Aberdeen raises £370m with bond issue
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Marischal College, Aberdeen City Council headquarters. Photo: Aberdeen City Council
Investors have snapped up all £370m of the first bond issued by a Scottish local authority.
Aberdeen City Council has announced it got the bond issue away at a margin of 1.25% over gilts.
The issue, which matures in 2054, has a 0.1% coupon and is inflation linked, with a floor of zero and no cap.
Council policy and resources committee convener Willie Young said: “The bond issue is part of our strategy to maintain a diversified funding portfolio that provides us with greater financial flexibility.
“This flexibility will help Aberdeen anchor its status as both a global energy hub as well as ensuring that we have the infrastructure required to attract world class businesses as we seek to broaden and diversify our economic base.”
A spokesman for the council said that the funds will be drawn in a single transaction and invested in fixed term deposits, bank deposits and money market funds.
The £370m raised will be used to pay for capital and infrastructure investment, including work to help deliver the city centre masterplan.
Other investment will deliver school and housing projects, roads, digital improvements as well as other economic development projects.
The issue follows Aberdeen becoming the first Scottish council to gain an issuer credit rating last month.
Moody’s Investors Services confirmed an Aa2 rating for the local authority, citing its “strong institutional framework” and “strong track record of operating performance”.
Issuing its rating, Moody’s said: “The council has demonstrated a solid financial record for the last five years, maintaining a net surplus against budget for each year.
“Gross operating balance to operating revenues was recorded at 8.3% in 2015/2016 and projected to average a healthy 7.5% over the next couple years if planned savings are delivered.”
In January, Westminster and the council agreed a £250m “city deal” for Aberdeen, while the Scottish government promised a further £254m for key infrastructure projects in the area.
