RATINGS RATIONALE

"Following the announcement that the South London Healthcare NHS Trust may be dissolved and that its PFI liabilities may be transferred to King's College Hospital NHS Foundation Trust, today's rating action reflects Moody's expectation that a process will be put in place for an orderly transfer of the South London Healthcare NHS Trust's PFI payment obligations to another highly creditworthy entity" says Johan Verhaeghe, a Moody's Vice President - Senior Credit Officer and lead analyst for United Healthcare (Bromley) Ltd.

In 1998 ProjectCo entered into a concession agreement ("CA") with the Bromley Hospital NHS Trust in relation to the construction of an acute general hospital and a mental health unit in Orpington, Kent, and the provision of certain services during the term of the CA (such works and services, together "the Project"). On 1 April 2009, the Bromley Hospitals NHS Trust merged with two other trusts to form a new successor organisation, the South London Healthcare NHS Trust (the "Trust"). On 29 of June 2012, Moody's placed the Bonds on review for downgrade following the announcement by the Secretary of State for Health that, as a result of accumulating a material deficit, the Trust may be subject to the Unsustainable Provider Regime ("UPR"), whereby a Trust Special Administrator ("TSA") may be appointed to run it. The UPR was enacted in July 2012 and a TSA was appointed by the Secretary of State for Health to work up recommendations to resolve the Trust's financial problems on a sustainable basis.

As part of the UPR process, the TSA prepared a draft report, published on 29 October 2012, with draft recommendations. This report will be followed by a consultation process running until 13 December 2012, a final report due 7 January 2013 and a Secretary of State decision, with respect to the future of the Trust, by 1 February 2013. The draft report recommends that the Trust should be dissolved and other organisations should take over the management and delivery of the NHS services it currently provides. This is subject to a transition period of possibly up to three years. With respect to the Trust's liabilities relative to ProjectCo, the preferred option is to transfer these liabilities to King's College Hospital NHS Foundation Trust. The draft recommendation is also that the Department of Health provides direct support to cover the excess costs of the Trust's two main PFI contracts (which includes the Project).

The draft report's recommendations provide some comfort that a process will be put in place to deal with the Trust's PFI liabilities on both a short- and long-term basis. The negative outlook on the Bonds' A2 rating reflects the uncertainty created by (1) the identity and credit quality of the Project's future offtaker, albeit the preferred option is King's College Hospital NHS Foundation Trust; (2) the fact that protective legislation, such as section 70 of the National Health Service Act 2006, is untested; and (3) the current high level of political focus and sensitivity surrounding PFI project procurements.

The A2 rating of the Bonds reflects as positives: (1) the relatively straightforward nature of the services and, consequently, low cash flow volatility; (2) the credit profile, ability and experience of the operations-phase services providers; (3) a range of creditor protections included within ProjectCo's financing structure, such as debt service and maintenance reserves; (4) our expectation that there is a likelihood of high recovery for the bondholders in the event of any default by ProjectCo; and (5) supportive legislation, particularly section 70 of the NHS Act 2006, which substantially mitigates the Trust's credit risk. The rating is constrained, however, by the Project's high leverage, which reduces the Project's ability to withstand unexpected stress.

WHAT COULD CHANGE THE RATING UP/DOWN

Given the Bonds' high rating and negative outlook, Moody's considers it highly unlikely that it will upgrade the Bonds in the near future.

Moody's could downgrade the Bonds if: (1) the implementation of section 70 of the NHS Act 2006 (according to which Secretary of State must transfer the liabilities of a failing NHS trust to an NHS body, the Secretary of State or the Welsh Ministers) doesn't lead to a transfer of the Trust's PFI liabilities to a credit worthy entity; or (2) there was any indication that the Trust's financial difficulties would affect the Project, through a delayed payment, for example. Furthermore, we could downgrade the rating if: (3) lifecycle cost assumptions were to prove inadequate; or (2) the level of service failure points suffered by ProjectCo appeared likely to increase the possibility of termination of the Project

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Operating Risk in Privately-Financed Public Infrastructure (PFI/PPP/P3) Projects published in December 2007. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

ProjectCo is owned by United Healthcare (Bromley) Holdings Limited, which is in turn owned by United Healthcare (Bromley) Group Limited, a company jointly owned by Innisfree Nominees Limited (which holds legal title on behalf of Innisfree M&G PPP LP) and Semperian PPP Investment Partners No. 2 Limited, each of which owns 50% of United Healthcare (Bromley) Group Limited.

REGULATORY DISCLOSURES

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Johan Verhaeghe VP - Senior Credit Officer Infrastructure Finance Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Neil Griffiths-Lambeth Senior Vice President Infrastructure Finance JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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