UKMBA launches first municipal bond with Lancashire County Council

Debut bond raises £350m; paves the way for pooled issuance

The UK Municipal Bonds Agency (UKMBA) today announces the pricing of its maiden bond issue on behalf of Lancashire County Council.

The transaction is  a 5-year, floating rate, SONIA-linked note at a rate of Sonia+80bps. The bond is being issued through the UKMBA’s special purpose vehicle, UK Municipal Bonds Agency Finance Company DAC.

The issue sits outside of the UKMBA’s own credit process and is rated Aa3 (negative) by Moody’s. Lancashire has a separate Aa3 (negative) rating from Moody’s.

The UKMBA mandated HSBC as Global Coordinator and BofA Securities, Barclays and HSBC as Joint Bookrunners.

The launch of the UKMBA’s first bond signals a step change for local government funding, with local authorities seeking alternatives to the Public Works Loans Board, following the one percentage point increases to PWLB rates in October 2019.  The UKMBA aims to provide a cost-effective and accessible complimentary alternative to the PWLB.

This initial issuance paves the way for a wider pooled bond to be launched, with an estimated timing of Spring 2020. That issue will fund loans to a group of local authorities and again offer pricing well below the PWLB’s rate.

Speaking on the launch, Sir Merrick Cockell, Chairman of the UK Municipal Bonds Agency, commented: “This issuance represents a hugely significant moment for local authority funding. We’re thrilled to be able to provide UK councils with an accessible and affordable financing option, that’s tailored to their needs. Ultimately, our goal is to provide a supplementary option for councils, alongside the PWLB, to allow them to manage their finances and raise funds effectively and efficiently. Doing so ensures local authorities have the flexibility and capacity to continue to deliver for residents, providing vital local services that materially impact on people’s lives.”

Mike Jensen, Director for Investment at Lancashire County Council, commented: “We’re excited with today’s issuance, following our long-standing support of the UKMBA since its inception. This proves the concept, long-mooted, that municipal bonds have a key role to play in providing councils with another fundraising tool, offering an important alternative to established channels. We look forward to continuing our work with the UKMBA in future.” ​​

For documentation related to the UKMBA’s issuance on behalf of Lancashire County Council, click here. FOR UK INVESTORS ONLY.