The bond amount includes GBP185 million of variation bonds and GBP90 million of construction inflation variation bonds, issued but not sold at financial close.

The Issuer is a financing conduit formed in 2006 to raise finance and on-lend it to Capital Hospitals Ltd ("ProjectCo"). In accordance with a 42-year contract signed with Barts Health NHS Trust (the "Trust", and previously Barts and the London NHS Trust), ProjectCo has assumed obligations to design, build and maintain new acute general hospitals on two sites, comprising The Royal Hospital of St Bartholomew ("Barts") and The Royal London Hospital (the "Royal London"), together with supporting infrastructure and amenities, and to undertake some refurbishment of existing buildings (taken together, "the Project"). ProjectCo will also provide facilities management (FM) services at the hospitals.

RATINGS RATIONALE

"Today's upgrade reflects the significant progress and de-risking of the construction works, which are now approximately 83% complete by contract value and include the successful delivery of Phase 1 of Barts and the Royal London," says Declan O'Brien, an Analyst in Moody's Infrastructure Finance Group. "Furthermore, the upgrade reflects that the Issuer has been successfully delivering facilities management services on the Project since 2006," adds Mr. O' Brien.

Moody's considers the delivery and commissioning of Phase 1 of the Royal London to be a significant factor driving the upgrade. Risks faced by ProjectCo are now materially reduced as a result of the delivery of Phase 1, which triggered a step-up to approximately 67% of the steady-state service payment. The technical advisor, Faithful and Gould, opines that the remaining works are straightforward and that there are a number of replacement contractors capable of completing the works in the absence of Skanska Major Projects (SMP), the main construction contractor for the Project.

Risks mitigated as a result of the delivery of Phase 1 include ProjectCo's high exposure at financial close to (1) SMP as provider of a fixed-price construction contract with a liability cap of 50% of the contract value (SMP's obligations are guaranteed by Skanska AB); (2) the size of the Project and the risk of replacing SMP with sufficiently experienced and capable contractors during the construction phase; and (3) potential delays in construction and, hence, revenues.

The Baa2 underlying rating of the bonds and the EIB loans positively reflects (1) ProjectCo's long-term Private Finance Initiative (PFI) contract with the Trust to redevelop and then provide FM services to the Royal London and Barts hospitals; (2) the strength of the Trust; (3) the successful certification of approximately 83% of construction works, including the satisfactory delivery of Phase 1; (4) the strong construction support package provided by SMP and supported by a performance bond of 10%, relative to remaining construction value (while Moody's does not rate Skanska AB, the rating agency considers the company's credit quality to be robust); and (5) the satisfactory performance of hard and soft FM to date. However, the ratings are constrained by the remaining construction works, amounting to approximately GBP180 million, which will be completed over a three-year period.

The stable outlook on the ratings reflects the construction progress and satisfactory service performance to date. While the remaining construction works should be straightforward, Moody's notes that next major step-up in unitary charge occurs upon the completion of Phase 2 at Barts which is not expected to occur before September 2014.

Both the bonds and the EIB loans benefit from the unconditional and irrevocable guarantees of scheduled principal and interest from Assured Guaranty (Europe) Ltd. and Ambac Assurance UK Limited (a subsidiary of Ambac Financial Group, Inc., "Ambac"),, respectively. The underlying rating of Baa2 reflects the credit risk of the bonds and EIB loans, absent the benefit of the respective guarantees. The ratings are determined as the higher of the underlying rating and the guarantor's rating. As at 23 November 2012, Assured Guaranty's insurance financial strength rating was Aa3 on review for downgrade and accordingly the ratings for the Assured Guaranty-wrapped debt obligations are Aa3. As Ambac's insurance financial strength and senior debt ratings were withdrawn on 7 April 2011, the ratings for the Ambac-wrapped debt obligations are Baa2, in line with the underlying rating.

WHAT COULD CHANGE THE RATINGS UP/DOWN

Moody's could consider upgrading the ratings if ProjectCo (1) successfully reaches the completion of Phase 2 at both hospitals on time and budget; and (2) continues to deliver satisfactory service performance.

Conversely, Moody's could consider downgrading the ratings if (1) there was a material decline in Skanska AB's credit quality or its commitment to the Project; or (2) the Project suffered a material delay, cost overrun, revenue shortfall or performance failure that could not easily be accommodated within the available contractual protections.

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Construction 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.

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Declan O'Brien Analyst Infrastructure Finance Moody's Investors Service Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain 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 Espana, S.A. Calle Principe de Vergara, 131, 6 Planta Madrid 28002 Spain 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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