A foundation trust is in talks about combining a “bullet payment” from the Department of Health with its own surplus and charity funds to make a private finance initiative rebuild more affordable.

Alder Hey Children’s Foundation Trust in Liverpool has applied to the DH’s foundation trust financing facility for £40m of its £227m project, according to documents seen by HSJ. The trust would use £77m of its own cash and £11m raised by charity, with the rest coming from PFI.

The trust’s application documents to the FT financing facility – a committee within the DH advising on capital loans to foundations – suggested the department could apply a similar model to other trusts.

It said: “This more affordable PFI has been agreed with the DH and the [DH] private finance unit to be a model of investment for the future.”

Alder Hey’s application in November had originally anticipated paying £6m of the £40m DH loan back over 10 years. Monitor’s long term modelling showed the debt servicing could cause the trust to slip to a financial risk rating of two – the second highest risk of five categories – in 2016-17 and 2017-18.

DH documents, released under the Freedom of Information Act, show the trust is now asking to repay that part of the loan over 25 years to reduce its financial risk.

Recommending the plan for approval in December, a report to the FT financing facility board said: “This is a significant commitment but on the base case the trust maintains a rating of five throughout the period to 2018.”

The DH element of the money would cover equipment and refurbishment, while the PFI element covered a large-scale rebuild of the trust’s estate, much of which dates from before 1948.

Alder Hey’s unique use of PFI to cover less than half of the total value of the project illustrates the difficulty trusts face getting funding for mid-scale capital projects.

Healthcare Financial Management Association spokesman Chris Calkin said: “I suspect increasing numbers of financial strategies will seek to address major capital investment by a mix of funding. Of course, not every trust has the same access to charitable funds as Alder Hey.

The news comes after HSJ revealed that Northumbria Healthcare Foundation Trust and Northumberland County Council were in talks about the latter buying out the hospital’s PFI debt.

The council would apply to the Public Works Loan Board and make the investment in return for a commitment to protect existing NHS services and invest in new ones.

The Foundation Trust Network said it was “keen to support the development of a more plural investment market” for trusts to invest in capital projects.

The December papers from the financing facility showed foundation trusts asking for larger amounts in loans and an increased number of mental health trust applicants.

Hertfordshire Partnership applied for £38.7m, South Staffordshire and Shropshire Healthcare £30m and North Essex Partnership £12m. Guy’s and St Thomas’ in London, which has a turnover of around £1bn, has applications lodged for £160m in loans.

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