40CZ Catalyst H.r Bd

TIDM40CZ

RNS Number : 6996U

Catalyst Healthcare (Manchester)Fin

26 November 2019

THIS NOTICE IS IMPORTANT AND REQUIRES THE IMMEDIATE ATTENTION OF HOLDERS OF THE BONDS. IF HOLDERS OF THE BONDS ARE IN ANY DOUBT AS TO THE MEANING OR IMPORT OF THE CONTENTS OF THIS NOTICE OR REQUIRE FURTHER ADVICE, THEY SHOULD CONSULT THEIR OWN INDEPENDENT PROFESSIONAL ADVISERS (INCLUDING IN RESPECT OF ANY TAX CONSEQUENCES).

Catalyst Healthcare (Manchester) Financing PLC (the "Issuer")

GBP218,050,000, 2.411 per cent. Index-linked Guaranteed Secured Bonds due 2040

(including up to GBP38,000,000 Variation Bonds) unconditionally and irrevocably guaranteed as to scheduled payments of principal and interest pursuant to a bond financial guarantee issued by AMBAC Assurance UK Limited (ISIN XS0208052265) (the "Bonds")

NOTICE

To the holders of the Issuer's Bonds

Court Proceedings - Deductions from Service Payments

Unless otherwise provided, terms defined in the Master Definitions Schedule dated 8 December 2004 (as the same may be amended, varied or supplemented from time to time) shall have the same meaning where used in this Notice.

As previously notified:

1 Central Manchester University Hospitals NHS Foundation Trust (now, Manchester University NHS Foundation Trust) (the "Trust") has issued unavailability notices to the Issuer's associated company, Catalyst Healthcare (Manchester) Limited ("Project Co"), because of alleged defects in respect of the fire doors and smoke doors (the "Doors") at the Central Manchester University Hospital (the "Hospital") forming part of Project Co's PFI project;

2 the Issuer and Project Co have been working (and continue to work) with the Trust, Lend Lease Construction (EMEA) Limited (the "Contractor") and its supply chain to resolve these issues. The vast majority of the Doors have now been replaced;

3 the Trust has advised that, to the end of June 2019, it has accrued unavailability deductions of approximately GBP24.3 million in relation to the Doors. There is a dispute as to the Trust's entitlement to accrue these deductions at all (the "Dispute"). The Trust has deferred taking any sum in relation to these unavailability deductions (the "Deferred Deductions");

4 in order to seek to assist with the resolution of the Dispute,, a number of legal issues and certain technical and factual issues relating to two of the Doors at the Hospital (the "Adjudication Doors") were referred to an adjudication (the "Adjudication"). The parties agreed that Stephen Furst QC would be appointed as the adjudicator (the "Adjudicator") in respect of the Adjudication;

5 during the course of the Adjudication, it was agreed between Project Co and the Trust that no availability deductions could be levied by the Trust in relation to the Adjudication Doors because the alleged defects in such Doors were remedied before availability deductions could accrue under the terms of the Project Agreement;

6 in his Decision dated 25 April 2019, the Adjudicator determined that the alleged defects in the Adjudication Doors did not breach the Safety Condition (as defined in the Project Agreement);

7 given that the alleged defects in the Adjudication Doors are materially similar to the alleged defects in the rest of the Doors, it is very likely that the Safety Condition will not have been breached in respect of any of the Doors and that the Trust is not entitled to the Deferred Deductions; and

8 the Adjudicator's Decision is binding on the parties unless the Trust brings court proceedings and the court reaches a different conclusion to the Adjudicator in the future.

By way of a letter dated 20 June 2019, the Trust confirmed that it did not accept the Decision and that it, therefore, maintained its claim against Project Co in relation to the Dispute.

Project Co considers that it is in the interests of both it and the Trust for the Dispute to be resolved as quickly and cost effectively as possible.

Project Co has, therefore, issued Part 7 court proceedings against the Trust, the Contractor and Lendlease Construction Holdings (Europe) Limited (the "Guarantor") (the "Part 7 Proceedings").

In the Part 7 Proceedings, Project Co's position is that:

1 the Trust is not entitled to the Deferred Deductions in relation to the Doors as the alleged defects do not amount to a breach of the Safety Condition; and

2 in the alternative, if the Trust is entitled to the Deferred Deductions, then the Contractor is liable to indemnify Project Co for any damages which it suffers (including the Deferred Deductions and any legal costs).

If the Trust is successful in defending the Proceedings and it were to deduct the Deferred Deductions:

1 Project Co considers that it would immediately be able to recover such Deferred Deductions from the Contractor and/or the Guarantor; and

2 the Trust would have grounds to terminate the Project Agreement because of the level of deductions incurred in the previous 12 months. However, Project Co and the Issuer are hopeful that matters would be resolved amongst the parties before it reached that stage.

Project Co and the Issuer continue to take legal advice with respect to the matters mentioned in this announcement and keep the matter under continual review.

A further update will be given in due course.

Enquiries

If you have any enquiries, please direct them to the Issuer

The Issuer

Catalyst Healthcare (Manchester) Financing PLC

c/o Albany SPC Services Limited,

3rd Floor,

3-5 Charlotte Street,

Manchester,

M1 4HB

Attention: Ailison Mitchell

The Principal Paying Agent

The Bank of New York Mellon,

International Corporate Trust Services,

Merck House, Seldown,

Poole, Dorset,

BH15 1PX

The Bond Trustee

Law Debenture Trustees Limited

Fifth Floor, 100 Wood Street,

London

EC2V 7EX

This notice is given by Catalyst Healthcare (Manchester) Financing PLC

26 November 2019

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November 26, 2019 06:03 ET (11:03 GMT)