10/9/11

Failing bank involved in 3 Ontario hospital P3s

Europe's latest failing bank, Dexia, is involved in at least three hospital public private partnership (P3) projects in Ontario: Halton Healthcare, Bridgepoint and CAMH, as well as the Windsor Essex Parkway P3 project.

The British government has said it does not expect Dexia's situation to affect the viability of P3 projects in Britain. So far, there is no word from the Ontario government on this point.

Will the financial crisis spread?
Quite a few banks were downgraded by credit rating agencies late this week, following the crisis at Dexia and declining confidence in the financial system. Ominously, the New York Times reports "European banks are reluctant to lend to one another, and United States lenders are reluctant to lend to European institutions. Banks have been unable to sell bonds to raise money."

Dexia has, however, held on to an investment grade credit rating due to the financial commitments from the French and Belgian governments to backstop the bank.

It seems that the bad assets of the Dexia will be piled into a 'bad bank' and the better bits sold off. Canadian bank RBC co-owns 'RBC Dexia' with Dexia and there is already speculation that RBC will purchase Dexia's share of that outfit.

The Fruits of Austerity in Greece
There hasn't been any fruits to the harsh cutback to public services in Greece. The economy has shrunk rapidly and the the fightback from working people makes the existing policy of cutbacks more and more untenable.

Investors in bank stocks and the rich it seems may have to bear more of the cost, after all.

It's beginning to look like Europe will let Greece default on its loans. That will cost the banks a lot of cash.

But, these guys have big backers in the European governments. There might be no money for public services, but the banks can count on European public authorities pouring in billions and billions to keep them afloat. Some reckon at least couple of dozen major banks will need government cash to stay afloat.

But there is tremendous strife between the classes and between European governments on who will pay the price for this. As a result, no plan has emerged, yet, and the governments continue to delay.

So, the ultimate impact on private financing of public infrastructure remains quite unclear. But, at the very least, P3s are facing choppy waters ahead.

Stay tuned.


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