3.5.1.1
General termination arrangements
If the State’s Project Director terminates the Project Deed following the occurrence of an uninsurable risk that would otherwise have had to be insured against under an opera- tions-phase industrial special risks insurance policy, in the circumstances described in section 3.4.2.3, or if the Project Deed is terminated for force majeure under the arrangements described in section 3.4.12.3,
· The Leases and Subleases will also terminate (if they have commenced)
· The State must pay compensation to the Project Com- pany, in the form of a “termination payment” as pre- scribed in a “termination payments” schedule to the Project Deed and described in section 3.5.1.2 below, with any amounts equal to or less than the amounts the Project Company owes to JEM under the project’s debt financing arrangements being paid instead to JEM, or as directed by JEM, under arrangements set out in the Pay- ment Directions Deed
· The State must also pay JEM a “securitisation refund payment” under arrangements set out in the Securitisa- tion Agreement and the “termination payments” schedule to the Project Deed and described in section 3.5.1.2 below
· The Project Company must pay the State the net amount of any insurance proceeds it receives, in connec- tion with the event leading to the termination, which is not spent on repairs, reinstatements or replacements
· The State’s Project Director may require the Project Company, at no cost to the State beyond the State’s “termination payment”, to:
¤ Transfer its title, interests and rights in any of its
works or any of the school facilities, and
¤ Novate the Construction Contracts, the Facilities
Management Contract and/or any other replace- ment subcontracts to the State or a replacement contractor, with the State or the replacement con- tractor stepping into the shoes of the Project Company under these subcontracts
· The Project Company must facilitate a smooth transfer of responsibility for the services it was to have provided to the State or any new contractor and take no action at any time, before or after the termination of the Project Deed, to prejudice or frustrate such a transfer, and
· More specifically, the Project Company must give the State’s Project Director and/or any new contractor all the documents and other information about the works, the school facilities, the sites and the services needed for an efficient transfer.
3.5.1.2
‘Termination’ and ‘securitisation refund’ payments
Under the Project Deed, following a termination of the Project Deed for an uninsurable risk or force majeure the Project Company will be entitled to receive a “termination payment” from the State equal to:
· The amount payable by the Project Company to JEM under the project’s debt financing arrangements, on the termination date, plus
· Half of the par value of all share capital in the Project Company plus its subordinated debts, as shown on its balance sheet on the termination date, less
· Any gains which have accrued or will accrue to the Project Company as a result of the termination, less
· Any amounts it owes to the State under the project’s contracts on the termination date, less
· The net amount of any insurance proceeds which it will receive (or would have received had it complied with its obligations under the Project Deed),
with adjustments, if necessary, to avoid any “double pay- ments” as a result of any earlier “compensation event” com- pensation payments (see section 3.4.11) and any other adjustments that are needed to avoid “double counting”.
As already indicated, under arrangements set out in the Payment Directions Deed the Project Company has irrevo- cably directed the State to pay any portion of this “termina- tion payment” that is equal to or less than the amounts the Project Company owes to JEM under the project’s debt financing agreements directly to JEM, or as directed by JEM.
The “termination payment” must be paid:
· As a single lump sum within 90 days of the termination of the Project Deed, or
· If the State so chooses, in its absolute discretion, through:
¤ Instalments payments, paid on the dates the Pro-
ject Company would otherwise be due to make principal repayments under the project’s debt fin- ancing agreements, with each instalment payment being equal to the amount that would otherwise have been payable by the Project Company, plus
¤ If the State’s total “termination payment” liability
exceeds the project’s total senior debt (i.e. the amount payable to holders of the bonds issued by JEM) on the termination date, a lump sum pay- ment of the difference within 90 days of the ter- mination.
Under either arrangement, interest will accrue on unpaid amounts from the termination date, at the interest rate for the project’s bonds specified in the private sector parties’ “base case” financial model for the project.
The State must also make a “securitisation refund pay- ment” to JEM, within 90 days of the termination of the Project Deed, equal to:
· The total senior debt (i.e. the amount payable to holders of the bonds issued by JEM) on the termination date,
plus
· If the State elects to make a lump sum “termination payment” under the arrangements described above, any amounts payable to the project’s financiers as a result of early repayments under the financing agreements, provided the Project Company, JEM and the financiers mitigate these costs as much as reasonably possible, less
· The amount the Project Company owes to JEM under the financing agreements on the termination date, less
· Any bank account credit balances held by the financiers on behalf of the Project Company or JEM on the termi- nation date, less
· If the State elects to make a lump sum “termination payment”, any amounts payable by the project’s finan- ciers to the Project Company or JEM as a result of early repayments under the financing agreements.
Again, interest will accrue on unpaid “securitisation refund payment” amounts from the termination date, at the interest rate for the project’s bonds specified in the “base case” finan- cial model.
