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

Room 151

Impact Awards –>
  • 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

Cornwall ends inverse LOBOs

0
  • by Colin Marrs
  • in 151 News · Funding · Treasury
  • — 10 Jan, 2019

Cornwall Council has become the first council to announce that it has repaid “inverse floating” Lender Option Borrower Option loans (LOBOS), ridding itself of an £85m portfolio in December.

In recent months, a number of councils have repaid hundreds of millions of pounds in LOBOs, but Cornwall has become the first to confirm that it has repaid “inverse floating” versions of the instrument – where banks have an option to propose a rise in interest payments if general banking rates fall.

The council used borrowing from the Public Works Loan Board (PWLB) to repay the loans which were taken out with Royal Bank of Scotland, which it said would lead to significant savings over the borrowing term.

A council spokesman told Room151: “Cornwall Council took three separate loans totalling £135m from the Public Works Loans Board during December 2018.

“The new loans were used to repay £85m of LOBO debt and a further £50m to redress part of the council’s under-borrowed position to help pay for significant planned capital expenditure.”

The exact level of savings from the LOBO repayments would become clear when it releases its final budget proposals, which are due imminently, it said.

The repayment of Cornwall’s inverse floating LOBO portfolio leaves the council with £234m of remaining “vanilla” LOBOs, where banks can propose a rise in interest repayments if general banking rates rise.

Cornwall’s LOBOs featured in the 2015 Channel 4 Dispatches documentary investigation which brought the issue of the loans to national attention for the first time.

Speaking to Room151 in the wake of that broadcast, Andy Brown, who is now service director for resources at the authority, admitted that the inverse floater LOBOs held by many councils “stick out like a sore thumb” at the moment due to their high interest rates – up to 7.6% in Cornwall’s case.

However, he said: “Our members understand that over a long period of time, the inverse floaters are there to protect against interest rate rises.

“On the ones we entered into, we got a two- or three-year introductory offer with a lower period of interest which means that we can still demonstrate value for money.”

In July 2015, during an evidence session as part of an inquiry into LOBO loans by Parliament’s former Communities and Local Government Committee, Abhishek Sachdev, chief executive officer of finance firm Vedanta Hedging, described inverse LOBOs as “some of the worst possible ones you could have”.

Overall borrowing from the PWLB during December reached £1.8bn – a record level since Room151 started collecting data in 2016.

The previous monthly record was the £1.33bn borrowed in June 2016, in the run-up to the Brexit referendum.

During December, Luton Borough Council took the second highest loan after Cornwall from the PWLB of £127.5m, using £27.5m to refinance some of its LOBO portfolio.

The other £100m will help finance the Luton Direct Air Rail transit scheme, aspart of the PWLB Local Infrastructure Rate initiative announced in the Autumn Budget.

A number of councils borrowing significant amounts from the PWLB during December to fund capital spending included South Lanarkshire Council (£78m), London Borough of Southwark (£76m), Birmingham City Council  (£60m) and Nottingham City Council (£40m).

Get the Room 151 Newsletter

Share

You may also like...

  • Brexit effect: what does a vote to leave mean for finances? Brexit effect: what does a vote to leave mean for finances? 16 Jun, 2016
  • Pensions chief outlines potential role for LGPS pools in managing liabilities Pensions chief outlines potential role for LGPS pools in managing liabilities 30 May, 2018
  • CCLA cautiously bullish on equities CCLA cautiously bullish on equities 7 Dec, 2018
  • Counties enter housing market with collective investment Counties enter housing market with collective investment 16 Jul, 2015

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 2 days ago

    Impact Awards: Cheltenham’s tech hub and Hackney’s recovery from cyber attack: The CCLA/Room151 Impact Awards spotlight  finance teams with a direct impact on their local communities and the environment. This week we explore Cheltenham Borough Council’s… dlvr.it/Rxg53h pic.twitter.com/iH8oGKOfSs

    Room151 3 days ago

    Collaboration the key to district recovery post-pandemic: Regeneration and economic growth will depend on districts’ ability to secure funding and work with public and private partners, argues Sanjiv Kohli. Covid hit us in March 2020 and immediately[...] dlvr.it/Rxb4VK pic.twitter.com/FiMynEQVPU

    Room151 7 days ago

    Impact Awards: Liverpool’s cafe culture and Warrington’s investment in homes: The CCLA/Room151 Impact Awards showcase  finance teams with a direct impact on their local communities and the environment. This week we spotlight Liverpool City Council’s… dlvr.it/RxJsKb pic.twitter.com/dEYpaz6HP0

    Room151 7 days ago

    Doing something in #localgov #finance for housing or regeneration? Check out the 'Place Shaping' category room151.co.uk/impact-awards/… sponsored by @31tenConsulting in the CCLA/Room151 Impact Awards. #timetoenter !! pic.twitter.com/dU99vE6Wws

    Room151 1 week ago

    Doing something in #localgov #finance for Adult Social Care & Health? Check out the ASC&H category room151.co.uk/impact-awards/… sponsored by Fundamentum Social Housing REIT in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    Doing something in #localgov #finance for the environment? Check out the 'carbon management' category room151.co.uk/impact-awards/… sponsored by @ACSLLP in the CCLA/Room151 Impact Awards. #timetoenter !!

    Room151 1 week ago

    So what are the seven categories for the CCLA/Room151 Impact Awards? Here they are room151.co.uk/impact-awards/… #localgov #finance #outcomes

    Room151 1 week ago

    Why should LGPS be concerned about rising inflation?: The impact of the coronavirus pandemic, lockdown and wider economic uncertainty created  deflationary pressures which raise important considerations for the Local Government Pension Scheme writes… dlvr.it/RxF7Fs pic.twitter.com/JlcjROBIpz

    Room151 1 week ago

    JOB ALERT: LPFA Finance Director vacancy: London Pensions Fund Authority Finance Director and s151 Officer Competitive salary and benefits The largest Local Government Pension (LGPS) provider in London with around £6.5 billion of assets and 135[...] dlvr.it/RxBdJP

    Room151 1 week ago

    Richard Harbord: Further signs that local government finance is failing: The crisis in Liverpool and a fix for education budgets are further indication that local government finance is in need of a root and branch review. Even for those students[...] dlvr.it/Rx9PSV pic.twitter.com/sAanC2gEyu

    Room151 2 weeks ago

    Impact Awards: Finance helps launch school meals company and support business during lockdown: The CCLA/Room151 Impact Awards will showcase the way finance teams have a direct impact on their local communities and the environment. This week we spotlight… dlvr.it/RwnlF4 pic.twitter.com/AJhne1MVG4

    Room151 2 weeks ago

    "This work has made a vital, practical contribution to ensuring people have been supported through the pandemic." #impact #151awards #covid #s151 room151.co.uk/treasury/impac… #impactcasestudies #councilfinancemakesadifference

  • 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 More than a third of councils at risk of financial failure over next decade new study finds
  • Next story Call for standardisation of the approach of LGPS actuaries

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.