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Case Study

Interest rate hedging for M25 road refinancing

  • Rishin Patel headshot


    Rishin Patel

    Managing Director
    Hedging and Capital Markets

    Infrastructure | London


Chatham advised Connect Plus on the refinancing of the M25 motorway, the largest infrastructure refinance in the UK since 2015.


  • The M25 motorway encircles most of Greater London. Its £889M refinance successfully raised the required debt in the public bond market.
  • As part of the refinance, additional debt was drawn to accommodate new works and project costs going forward.
  • The project’s existing funding structure consisted of a syndicate of commercial bank debt and included pay fixed interest rate swaps and receive fixed RPI (retail price index).
  • Existing interest rate swaps were terminated and RPI swaps were restructured to match the new notional and economic terms.

Our approach

  • Chatham advised Connect Plus on the value attributed to terminating the existing interest rate swaps before maturity, by looking at x-value adjustment (XVA) reserves held against the derivative positions.
  • Chatham participated in the evaluation of bids from potential hedge coordinating banks and presented the sponsors with the best value proposition and commentary on each bank's deliverability of such a large coordination mandate.
  • Chatham benchmarked the pricing for the coordination role as well as the associated novation fee. Swing tables allowed us to pre-agree spreads that would provide complete transparency in the process leading up to and on financial close.
  • Chatham also benchmarked the restructure of the RPI swap, providing transparency around how the large out-of-the-money position should be dealt with.


  • The refinancing of the project was successful and achieved the objectives required by the sponsors.
  • Financial close was smooth with several dry runs held in the run up.
  • The sponsors were able to refinance the project despite having a significant negative mark to market.
  • The fixed bond priced better than expected, which resulted in a significant pick up in debt servicing costs compared to the original 2009 private finance initiative (PFI).

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About the author

  • Rishin Patel

    Managing Director
    Hedging and Capital Markets

    Infrastructure | London


This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.