Transfer of 10% Subordinate Debt by Gleeson and Nationwide to MBIA
Meeting: 28/09/2011 - Joint Extra Care Housing Management Board (Item 8)
8 Transfer of 10% Subordinate Debt by Gleeson and Nationwide to MBIA 
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To consider a report on the proposed transfer of the PFI subordinate debt currently held by Gleeson and Nationwide to MBIA and explains the limited due diligence carried out by Council officers
Minutes:
Consideration was given to a report on the proposed transfer of PFI subordinate debt from Gleeson and Nationwide to MBIA.
Notification had been received that Gleeson and Nationwide intended to sell their share in the Special Projects Vehicle to MBIA UK (Insurance) Ltd. This amounted to two-thirds of the subordinate debt with a value of approximately £3m. The senior debt of approximately £80m remained with Nationwide.
The Project Agreement provided in Clause 69.2 that the Contractor may transfer shares to a Suitable Third Party and was obliged to provide the Authority with written notice of its intention to do so.
A ‘Suitable’ Third Party was defined as a party which was not Unsuitable. An Unsuitable Third Party was defined as
“(a) any person who has a material interest in the production, distribution or sale of tobacco products and/or alcoholic drinks
(b) any person whose activities are, in the reasonable opinion of the Authority, incompatible with the provision of having Services by the Authority or
(c) any persons whose activities, in the reasonable opinion of the Authority, pose or could pose a threat to national security.”
Based on a limited due diligence exercise, which included obtaining background information on the structure of the MBIA Group, officers were able to discount (c) and decided that neither (a) or (b) applied to the MBIA Group. Standard financial checks had also been carried out on MBIA and its holding company.
This opinion was supported by a letter from Nationwide giving their consent to the transfer.
Avantage had concluded their own due diligence and was comfortable with MBIA’s suitability as a shareholder in the Special Projects Vehicle. The partners in the Special Projects Vehicle had had an ongoing relationship with MBIA for a number of years.
RESOLVED:
That the due diligence exercise be confirmed.