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UK Municipal Bonds Agency appoints PFM as managed service provider to deliver revised guarantee framework

Leading public sector advisory firm PFM Financial Advisors LLC, [PFM] has been announced as the managed service provider to the UK Municipal Bonds Agency [UKMBA]. The firm’s remit will focus on structuring the UKMBA’s offering and providing a flexible, user-friendly and cost-effective framework to address the borrowing needs of local authorities.

The revised structure aims to directly address local authorities’ feedback to the Agency thus far and promote uptake of a funding solution that stands to deliver a much-needed option to councils facing increasing funding and service pressures. 

In light of the recent one per cent hike in the interest rate offered by the Public Works Loan Board to local councils, an alternative source of economical funding is desperately needed.

The new framework will eliminate the unconditional element of the Agency’s existing guarantee, which has proved a stumbling block to local authorities borrowing through the Agency.  Under this model, local authorities will guarantee borrowing through the UKMBA in proportion to their borrowings through the UKMBA. This means that no council can be singled out to cover the liability in the unlikely case of another council’s default.

The UKMBA will retain its rigorous credit process, which is strongly in the public interest and key to ensuring that there are tough controls that prevent excessive or reckless borrowing by councils.  This will allow local authorities to take advantage of market interest rates while being subject to market discipline.  All borrowing through the UKMBA will be on balance sheet and fully transparent.

Commenting on the announcement, Sir Merrick Cockell, Chairman of the UK Municipal Bond Agency said:

“The UK Municipal Bond Agency will revolutionise how local authorities finance their capital expenditure and enable local government to stand on its own two feet, while not indulging imprudent or excessive borrowing.

“We’ve clearly heard the feedback from local authorities around the original guarantee structure and have taken steps to implement a revised framework that offers the security and flexibility they need.

“PFM are an ideal delivery partner for this, with a proven track record in transforming finance as the leading independent financial advisory firm for public sector clients in the US.”

PFM Managing Director June Matte said:

“Our revised model which builds on our successful experience with similar local government borrowing structures in the US maintains the credit strength of the Agency while removing some of the biggest obstacles to success.  A streamlined structure will help the UKMBA to establish itself as the key provider of funding solutions for local councils that will empower them to deliver their goals and secure their financial futures.

“We look forward to working closely with the Agency’s board to deliver this ground breaking and important programme.”

Cllr James Jamieson, Local Government Association Chairman, said:

“The UKMBA remains well placed to cut the cost of council borrowing to deliver vital new infrastructure like homes, roads and business hubs.

“This revised structure presents councils with a range of secure borrowing options and we look forward to working closely with the UKMBA so it can help councils deliver even better value for local taxpayers and benefits for local communities.”

For enquiries related to the UKMBA, please contact Christian Wall (wallc@pfm.com) or June Matte (MATTEJ@pfm.com)/ 020 3530 7500 

For media enquiries please contact Newgate communications: pfm@newgatecomms.com / 020 3757 6870