An Equitix-owned hospital PFI was wound up earlier this week as it was unable to service its debt, the latest twist in an ongoing saga of troubled projects in the UK healthcare sector.
Insolvency and Companies Court Judge Mullen on Wednesday (5 July) ordered that project company Prime Care Solutions (Kingston) Limited be wound up under the provisions of the Insolvency Act 1986, according to a court document seen by Infralogic.
The winding up order for the SPV of the Kingston Hospital Redevelopment PFI comes shortly after Michael Bint from UK government agency Insolvency Service was appointed as provisional liquidator.
Industry sources said that a liquidation of the project company gives the Kingston Hospital NHS Foundation Trust the right to terminate the project agreement, leaving the project’s lender, NIBC, to decide upon exercising their step-in rights and retaining or getting rid of equity sponsor Equitix.
“On such occasions, the equity gets burned. Only the lenders are entitled to compensation from the Trust,” one of the sources said.
Following the winding up of the company, the liquidator of the project company will have the rights to sell the PFI assets, the sources added, including a new building on the Kingston Hospital site with an 80-bed surgery and a 20-bed gynaecology ward.
An indication of the minimal equity value of the Kingston hospital PFI is the price paid by Equitix to acquire Costain’s stake in the scheme.
Equitix, an initial 60% stakeholder in the scheme, became the sole shareholder in 2021 when Palio (No 3) Limited – an Equitix-owned vehicle – paid just GBP 4,000 for Costain’s 40% stake, according to Palio (No 3) Limited filings.
The industry sources also noted that the entity that has been wound up is the project company of the PFI, and not the holding company, something that could offer protection to projectco level.
Prime Care Solutions (Kingston) Limited has been embroiled in disputes with the Kingston Hospital NHS Foundation Trust for years over performance issues.
The trust stopped paying the monthly unitary charge for the PFI, due to expire in 2036, and applied deductions that exceeded the project agreement termination thresholds over the past four years.
Kingston Hospital NHS Foundation Trust levied deductions in relation to service failure points (SFPs) applied to the project company for underperformance, the project company’s accounts explain without clarifying the exact reasons for the deductions.
On the back of deductions and the withholding of monthly payments, the Equitix-owned project company had to use its debt service reserve accounts to meet its senior debt obligations. The final debt deferral expired in October 2022, according to the 2021 annual report of Equitix’s Palio (No 3) Limited.
“The directors believe that the risk of Prime Care Solutions (Kingston) Holdings Limited going into administration or insolvency later this calendar year has arguably increased, given it will not be able to generate enough cashflow to service its debt,” the accounts read.
NIBC provided around GBP 30m of debt for the PFI, of which GBP 24.4m was outstanding, according to the project company’s most recently filed accounts for 2020. The NIBC facility carries a fixed interest rate of 4.98%, according to the same accounts.
Equitix is one of the largest investors in UK social infrastructure and has stakes in over 40 healthcare schemes across the country, according to Infralogic data.
The winding up of the Equitix-backed hospital PFI comes at a turbulent time for the sector, with multiple projects facing issued and financial woes.
HICL-backed Tameside Hospital PFI is at loggerheads with the Tameside and Glossop Integrated Care NHS Foundation Trust, and the latest settlement negotiations failed, resulting in the recommencement of fresh adjudication proceedings.
Earlier this year, Alvarez & Marsal was appointed as administrator for the Innisfree-owned project company in charge of a troubled mental health unit at Coventry New Hospital.
The Kingston Hospital NHS Foundation Trust declined to comment. Equitix and NIBC did not respond to requests for comment.
