PFI contractors face profit cuts after change in rules

PFI contractors will see their refinancing profits slashed under new Treasury rules.

All refinancing profits after the first £3m will be split 70/30 in favour of the public sector. Previously, only half of all PFI refinancing gains were claimed by the public sector.

As reported in CJ last month, the Treasury has adjusted the split in gains to reflect the increasing cost of debt in the current market.

The credit squeeze has seen funders demanding higher margins on the debt put into the deals, which opens up the possibility of refinancing gains if investment and interest rates fall to pre-credit crunch levels.