• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Bonds agency on verge of first bond launch

0
  • by Colin Marrs
  • in 151 News · Treasury
  • — 8 Jan, 2020

The UK Municipal Bonds Agency is poised to launch its long-awaited first bond within weeks, with a second issue set to follow before the end of the financial year.

Councillor Richard Watts, chair of the Local Government Association resources board, revealed the news this week at his organisation’s annual local government finance conference in London.

3rd LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

Room151 understands that the inaugural bond will involve just one local authority, with the second involving a group of authorities.

Speaking to the conference, Watts said: “The agency has recently redesigned [its] lending offerings councils and removed the simple and irrevocable guarantee element to ensure the offer fully meets the council’s requirements.

“They are now working on two bond issues, both scheduled to be completed within the current financial year.”

Sources close to the deal say that the first issue is likely to be worth more than £100m, have a duration of around 12 years, and will involve a large local authority.

The UKMBA is understood to be confident that the rates at which both bonds will be issued will comfortably beat the current rate for Public Works Loan Board (PWLB) loans.

It is understood that the council involved in the first bond will use the cash to support a number of projects within its capital programme.

It is understood that banks have already started a soft marketing exercise to attract interest in the bond among investors.

In order to complete the deal, the council involved will need to either already have a rating agency rating, or gain one before the bond is launched.

If and when the bond is issued, it will be the culmination of more than five years’ work by the agency, which has struggled with previous attempts to launch a bond.

In March last year, Room151 revealed that the UKMBA was dropping the “joint and several liability” (JSL) clause that commits borrowers to cover liabilities caused by defaults on payments by other participants.

Along with adverse market conditions, concerns over the JSL guarantee among potential borrowers was seen as a key factor in the ongoing failure of the agency to issue its first bond.

In October, the agency appointed financial adviser PFM to administer the agency on an outsourced basis, following which the firm reworked the guarantee.

Whereas the JSL guarantee would have left authorities on the hook for the full amount of any default by other participants, the new “proportional guarantee” means participants will now only be liable for their own share of borrowing.

The agency’s efforts to launch its first bond were boosted by October’s decision by the Treasury to hike PWLB rates by a full percentage point.

Speaking to Room151 at the time of that decision, former UKMBA chief executive Aidan Brady said: “The increase in PWLB rates is likely to leave many councils considering alternative sources of borrowing.

“It also means that aggregating borrowing to issue bonds at rates below what those councils can achieve through the PWLB becomes an even more cost-effective option for them.”

According to the UKMBA, around 25 councils have signed up to its framework agreement, its basic loan document.

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.

Share

You may also like...

  • Collaboration ‘important’ to future of treasury management Collaboration ‘important’ to future of treasury management 7 Apr, 2016
  • News Roundup: Smith Commission, Welsh mergers, Kerslake defence, Barnett formula… News Roundup: Smith Commission, Welsh mergers, Kerslake defence, Barnett formula… 27 Nov, 2014
  • PWLB borrowing plummets in wake of rate increase PWLB borrowing plummets in wake of rate increase 5 Nov, 2019
  • CIPFA’s Resilience Index: laudable but flawed CIPFA’s Resilience Index: laudable but flawed 15 Jan, 2019

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 21 hours ago

    Going beyond the standard metrics for climate change: Sponsored article: With climate change an investment imperative and an imminent reporting requirement, Ritesh Bamania argues UK pension schemes should look beyond today’s standard metrics. With… dlvr.it/RtnpLS pic.twitter.com/6ABaFHyS9I

    Room151 2 days ago

    LGPS webinar: Governance the key to TCFD implementation: LGPS funds have been warned that governance is it at the here of Whitehall plans to impose a new climate reporting regime on pension funds. In January the Department for[...] dlvr.it/RtjwNq pic.twitter.com/YMiMdmRyzU

    Room151 2 days ago

    LGPS webinar: Central bank management of bond purchasing could affect all asset classes: When the government debt caused by the pandemic is eventually tackled there may be a huge impact on assets of all classes, according to a leading investment expert… dlvr.it/RtjwJx pic.twitter.com/7v8K5vMYHo

    Room151 2 days ago

    #LGPS readers...what to do about #bonds? room151.co.uk/blogs/lgps-web… @BrunelPP 's new CIO, David Vickers tackles a problematic area #centralbanks #assetallocation #fixedincome pic.twitter.com/yUJr0azbKv

    Room151 2 days ago

    LGPS Challenges: Balancing Realpolitik and responsible investment: Elizabeth M. Carey warns of the perils of an ESG echo chamber as countries outside the West continue to invest in fossil fuels. Anyone working with the LGPS probably feels[...] dlvr.it/RtjMpq pic.twitter.com/MykIYxuYri

    Room151 6 days ago

    How can local government ‘build back better’?: Beverley Gower-Jones looks at the options for driving small business entrepreneurship in clean technologies. Innovation is essential for local authorities to save money and reduce emissions, it is the… dlvr.it/RtT3nS pic.twitter.com/bSMB6OG70t

    Room151 6 days ago

    Helen Randall: Spelthorne report places spotlight on ‘controls’: Fresh criticism of Spelthorne Council raises the question of what “good” controls look like when negotiating a property deal. Spelthorne Council’s continuing debacle over property… dlvr.it/RtSPhy pic.twitter.com/9uCOJgBcH6

    Room151 6 days ago

    Step-out strategies: Hitting the sweet spot between liquidity and ultra-short duration: Sponsored article: Jemma Clee describes how an ultra-short duration strategy can help local authorities enhance returns. Despite the expectation of a low, and… dlvr.it/RtSPZb pic.twitter.com/pdXPpv5lcN

    Room151 7 days ago

    What role will climate change have on the pricing of government bonds?: Sponsored article: Kerry Duffain finds that “vulnerability and resilience to climate change” have a significant impact on the cost of government borrowing. Ardea Investment… dlvr.it/RtNKv7 pic.twitter.com/wDjT31x4Yt

    Room151 1 week ago

    ESGenius: Slashing emissions will fuel green growth for decades: Sponsored article: Velislava Dimitrova argues that a big enough investment could mean transition to a low, or no, carbon economy can become a reality. The world needs to slash carbon[...] dlvr.it/RtKZJp pic.twitter.com/cd8S3ijERl

    Room151 1 week ago

    Prudential code: “Not perfect, but its heart is in the right place”: The new Prudential Code offers revised rules for borrowing. Nikki Bishop is sceptical it will work while Gary Fielding offers his support. Nikki Bishop I have been asked to give[...] dlvr.it/RtKZFh pic.twitter.com/OriN28lXcb

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Audit: 2019 was a bust, let’s hope it gets better
  • Next story Call for action on £250m annual cost of business rates avoidance

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.