The London Fire Brigade (LFB) has made arrangements to guarantee the supply and maintenance of its fire engines amid growing doubts over the future of its leasing and managed services provider.
Last week, AssetCo, which owns and maintains London’s fire engines, announced plans for a re-financing, including a possible sale of its UK
contracts to ensure that it can pay its debts and stabilise its finances. The plan, due to be approved by shareholders later this month, also includes a plan to sell shares to raise £14m and focus on its fast-growing business in the United Arab Emirates.
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If shareholders do not approve the plan the company has warned that it could go into administration. Takeover talks with Arcapita ended last week after the Bahraini-based bank withdrew its offer for AssetCo.
A spokesman for the LFB, the UK’s largest fire and rescue service, said that it had made contingency arrangements with AssetCo’s main creditor and potential administrator should its supplier collapse. “We have a detailed agreement in place which provides full assurance that our
fire engines will continue to be maintained and available during any period of administration.”
A leasing consultant, who asked not to be named, said that while the high profile of the deal might make it superficially attractive, the
length and the complexity of the PFI and PPP contracts involved could put it beyond the reach of many asset finance companies.
Banks could be interested in AssetCo’s UK contracts, but they face new regulatory requirements to set aside more capital against financial risk. This could limit the amount of capital banks have available for acquiring new leasing contracts, the consultant said.
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By GlobalDataWhen the 20-year Private Finance Initiative (PFI) contract with the LFB was signed in 2001 it was the world’s biggest outsourcing contract of its kind and worth £292m, according to AssetCo. By 2007 it was worth £400m due to additional equipment, AssetCo said.
The contract includes buying, supplying, maintaining and replacing all LFB fire appliances, specialist fire and rescue vehicles and “operational
equipment”.
AssetCo’s other main contract in the UK is a 20-year public Private Partnership (PPP) contract with Lincolnshire Fire and Rescue Service, signed in 2006.
Under the contract AssetCo suppliers and maintains pumping appliances, response and support vehicles, and operational equipment.
Last year, AssetCo, signed a three-year year £40 million contract to provide an outsourced fire-fighting service in the UAE, followed by a joint
venture in the UAE that delivers fire fighting services to the UAE Air Force.
