by the Restructuring Plan.

·      Operational protocols shall be incorporated in respect of (1) Trust works, (2) access, (3) follow-on works, (4) extensions of time, (5) the helpdesk service, (6) Trust damage, (7) grounds and gardens, (8) the schedule of programmed maintenance and (9) timescales, in order to assist with the effective operation of the project.

·      Restriction on the Company being penalised for early completion of programmed maintenance work prior to its planned completion date shall be agreed.

·      In addition, under the Sustainability Option Restructuring Plan:

o  The payment mechanism under the Project Agreement shall be amended to:

§ provide relief from Service Failure Deductions and Service Failure Points for up to 12 months (subject to extension) in respect of certain events for certain categories of failure event under the Project Agreement; and

§ reduce Service Failure Deductions in respect of events covered by the 12-months' relief for certain categories of failure event under the Project Agreement by a factor of 2 (50%) of current values for a period of six months following expiry of the 12-months' relief.

o  In order to enable the Company to pay a greater amount to the Trust by way of reduction to the unitary charge (as referred to above) than under the Settlement Option Restructuring Plan:

§ the loan stock holders will subscribe for £1,500,000 in new secured loan stock, subordinated to the bonds; and

§ a gain share agreement shall be entered into facilitating the sharing of any excess cash in the project between the Trust and the loan stock holders.

·      In addition, under the Settlement Option Restructuring Plan, in the Project Agreement:

o  Provisions shall be agreed in respect of future condition surveys and follow-on maintenance works, including relief for the Company from Service Failure Deductions and Service Failure Points for up to 12 months (subject to extension).

o  A cap of 5% on the amount of the total monthly service payment that the Trust can withhold from the Company in respect of disputed Service Failure Deductions shall be implemented, pending final determination under the dispute resolution procedure."

24 April 2024