If the State elects to pay its “termination payment” by instalments, it may at any time require the Project Company to novate the Project Company’s rights and liabilities under the project’s debt financing arrangements to the State or a nominee of the State, in which case the Project Company must arrange this within 20 business days, the State’s “termi- nation payment” liability will be reduced by the principal then owed to the project’s financiers and, if requested by the State, JEM must also novate its rights and liabilities under specified financing agreements to the State or a nominee of the State.
3.5.2
‘Voluntary’ termination by the State
3.5.2.1
General termination arrangements
The State may terminate the Project Deed at any time— even if there have been no defaults by the Project Company, no uninsurable risk events and no force majeure events—by giving the Project Company at least 120 business days’ written notice.
If the State issues such a “voluntary termination” notice, the Project Company must give the Security Trustee and the Bond Trustee copies of the notice and:
· The Project Deed—and, if they have commenced, the Leases and Subleases—will terminate at the end of the notice period
· The State must pay compensation to the Project Com- pany, in the form of a “termination payment” as pre- scribed in a “termination payments” schedule to the Project Deed and described in section 3.5.2.2 below, with any amounts equal to or less than the amounts the Project Company owes to JEM under the project’s debt financing arrangements being paid instead to JEM, or as directed by JEM, under arrangements set out in the Pay- ment Directions Deed
· The State must also pay JEM a “securitisation refund payment” under arrangements set out in the Securitisa- tion Agreement and the “termination payments” schedule to the Project Deed, as already described in section 3.5.1.2
· The Project Company must pay the State the net amount of any insurance proceeds it receives, in connection with the event leading to the termination, which is not spent on repairs, reinstatements or replacements
· The State’s Project Director may require the Project Company, at no cost to the State beyond the State’s compensation payment, to:
¤ Transfer its title, interests and rights in any of its
works or any of the school facilities, and
¤ Novate the Construction Contracts, the Facilities
Management Contract and/or any other replace- ment subcontracts to the State or a replacement contractor, with the State or the replacement con- tractor stepping into the shoes of the Project Company under these subcontracts
· The Project Company must facilitate a smooth transfer of responsibility for the services it was to have provided to the State or any new contractor and take no action at any time, before or after the termination of the Project Deed, to prejudice or frustrate such a transfer, and
· More specifically, the Project Company must give the State’s Project Director and/or any new contractor all the documents and other information about the works, the school facilities, the sites and the services needed for an efficient transfer
In addition, as already discussed in section 3.3.12, during the notice period and then for the following 12 months, the Project Company must fully cooperate with the transfer of
any or all of its services to the State or any new contractor providing the same or similar services.
Among other things, it must:
· If it has not already done so, transfer all its title to and interests and rights in the project, the works, the school facilities and the school sites to the State or the new contractor, free of any encumbrances
· Liaise with the State’s Project Director and/or the new contractor and provide reasonable assistance and advice concerning the services and their transfer, and
· Give the new contractor access to the school facilities and sites at reasonable times and on reasonable notice, provided this does not interfere with their services.
3.5.2.2
‘Termination’ and ‘securitisation refund’ payments
Under the Project Deed, following a “voluntary” termination of the Project Deed by the State the Project Company will be entitled to receive a “termination payment” from the State equal to:
· The amount payable by the Project Company to JEM under the project’s debt financing arrangements, on the termination date, plus
· An amount which, in combination with any dividend, interest, principal or other payments made by the Project Company to the project’s equity investors prior to the termination of the Project Deed, will give these investors an internal rate of return equal to the return forecast in the project’s “base case” financial model, plus
· Any amounts reasonably payable by the Project Com- pany to the Construction Contractors, the Facilities Manager or any other arms-length subcontractor or sub- subcontractor upon the termination of the Project Deed, provided the Project Company and the relevant subcon- tractors and sub-subcontractors have made reasonable mitigation efforts, less
· Any amounts the Project Company owes to the State under the project’s contracts on the termination date,
less
· Any gains which have accrued or will accrue to the Project Company as a result of the termination of the Project Deed and the other project contracts, not counting any amounts payable by the project’s finan- ciers to the Project Company or JEM as a result of early repayments under the project’s financing agreements,
less
· The net amount of any insurance proceeds which it will receive (or would have received had it complied with its obligations under the Project Deed),
with adjustments, if necessary, to avoid any “double pay- ments” as a result of any earlier “compensation event” com-
pensation payments (see section 3.4.11) and any other adjustments that are needed to avoid “double counting”.
The arrangements for the payment of this “termination payment”, the formula for calculating the State’s “securitisa- tion refund payment” and the arrangements for making this payment are identical to those already described in section 3.5.1.2.