Investor relations

This page sets out some key information for investors in the bonds and commercial paper issued by the UK Municipal Bonds Agency and its Special Purpose Vehicle, the UK Municipal Bonds Agency Finance Company DAC.

PFM Financial Advisors LLC, the Managed Service Provider to the UK Municipal Bonds Agency, has retained Newgate Communications to provide public affairs and investor relations advice to the UK Municipal Bonds Agency.

For media enquiries please contact Newgate Communications at [email protected] or 020 3757 687.

For all other enquiries please contact either June Matte or Christian Wall. [email protected], [email protected] or 020 3530 7500.

Lending and funding

The UK Municipal Bonds Agency matches its lending and funding so that the terms and conditions are fully “back-to-back”.  All borrowing will be undertaken in Sterling and no maturity or interest rate risk will be undertaken by the UK Municipal Bonds Agency.

Investor presentations

Investor presentations will be made available as the UK Municipal Bonds Agency’s bond and commercial paper programmes are rolled out.

The investor presentation for the £350 million 5-year FRN issued by the UK Municipal Bonds Agency Finance Company DAC in March 2020 to fund a loan made by the UK Municipal Bonds Agency to Lancashire County Council can be downloaded here.

The investor presentation for the £250 million 40-year bond issued by the UK Municipal Bonds Agency Finance Company DAC in August 2020 to fund a loan made by the UK Municipal Bonds Agency to Lancashire County Council can be downloaded here.

Information memoranda

The UK Municipal Bonds Agency will make the information memoranda for its standalone bond issues, programme documentation for its Medium Term Note and Commercial Paper Programme as they are developed or bonds issued.

The information memorandum for the £350 million 5-year FRN issued by the UK Municipal Bonds Agency Finance Company DAC in March 2020 to fund a loan made by the UK Municipal Bonds Agency to Lancashire County Council can be downloaded here.

The information memorandum for the £250 million 40-year bond issued by the UK Municipal Bonds Agency Finance Company DAC in August 2020 to fund a loan made by the UK Municipal Bonds Agency to Lancashire County Council can be downloaded here.

External credit rating

The UK Municipal Bonds Agency will establish a Euro Medium Term Note Programme for its proportionally guaranteed bonds through its SPV, the UK Municipal Bonds Agency Finance Company DAC.  The programme will be rated by one or more of Moody’s, Standard & Poor’s and Fitch.

The commercial paper programme to fund short term loans to local authorities, will be rated by at least two of Moody’s, Standard & Poor’s and Fitch.  The structure of the programme is currently being finalised, but at this time, it is intended that the programme will be rated rather than individual issues of paper.

Any standalone benchmark bond issue to fund a loan to a single authority will have that issue rated and the underlying borrower will also be required to have a cr4edit rating from one of Moody’s, Standard & Poor’s and Fitch.

The recent issue of the £350 million 5-year FRN through the UK Municipal Bonds Agency Finance Company DAC to fund a matching loan to Lancashire County Council provided by the UK Municipal Bonds Agency was rated Aa3 by Moody’s.  Similarly, Lancashire County Council has an Aa3 rating from Moody’s.

Agency’s credit methodology

Credit quality is at the heart of all debt financing and the interests of the UK Municipal Bonds Agency, local authorities and investors are all aligned towards ensuring that the UK Municipal Bonds Agency maintains a rigorous and smart credit process.

The UKMBA will undertake its own credit ratings of the borrowers and will exclude those whom it believes either do not have the necessary credit standing or whose business model, particularly level of commercial property investment and attendant debt, are deemed excessive.

The UK Municipal Bonds Agency uses a proprietary credit methodology that is built upon those used by the major credit rating agencies, particularly that of Moody’s.  The process is based on four key elements:

  • Credit scoring model
  • Document Review
  • Cohort analysis
  • Discussions with councils

These elements are combined to calculate a credit score for each borrower.  The score that is required for a local authority to be eligible to borrow through the UK Municipal Bonds Agency is set by the Board and periodically reviewed.  In addition, there are a series of “red lines” that should they be crossed by a local authority, automatically mean that a local authority will not be able to borrow e.g. if the accounts of a local authority are qualified.

More information on the credit process can be found here.

Framework agreement

Any local authority wishing to borrow for the medium-term and long-term through the UK Municipal Bonds Agency is required to enter into the UK Municipal Bonds Agency’s Framework Agreement.  This legal document forms a contract between each local authority and the UK Municipal Bonds Agency.  The Framework Agreement sets outs the terms and conditions of the UK Municipal Bonds Agency’s loans and the terms of the proportional guarantee.

Risk management

The UK Municipal Bonds Agency has an extremely conservative approach to risk management.  The Governance, Risk and Compliance Framework, together with the detailed policies and procedures that flow from that framework, set out the UK Municipal Bonds Agency’s strategy, processes and practices to ensure that its:

  • governance and management is of a high standard;
  • credit processes and lending policies are robust and appropriate; and
  • adherence to laws and regulations is assured.

The credit process is an integral part of the proportionally guaranteed loan programme and core to the UK Municipal Bonds Agency’s risk management.  The process is built upon the methodologies used by the leading credit rating agencies Moody’s, Standard & Poor’s and Fitch.  It is used to ensure that local authorities whose finances are significantly less sound than their peers, or whose business model is risky compared to their peers, cannot borrow under the proportional guarantee.

Loan reports

As the UK Municipal Bonds Agency issues bonds, it will publish reports setting out details of the loans it has made to local authorities.  These will be posted onto the page that can be reached by clicking on “Loan reports” above.

To date, two loans have been made to Lancashire County Council, which are standalone loan outside of the proportional guarantee.  The first loan was for a £350 million loan for 5-years maturing March 2025.  The loan is floating rate and linked to SONIA at a spread of 80bps.  The second loan was for a £250 million loan for 40-years maturing March 2060.  The loan is fixed rate and issued at a spread to Gilts of 100bps