Council seeks GBP 250-300 million over 5 years
The UK Municipal Bonds Agency [“UKMBA”] today announces plans to issue its first ever bond with Lancashire County Council [“LCC”], subject to LCC’s usual governance processes.
The UKMBA will issue a GBP 250-300 million 5-year SONIA linked Floating Rate Note (FRN) for LCC.
The bond will not fall within the Agency’s proportional guarantee either now or in the future; it will be guaranteed solely by LCC.
As the bond will be issued on behalf of a single council and will not be guaranteed by any other local authority, Lancashire has not been subject to the UKMBA’s own credit process because Lancashire County Council has an AA3 credit rating from Moody’s.
The issuance, which will be used to help fund Lancashire’s capital programme, will be the first bond to enter the market from the UKMBA.
This second issuance will be the UKMBA’s first proportionally guaranteed bond that aggregates borrowing from several councils, expected to be a GBP 250 million 10-year fixed rate bond placed in March/April 2020. The maturity and date of issue are still to be agreed.
Commenting on the planned issue, Sir Merrick Cockell, Chairman of the UKMBA, said: “This is an incredibly significant moment for local government. The launch of the very first UK municipal bond finally gives UK authorities the opportunity to take control of their own finances. Raising money through the Agency gives local authorities a flexible and simple route to access highly competitive, market-beating rates, under terms that suit their circumstances.
“Following the PWLB rate rise in 2019, which has priced a large number of councils out of the market, there is strong appetite from across the sector for access to the funding options the UKMBA offers.
“The UKMBA offers, flexible and highly competitive funding structures, underpinned by our robust credit process and revised guarantee structure that we believe is highly attractive to a broad range of investors.”
Newgate: Charles Ansdell / Simone Fassom / Joe Cockerline
Phone: 020 3757 6870
About the UKMBA:
The UK Municipal Bonds Agency Plc is a first for the sector in the UK. It helps local councils to finance their investment in projects including infrastructure and housing, efficiently and cost effectively. It issues bonds and borrows in the market to finance local authority projects at a lower cost than the Public Works Loan Board. This reduces councils’ finance costs, which means either more can be invested into local economies, infrastructure and housing projects or there is less pressure on council tax.
Whereas the Public Works Loan Board does not undertake any affordability or credit checks on local authority borrowers, the UKMBA uses a proprietary rating process that builds upon the methodologies used by international credit rating agencies such as Moody’s, S&P and Fitch, to determine whether councils’ borrowing through the UK MBA is affordable and sustainable. No local authority has the automatic right to borrow through the UKMBA and unlike PFI and many other alternatives, borrowing through the UKMBA is on balance sheet and fully transparent.
The UK Municipal Bonds Agency Plc is a public limited company, owned by local councils and the Local Government Association. While a municipal bonds agency has not previously existed in the UK, they have been successfully established throughout Europe – in France, the Nordics, Scandinavia and Holland as well as in Japan, New Zealand and Canada. In each case, borrowing costs, transparency and efficiency were improved by the creation of a municipal bonds agency.