Bond agency happy with ratings

The long-awaited municipal bonds agency has been formally assessed by two ratings agencies and is ready to issue its first bond, according to the man running the project.

In an interview with Room151, Aidan Brady, chief executive of the Local Capital Finance Company, expressed happiness with the ratings achieved.

He said that the agency was ready to approach the market as soon as councils wanting to borrow have gone through internal approval processes.

He said: “We are ready to go today. If I had 10 or 15 authorities sitting round this table today with their documents we would be in the market and issuing a bond in a few weeks, potentially.”

Brady said that the first issue would be below the current PWLB rate.

However, Brady was reluctant to commit himself to an expected date for the first bond issue, the agency having already missed its original target.

He said: “We are now dependent on the speed that local authorities move. The documentation process has been rightly rigorous and valuable and worthwhile, but has taken longer than we expected. I don’t think we want to hold ourselves hostage to fortune again [to another deadline].”

Brady would not reveal the ratings achieved by the bond agency, but said that he was “happy enough” with the assessments given.

He said: “We can’t tell you what the ratings are because they are private ratings. When you are looking to issue debt what you will do is wait until you are about to issue the debt until you announce the rating.”

He described the process of assuring ratings agencies about the robustness of the business plan as “rightly rigorous”.

“The starting point is it is quite a simple story to tell,” he said. “But we needed to take them through the minutiae of local authority finance.

“You also have to explain in absolute minute detail the operation of the agency down to the timing of when payments will go in and will go out, what happens if a payment doesn’t come in.

“It is a very complex and detailed process.”

Brady said that councils looking to borrow from the agency are now going through internal processes of approval following the completion of a framework agreement covering the terms of lending.

Brady said: “We worked with three councils to negotiate that and it was a very thorough and rigorous process. That completed literally days before Christmas so we got it distributed to our 56 shareholders and other councils we have been talking to just before the break. They are now taking it through their individual processes.

“They can approve the agreements now. They don’t go onto the joint and several guarantee until we are ready to advance cash to them.”

He added that the first bond issue was on course to ensure cash lent to local authorities was not going to be above the current rate on offer from the Public Works Loan Board.

“We have always known we can beat that,” he said.

Look out for a fuller version of this interview with Aiden Brady and Local Capital Finance Company chairman Sir Merrick Cockell next week.