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Infrastructure trusts invested in botched NHS PFI deals
John Laing Infrastructure and GCP trusts have exposure to South London Healthcare Trust, which could face administration.
Private finance contracts, which are partnerships between private companies and public services, have brought the NHS trust to the brink of bankruptcy and could see it enter administration next month as it struggles under a £69 million debt pile.
John Laing has exposure to the trust through a 27.5% equity stake in the Queen Elizabeth Hospital in Woolwich, which represents 3% of its net asset value (NAV). The trust has a 30-year contract to design, build and operate the hospital until 2031.
GCP has 5% of its NAV in the Princess Royal University in Orpington through a £155 million loan to finance and maintain equipment with the Bromley Hospitals NHS Trust. The contract began in 2003 and will run to 2032.
PFI contracts are costing the South London Healthcare Trust 14% of its income, and an administrator could be appointed in the coming weeks.
However, the costly contracts will remain in place and neither John Laing nor GCP are expecting any financial impact from the possible bankruptcy of the trust.
The NHS trust is one of more than 30 struggling under debts due to poor PFI deals. A review of the PFI model was launched in December 2011 after a number of deals were criticised for delivering poor value for taxpayers.
Shares in both trusts dipped in Wednesday morning trade. GCP is currently trading at 104.9p, a 6.5% premium to its net asset value (NAV) of 98.5p per share, and John Laing is priced at 108.4p, a 3.9% premium to its NAV of 108.4p per share.
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